Best Practices

What Are Best Practices?

Best practices are a set of guidelines, ethics, or ideas that represent the most efficient or prudent course of action in a given business situation.

Best practices may be established by authorities, such as regulators, self-regulatory organizations (SROs), or other governing bodies, or they may be internally decreed by a company's management team.

How Best Practices Work

Best practices serve as a general framework for a variety of situations. For instance, in businesses that produce physical products, best practices that highlight efficient ways to complete tasks might be given to employees. Best practices lists may also outline safety procedures in order to minimize employee injuries.

For corporate accountants, the generally accepted accounting principles (GAAP) represent best practices. GAAP is a common set of accounting standards which aim to improve the clarity, consistency, and comparability of the communication of financial information.

GAAP facilitates the cross-comparison of financial information across different companies within the same sector. This benefits investors and the companies they invest in by promoting transparency.

Investment managers may follow best practices when handling a client's money by prudently investing in a well-diversified portfolio and adhering to a client's risk tolerances, time horizons, and retirement goals.

Corporate governance or a code of ethics can serve as best practices for an organization.

Special Considerations

"Best practices" is a term that can be applied broadly and across a swath of industries. In the world of business, the phrase is used in connection with everything from project management to audit functions to explain the most efficient method of completing a business task.

With the advent of newer quality control systems came the need for a way to apply measurable benchmarks and communicate ways to rapidly implement new standards of excellence across an organization. This is done by identifying problems, quantifying their frequencies, cultivating solutions, and monitoring the execution of those solutions to ensure they solve the issues at hand.

Best Practices as Industry Benchmarks

Best practices can also be used as a benchmark where one company can share actionable solutions with other organizations. Say there's a firm well-known for its best-in-class product distribution infrastructure. When asked to precisely describe the best practices that led to their hyper-efficiency, the company reveals that it outfits all fulfillment staffers with red markers that they may use to sign off on their highest priority deliveries.

Consequently, all red ink orders are given higher levels of scrutiny than others. As more eyes reflexively search for errors when they see red ink, more mistakes can be flagged and corrected.

Although companies share their best practices as a matter of routine, revealing trade secrets that might be easily replicated by the competition would be unwise.

Steps for Developing Best Practices

Here are eight steps for developing best practices:

1. Do your homework: Research what companies in your industry do regarding best practices, in terms of customer service, hiring, promotions, production, and anything else of import.
2. Share your information: Once you have determined what best practices are important, communicate this to key individuals in your company so that everyone is on the same page.
3. Define your metrics: When you determine your best practices make sure they are measurable so you can keep track of progress towards their implementation, and to boost accountability.
4. Manage change: Employees and others are typically resistant to change. Prepare for this resistance and develop a strategy to move forward when you implement new practices.
5. Modify and customize for your business: When implementing a best practice, modify it so that it meets the characteristics of your business and fits with your intended goals.
6. Involve everyone: Like sharing your information, make certain that everyone in the organization is aware of best practices and that they have agreed to abide by them.
7. Align business and customer needs: Seek guidance from other businesses or customers that might be able to help you refine and better implement your best practices.
8. Evaluate and refine: As your business evolves, take stock of your best practices and refine if necessary to meet the ways that your organization has changed.

Examples of Best Practices

Just in Time

Just in time (JIT) is a best practices solution focused on inventory that seeks to align materials ordered from suppliers to a production schedule. The goal of JIT is to ensure efficiency and reduce waste by only receiving materials when needed. While this trims inventory costs, it requires businesses to forecast demand for their goods accurately to ensure proper amounts of supplies are on hand.

Kaizen is a Japanese management philosophy that seeks to improve productivity gradually and methodically. It is a Japanese word that means "change for the better" or "continuous improvement."

Kaizen seeks to involve all employees and improve operations on a continuous basis. Characteristics of kaizen include designing a workplace to be more efficient and impactful by creating a team atmosphere, improving everyday procedures, making sure employees are engaged, and seeking to make jobs more fulfilling, safer, and less tiring.

Best Practices for Investors

With so many stocks to choose from, it can be hard to know which one to pick for your portfolio. In choosing a stock, it's important to know what you want your portfolio to look like and to keep that in mind as time goes by.

As an investor, it's critical to be aware of daily news, not only for the companies you are analyzing or have already invested in but also for world and financial news, as these impact stocks as well. Reading the news is probably the first step in deciding what stock to pick. Understanding which companies are trending, what sectors are primed to do well, and where the economy is heading, will give you an idea of where to start looking.

From there, start compiling a list of stocks that interest you. For example, if you read that new technology has emerged that has made another product obsolete (for example, smartphones making traditional landlines obsolete), you may start looking into such companies.

You can find stocks through research of who the main players are in the sector you are interested in. Conversely, you can look at exchange traded funds (ETFs) that invest in the sector. You can also use screeners to sort through companies based on a variety of factors, such as market cap and earnings. From there, a detailed analysis of a company's financial statements would provide you with information you need regarding the company's health.

What Are Best Practices in Education?

Best practices in education include staying proactive by ensuring your next teaching activity is prepared and set to go before the current one finishes. This allows students to be engaged by reducing disruptions. Encourage communication by involving students in the classroom setting. This can include varying the way in which they provide answers (e.g. verbal, written, visual, in groups, etc.). Work backward by setting an end goal and figuring out how to reach that goal with your students. Always keep your resources, such as lesson plans, so you can build upon what you have done before and refine the way you approach teaching. And lastly, be a role model by setting the examples you want your students to exhibit.

What Are Best Practices in Healthcare?

Best practices in healthcare include training your staff so that they know how to deliver great service and put patient care and experience as their main priority. Ensure patient education, which has been proven to improve the overall healthcare experience. A patient that understands the what and why of their health and the care they are getting are usually happier and more comfortable. Establish a care-orientated environment by incorporating small details, such as remembering a patient's name, smiling, listening carefully, and incorporating follow-up calls.

What Are Best Practices in Customer Service?

Good customer service starts with good employees. Ensure you are hiring the best people and incentivizing them to join your firm and stay. This can be done through good pay and benefits as well as the overall corporate environment.

Manage customer expectations. Telling a customer that everything will be taken care of is easy, but this isn't always the case. Being upfront and honest with a customer will always keep them grounded and prevent them from being disappointed.

With customer service, first impressions count. Make sure the first impression is perfect. This sets the tone for future engagement and shapes customers' opinions of the service they're receiving. Collect as much data as you can to help them and also personalize the experience.