Best Practices

The phrase "best practices" or, in the singular, "best practice" is business jargon arising from the management tool known as "benchmarking." The assumption underlying this term is that production and management processes are uniform enough so that a "best practice" can be identified and then adopted more or less "as is" by another entity. This is obviously the case in technical areas, the adoption of "best practice" by others blocked only by patent protection. When the concept is applied to management procedures however, the transferability of "best practices" may be more difficult to accomplish. Benchmarking programs attempt to identify best practices in a sector, an industry, or a cluster of competitors. Best practices are quantified to the extent possible by developing measurements ("metrics") and then comparing the numbers to similarly developed values inside the surveying operation.

According to the consulting firm Best Practices LLC, companies exhibiting a best practice may not be best-in-class in every area. But due to industry forces or the firm's goal of excellence, practices have been implemented and developed that have brought the firm recognition in a certain area. Typically the best practices result in higher profits.

IDENTIFYING BEST PRACTICES

Some firms are so well known for best practices in certain areas that it is not necessary to consult books, magazines, libraries, or the Internet to find the information. For example, Federal Express is often cited as having best practices among competitors in the expedited small package industry for their on-time delivery and package tracking services. Microsoft, the computer software developer, is cited as being innovative and creative, while the L. L. Bean outdoor products and clothing company is frequently lauded for its customer service practices and return policy guarantees.

When a firm is benchmarking to learn about the best practices of others, often these superior methods are found in companies outside the firm's key industry segment. Thus it is important to research and observe companies in a wide variety of settings, countries, industries, and even in the not-for-profit sector to learn better ways to improve continuously.

Information on best practices and innovative technologies can also be found on the Best Manufacturing Practices (BMP) Web site at http://www.bmpcoe.org/. This site has as its goal to increase the quality, reliability, and maintainability of goods produced by American firms. One way BMP accomplishes this goal is to identify best practices, document them, and share the information across industry segments. They believe that by sharing best practices, they allow companies to learn from others' attempts and to avoid costly and time-consuming duplication of efforts. Companies profiled have submitted abstracts of what their organization does well and they include previous practices, changes to new processes, and information on implementation as well as quantitative details and lessons learned.

An example of best practice outside the manufacturing sector is provided by Richard T. Roth in a recent article in Financial Executive. Roth writes: "An analysis of the most recent finance benchmarks in the 2005 Hackett Book of Numbers finds that world-class performers spend 42 percent less than typical companies on their finance operations as a percentage of revenue … and operate with less than half the staff of their peers. At the same time, they close their books more quickly each month, and historically have generated significant additional savings through reducing effective tax rates and days sales outstanding." The example illustrates how a well-quantified "best practice" can become a corporate goal elsewhere.

LEARNING FROM AWARD WINNERS

Other ways to identify best practices include observing businesses as a consumer or as a mystery shopper. It is also possible to identify best practices by examining professional journals and business periodicals. Companies that win various awards often exhibit best practices to emulate. The Malcolm Baldrige National Quality Award winners are a good group of companies to benchmark for best practices. They have met the rigorous award criteria and have had success that allowed them to win this prestigious award. The Malcolm Baldrige National Quality Award is given to U.S. organizations that have shown achievements and improvements in seven areas: leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management, and business results. For information about the award and profiles of past winners, see http://www.quality.nist.gov/.

Industry Week, a publication aimed at manufacturers, has since 1990 set out to find and share stories of America's best plants. They later extended their coverage to include Europe's best plants. They have set out to define the best practices of world-class competition and highlight quality approaches, lean manufacturing, and employee empowerment. The publication stresses the fact that these practices can be implemented in a wide range of industries to improve competitiveness and productivity.

Learning about the best practices of others is a valuable way for firms to gather fresh insights into possible methods of improving a myriad of aspects of their operations. It should be an important part of an organization's strategic planning activities.

see also Benchmarking

BIBLIOGRAPHY

Panchak, Patricia. "The Never-Ending Search for Excellence." Industry Week. 16 October 2000.

Patton, Susannah. "By the Numbers." CIO. 1 October 2000.

Roth, Richard T. "Best practice benchmarking." Financial Executive. July-August 2005.

                               Hillstrom, Northern Lights

                                 updated by Magee, ECDI

Best Practices

In a general sense, the term best practice refers to the most efficient way of doing something. The fastest method that uses the least resources (including labor and parts) to create the highest quality output is the “best practice.” Almost every thinkable industry has adopted best practices in some aspect of its processes, but those that have made use of it successfully and publicly have typically done so in the fields of technology development, quality control, project management, teaching (on the college and secondary circuits), manufacturing, health-care, and sales.

