3 Ways Best Practices Can Backfire
In management circles, and especially if you deal with consultants, you're bound to hear the term "best practices." The idea is to study other companies at the top of their game, identify key practices, and then imitate them to improve the performance of your own business. You can find best practices for cash management, supply chain, innovation, and virtually anything else you could imagine. Smart right?
It can be, but only if you use the information intelligently. Too many companies slavishly adhere to best practices in a race for the Great Silver Bullet that will put all of their problems into the cold dark ground. Unfortunately, that doesn't make a lot of sense for three reasons.
Simultaneity and causality are two different things.
The way most companies look at best practices is as a list of activities that will bring desired results. But as a quick review of statistics and logic reminds us, two things can happen at the same time without one causing the other. For example, someone drops a book with a loud thud at the same time you sneeze. Are you allergic to gravity-induced book movement? Probably not, although if the book fell on a dusty table top, maybe the resulting cloud sent into the air indirectly did cause a problem.
Billions of things happen everywhere at the same time in any given moment, and yet who suggests that they are all interrelated? It may be that some of the best practices create the improved performance area that you seek. Or maybe the characteristics of a company with such improved performance cause the particular practice, with something else the root cause. Don't dismiss the practices, but be wary of assuming what they cause.
Every organization is different.
Even two companies in the same business can have significantly different characteristics, goals, and requirements. Something that works in one of them might not in another. Say that two companies make widgets and one best practice is to limit inventory on hand. That sounds fine, but one of the companies makes a significant amount of its profit from high-profit custom work. Such work might require a higher inventory of components or materials to allow the custom fabrication. It would make little sense to significantly reduce profits to meet some artificial set of recommendations under the Lemming Law of Business Management.
Best practices can't replace innovation.
An interesting point comes from veteran project manager Russell Harley. When a company is too focused on following best practices, he says it can become a "defense against innovation or change." Management refuses to consider something new because it isn't on the existing checklist and it could be risky to do something not previously vetted by a successful organization.
Where do you think those best practices come from originally? Divine revelation? They came from companies experimenting with their operations, keeping an eye on strategic goals, and finding what works. If you can't trust innovation, then you can't find what might become the next generation of best practices.
Use what you can learn from other companies, but remember never to entirely turn over your decisions and responsibilities to someone else. If something doesn't make sense, maybe adopting it isn't such a good idea.
ERIK SHERMAN | Columnist
Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.