What Are Best Practices?
Best practices encompass guidelines, ethics, or ideas that signify the most effective or sensible course of action in a specific business scenario.
These practices can originate from authorities like regulators, self-regulatory entities (SROs), or other governing bodies. Alternatively, they may be internally mandated by a company’s management team.
- Best practices are the working standards or ethical guidelines that provide the best course(s) of action in a given situation.
- Companies, regulators, or governing bodies can all set best practices for businesses.
- Best practices serve as a roadmap for a company on how to do business and provide the best way to deal with problems and issues that arise.
- Steps to setting best practices include researching the industry and competitors, communicating the standards to all employees, setting metrics, managing change, evaluating and refining the best practices.
- Two common best practices that have been implemented for inventory management include “just in time” and “kaizen.”
How Best Practices Work
Best practices serve as a general framework for various situations. For instance, businesses producing physical products may provide employees with efficiency-focused task completion guidelines. Safety protocols could also be outlined in best practices to minimize work-related injuries.
In the realm of corporate accounting, generally accepted accounting principles (GAAP) represent best practices. GAAP, a standardized set of accounting principles, enhances the clarity, consistency, and comparability of financial information communication.
GAAP facilitates comparative financial analysis among companies within the same sector, enhancing transparency for investors.
Investment managers adhere to best practices when handling client funds by making prudent investments aligned with the client’s risk tolerances, time horizons, and retirement goals.
Corporate governance or a code of ethics can also serve as best practices for organizational operations.
Special Considerations
“Best practices” is a widely applicable term spanning various industries. In business contexts, the term covers everything from project management to audit functions, emphasizing optimal methods for completing tasks efficiently.
Advances in quality control systems have necessitated the establishment of measurable benchmarks to rapidly implement new standards across organizations. Identifying issues, quantifying their occurrence, devising solutions, and monitoring implementation are integral to this process.
Best Practices as Industry Benchmarks
Best practices can serve as benchmarks, allowing companies to share effective strategies with other organizations. For example, a company known for efficient product distribution credits its hyper-efficiency to a distinctive practice of having fulfillment staff sign off on priority deliveries with red markers. This practice enhances error detection and correction.
While companies often share best practices, it’s crucial to safeguard trade secrets from potential replication by competitors.
Steps for Developing Best Practices
Here are eight steps for developing best practices:
- Do your homework: Research prevalent best practices across industries to improve processes, customer service, hiring, production, and more.
- Share information: Communicate identified best practices internally to align organizational objectives.
- Define metrics: Ensure measurable benchmarks to track progress and enhance accountability.
- Manage change: Address resistance to change and strategize implementation of new practices.
- Customize: Tailor best practices to align with business objectives.
- Involve all: Ensure organizational-wide awareness and compliance with best practices.
- Align with business and customer needs: Seek input from customers and other businesses to refine practices.
- Evaluate and refine: Continuously assess and improve best practices to adapt to organizational changes.
Examples of Best Practices
Just in Time
Just in time (JIT) is an inventory management best practice focused on aligning material orders with production schedules for efficiency and waste reduction.
Kaizen
Kaizen, a Japanese management philosophy, aims to enhance productivity gradually and methodically through continuous improvement and employee involvement.
Characteristics of kaizen include optimizing workplace efficiency, teamwork promotion, enhancing procedures, ensuring employee engagement, and improving job fulfillment and safety.
Best Practices for Investors
Selecting stocks requires awareness of market trends and company performance. Stay updated on news that impacts the stock market to make informed decisions.
Compile a list of stocks based on emerging technologies, industry trends, and financial analysis. Use tools like ETFs and screeners for comprehensive market evaluation.
Analyze company financials to assess health and performance before investing in stocks.
What Are Best Practices in Education?
Best practices in education involve proactive lesson planning, incorporating student engagement strategies, setting clear goals, resource retention, and leading by example.
What Are Best Practices in Healthcare?
Best practices in healthcare include staff training, patient education, creating a caring environment, and personalized care to enhance patient experiences.
What Are Best Practices in Customer Service?
Effective customer service relies on hiring quality staff, managing expectations, making a great first impression, collecting data for personalization, and ensuring customer satisfaction.