Aug 2008

Best practice can be wrong

The phrase “best practice” is so popular in management circles and consultants that they are sometimes mis-applied by well-meaning individuals.

By definition, “best” implies that a comparative analysis has been completed, whose conclusion is that the “practice” in discussion is deemed to be better than any other known alternatives. Naturally, if someone claims “best practice”, then he or she is expected to be able to supply the comparative analysis to support such claim. More often than not, such comparative analysis is non-existent or, at best, flawed.

Even in scenario where such comparative analysis exists, “best” needs to be put within context. Some business practices are not applicable across industries. For example, some practices in the defense industry do not make sense to be copied by a paper clip manufacturer. And vice versa, a defense contractor cannot adopt some practices that produce “best” result for a paper clip manufacturer if it is to meet the minimum government requirement on defense contracting.

Another potential mis-application is in the word “practice”. A common story goes: Company C did “best practice” X, and got performance Y. So it is assumed that if X is copied, then Y should be repeatable outside of company C. That is a big assumption that undermines many differences among companies. More often than not, other companies cannot duplicate X due to many variables (even company C may not be able to repeat X and Y consistently year after year). It is not that X must be done, but the desired net effect is performance Y (or better). Thus the intended use of “best practice” is actually not the “practice” itself, but the result.

The difference is not just semantics; it is real enough that chasing the wrong “best practice” can yield a negative return on investments. The following gives some ideas on what to look for before implementing an improvement initiative based on “best practice”.

Metrics Analysis: If the performance of the business practice is not measurable, then it is difficult to factually justify why it needs to be improved in the first place. Also, the ability to measure the performance, before and after, provides the confirmation that the improvement initiative works.

Root Cause Analysis: Before too much is invested, it is wise to know what the current performance level is and why it is not where it should be. Adopting a “best practice” that will not address the root cause of poor performance is wasteful.

Impact Analysis: Even when a “best practice” can address the root cause and can demonstrably improve a performance metric, the impact to the overall organisation needs to be understood. It may affect more than one metric, and more importantly, it may affect the other metric in the wrong way. Putting more money to the left pocket with money that comes from the right pocket, does not increase the total amount of money.

Continuous Improvement: Nothing stands still – business environment changes all the time, and companies change too. A business practice that is good for a company in one year, may lead to negative impact in another year. A common mistake is to say, “we have always done it this way and we will continue to do it this way.”

In closing, what is “best practice” for one company at a given time may not be the right one for another company.

#learningorg #obxerve