Best Practices: How They Can Cause More Harm Than Good
Why Best Practices are Prevalent
Companies engage consultants and explain how their problems are ‘unique’ and have various nuances.
However, when consultants offer unique and insightful solutions, many companies take a step back and ask for ‘best practices’.
“Has this been tried earlier?”
“What are some of the industry practices?”
“Why should we take the risk of breaking away from practices that already work for some companies?”
Best practices can certainly provide some insight into what the industry could be doing right, but they have their flaws as well.
The Problem with Best Practices
If Steve Jobs had continued with the best practices other phone-making companies were following, we might never have ended up seeing iPhones. Best practices create the following challenges for companies:
1. They make you average. They take competitive advantage and strategic differentiation away and make you like everyone else in the industry.
The uniqueness of your business model and operating strategy is lost in the quest to be like everyone else.
Of course, for aspects such as compensation and benefits, market benchmarking and best practices can be useful. But, if you are starting a gourmet restaurant and choose to use the best practices of McDonald’s and Domino’s, you’re unlikely to succeed.
2. They don’t provide the ‘how.’ Even if you adopt some practices from other companies, implementing them could be very different. Do you have similar roles and infrastructure to implement them?
For example, a few years ago, an HR: employee ratio of 1:100 was publicized as an aspirational number for IT companies. However, would the ratio need to remain the same irrespective of the number of locations, the use of technology, the overall culture of the company and other aspects?
3. They ignore the cultural factors at play. Best practices cannot be plug-and-play. Just because something works at Google or Microsoft does not necessarily mean it would work for you.
For example, Netflix has an expense policy that is summed up in one line. Other organizations trying to implement the same might fail because they may not have the same culture of empowerment and autonomy.
4. They may create negative long-term effects. Best practices, without a timeframe could have the opposite effect of what you are trying to achieve. You may find leaders sacrificing long-term wins for short-term ones.
For example, leaders with stock options may try to take greater risks, increase cash burn, and push up share prices to get financial benefits. In the long-term, this could be detrimental to the growth or even the existence of the company.
How you can make them work
However, despite the possible negatives, best practices can be useful tools to understand what the market is doing. If used wisely, they can provide useful trends and an overall understanding of short-term and long-term effects.
Using them as guides to create your own custom course of action is the most effective approach to support long-term success. The idea is not to abandon them but to use them meaningfully and adapt them to your context before implementation.
To know more about how we can help you not just implement, but actually create best practices, reach out to us at [email protected].