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-inclass 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.
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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