What was once considered plain “good sense” in many corporate spheres can now often be referred to as best practice, making the phrase seem inconsequential or part of corporate pop culture to opponents who would rather stick to common sense approaches and hard work. Best practice, therefore, can be seen as still in its infancy in terms of truly determining what it defines and for whom. For now, best practice is a way to describe the best ideas for the successful completion of specific jobs during actual application. It would be hard to oppose this kind of simple sense in any industry, but opponents of the term “best practice” oppose it on the basis that for some it has become an umbrella under which what is best for a particular agenda is the objective, not what is best overall. For example, a construction company that subcontracts a friend's bulldozer company for a kickback may be seen as best practice for both friends, but it would not be considered a best practice for those paying for the construction.

Best practice is also the outgrowth of the standard of good practice (SoGP) and benchmarking, both of which are highly organized methodologies. As it applies to business in general, best practice itself is optimally executed

using the tenets established by Robert Camp in his 1989 text “Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance.”

PHASES OF IMPLEMENTATION

Planning. Some consider the planning phase of benchmarking or best practice to be the step in which a firm decides what, exactly, it would like to improve within its process. Where does the problem begin? Where does it end? What are the frequent complaints among workers and managers? Once these questions are answered, a more concrete plan of what needs to be done to have the best practice possible for the particular phase of production or creation can be conceived.

In this initial phase of creating a best practice for any aspect of a firm's process, it is extremely important to remember the stakeholders, customers, and employees; what will they think of changing the practice in question? If there is any doubt as to whether any party will object to changes in the process, sidestepping the forward movement of best practice implementation may be best until alternative approaches or unanimous opinions on the change can be reached.

Analysis. Once a consensus has been reached about where the problem exists, and there are no challenging opinions or opponents of changing the existing format of a firm's process, analysis of the problem can begin. Fundamental aspects of the analysis phase of best practice implementation include answering important questions about: why the current system is not working; what goals are not being met due to an outdated method; where is production slowed and why; what are the aspects of the existing process that contribute to a negative public image for the firm; and what resources are being used inefficiently to achieve too little. Analysis of these questions will establish whether there is in fact a great enough need to constitute the implementation of a new, better practice.

During the analysis phase of best practice conception, it is crucial to ensure that all data used in the analysis and decision-making process is true, accurate, from a reliable source, and timely. Additionally, those who gather data must be careful and considerate of sources and should never misrepresent why and how the information may be used. Proprietary information should never be shared with anyone outside of the benchmarking, analysis, or best practice implementation process.

Integration. The integration phase of best practice implementation is the creation of a measurable plan based on information gathered during analysis. The plan will allow action to be taken so that the best practice can be created and initialized. Integration will begin the process of solving the problem and lay the groundwork for the action that must be taken to bring the best practice to fruition. Looking to how other firms have successfully integrated their analysis into a workable plan is a good way to ensure a positive outcome.

Action. The action part of implementing best practice will need to follow the measurable plan created during the integration process. The plan has to be measurable in terms of resources and hours used, monies budgeted, and any other quantitative aspects of the new practice. This will enable managers to determine whether the new practice is actually the best practice in regards to time, money, and resources.

Another part of taking action is monitoring the effectiveness of the plan and how well the action is working. Are workers and managers following the new plan or is there resistance to the change? Monitoring the effectiveness of the new action plan allows managers to establish whether real change is taking place. The action should be taken for at least one fiscal quarter to determine its efficacy within the firm's processes.

It is important to remember how to determine when and how a best practice should be implemented. Changing the old model for reasons other than what is best for the firm at large should always be avoided, and implementing a plan of action must always be a measurable process; otherwise, determining the results it has created is nearly impossible. The best practice will always be the one that creates the best results in the least amount of time while using the fewest resources.

BIBLIOGRAPHY

“Benchmarking Best Practices.” Available from: http://www.finance.alberta.ca/publications/measuring/results_oriented/module2_overview.pdf.

Camp, Robert. Benchmarking: The Search for Industry BestPractices that Lead to Superior Performance. Portland, OR: ASQC Quality Press, 1989.

Stenzel, Joel, Gary Cokins, Bill Flemming, Anthony Hill, Michael Hugos, Paul R. Niven, Karl D. Schubert, and Alan Stratton. CIO Best Practices: Enabling Strategic Value with Information Technology. Hoboken, NJ: John Wiley & Sons, 2007.