Best Practice is a way or method of performing a business function or process that is considered to be superior to those achieved with other means, and is considered as a model for others to follow. Benchmarking is a systematic process used for identifying, adopting and implementing best practices.
Japanese firms improved their quality drastically after WWII by benchmarking the best practices of western firms and adopting them. It is rightly said that “There is no point in re-inventing the wheel.”
It is the fastest and easiest way to improve. But it does not stop the door of innovation. Adopting best practices and innovating for improving procedures, processes and products go hand in hand.
“World Class” performance is acceptance of organizational performance levels that have been recognized by a national or international quality award such as Malcolm Baldridge National Quality Award (MBNQA).
A practice, method, procedure or process may be called a best practice when
- It produces superior results, meaning 25 percent or higher performance levels than normal.
- It is a new or innovative use of technology of manpower.
- It has been recognized and referenced by at least three or more public sources as a best practice and mentioned in industry journals or periodicals.
- It has received an external award for it.
- It has been recognized by customers or suppliers or experts.
- The company has patented this practice.
Best practices can be adopted from within one part of the organization, from competitors, companies with similar functions or generic i.e. comparing operations from unrelated industries.
A best practice can evolve to become better as improvements are discovered. A best practice is also considered as developing and performing a standard way of doing things that multiple organizations can follow. Best practices are also used to maintain quality.
Some of the best practices in various industries have been collected and are known as Good Operating Practices such as good manufacturing practices, good agricultural practices, good clinical practices, good laboratory practices and good distribution practices.
Benchmarking is the process of systematically finding the best practices from other industries and comparing them to one’s own business processes and performance metrics. Usually, cost, time and quality are measured. The methodology for adopting best practices through benchmarking is as follows:
- Identify problem areas
- Identify other companies & industries that have similar processes
- Identify organizations that are leaders in those areas
- Survey those companies for measures and practices
- Visit the best practice companies and compare their methods with own practices
- Implement and adopt the new & improved practices
The management has got first to understand thoroughly their own practices thoroughly when comparing them with best practices elsewhere in order to identify Gaps between performance. Gaps are the result of Process Practices, General Business Practices and the Organizational and Operational Structure.
Process practices are the methods and procedures that are followed by the companies. Business Practices are more general and include personnel policy, accounting practices and measurement and reward systems. Organizational and Operational Structure is concerned with the location of activities, the organizational chart and the capabilities of the information system.
Process Practices are easiest to change. Changing Business Practices and the Organizational and Operations Structure is a long term job. Process changes will likely affect upstream and downstream operations as well as suppliers and customers and may also affect the organizational and operational structure. Therefore management has to know the payoff of new goals and objectives in order to support the change.