Defining Best Practices
Updated January 2, 2015 by Matt H. Evans
One of the most overused terms in business has to be: Best Practices. It seems everyone (including myself) is always labeling something as a “best practice.” Thanks to Hackett Benchmarking, a common definition has emerged for best practices. According to Hackett Benchmarking, a best practice must:
1) Place the company in a top percentile ranking within its industry.
2) Leverage and take advantage of technology.
3) Improve quality and speed, and also lower costs.
4) Give management more control and influence.
5) And finally, it has to be working; i.e. it can't be planned but not implemented.
If you can measure up to these five standards, then you can truly boast about a best practice. And the benefits of having such a best practice will separate your company from the rest of the competition.
What makes this so appealing is that the gap between average performing companies and best in class companies is widening. According to Hackett Benchmarking, once a company has met the five standards for a best practice, it begins to pull away from the competition as it becomes easier to initiate improvements while average companies continue to struggle with process improvement programs. Making improvements without measuring up to best practice standards is like being in a row boat race. The best practice rowboat keeps moving ahead while you try to catch up at a slower rate of speed.
A good example of this is the financial analysis function. According to Hackett Benchmarking, average performing companies spend about half their time collecting data for analysis and the other half of their time actually analyzing it. Companies with best practices spend about 13% of their time collecting data for analysis and the remaining 87% analyzing and producing high quality information for decision-making. Therefore, the gaps between average and best practices can be significant.
Many companies that are considered best in class often follow similar strategies. For example, using one single standard throughout the entire organization seems to be a recurring theme. In the case of Enterprise Resource Planning (ERP), most organizations force fit many of their processes to the ERP application, thereby achieving standardization, consistency, and lower costs.
Another common theme is the use of self-service for both internal and external customers. Once again, technology plays a central role behind this best practice. Examples include having employees (internal customers) administer their own benefits through a web based application and having outside customers resolve their questions through another web based application.
Therefore, many best practices seem to strive for things like consistency, standardization, simplifying the process, zero redundancies, leveraging technology, single source for all data, and moving processes over to the internet. Finally, don't get discouraged – only a few companies can measure up to best in class. Now that you understand what it is and why it is important, you can begin your journey from average performance to best practices.
Written by: Matt H. Evans, CPA, CMA, CFM | Email: firstname.lastname@example.org | Phone: 1-877-807-8756
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