When I worked at State Street Bank, I was asked by the CFO to lead a project to identify best financial management practices for the Bank. We selected a consulting firm that claimed to have
THE best practices for banks (we chose them primarily because the CFO believed this was true, and the price was cheap).
Two young consultants arrived and went to work. We housed them in the "Fish Bowl," an all glass conference room, so we could see what they were doing. Not surprisingly, the consulting firm started with benchmarking, a process that began with a survey of senior management. We would have meetings to review the questions they proposed on the survey and so forth.
Whenever I would pass by the Fish Bowl, I noticed they were always inserting a CD-ROM drive (remember those?) into their laptops. When the junior consultant was alone, I asked her about it. With a little bit of prodding, she admitted that earlier in the year she had taken a training class on CFO Best Practices and those materials were on the drive - it included project design, standard approach, standard recommendations and a standard final report. Fortunately, I was able to move the project from this "cut and paste" approach to one in which
we focused on what the CFO's priorities ought to be in adding value to the company and, ultimately, its shareholders.
Adopting best practices has become the mantra for many companies these days. Sometimes it is in the form of hiring consultants. Other times it involves bringing on a CEO that knows industry best practices because he worked at a leading firm. In cases involving private equity firms, family businesses are often purchased with the aim of importing best practices and the idea that as a result, the company will somehow be worth more.
But are best practices really best for your business? Not necessarily.
They are only best if those practices are appropriate for your particular organization at this particular time. The "correct approach" can vary wildly and since I am not a wizard, I can't give you an appropriate recommendation without knowing much more about your circumstances. I can say, however, that if you simply copy what your competitor does, you won't have any competitive advantages.
At their core, best practices are best processes. Practically speaking, best practices are usually a mixture of process supported by systems that work with your set of people, culture and business model.
So what makes for a good process?
As I have said before, a good business process means that things happen consistently and efficiently, and with no surprises. And process is just a series of steps or tasks to get something done.
Here are some tips on how to get best practices for your business or organization:- Understand your business model inside and out. Within your business model, thoroughly understand the key drivers of customer satisfaction and financial success.
- Understand who your competition is and how they accomplish the same things. Understand the differences between how you do it and how they do it.
- Build strong processes that are unique to your business and that maintain your differentiation, drive customer satisfaction, and increase profits. "Unique to you" is the operative phrase. Your processes and approach may be similar to your competition, but understand how you are different and respect those differences as you build your own best practices.
- For those things that are not critical to customer satisfaction and financial success, go ahead and copy the so-called best practices. In these situations, there is little value in reinventing the wheel and you may even want to consider outsourcing. But remember, often much of the less critical work is more back end or administrative in nature. To the extent those activities stem from doing the critical work uniquely, you may not be able to just plug in "best practices" - you may have to adjust for your particular situation.
It's important and valuable to learn from those who have gone before and best practices attempt to capture and represent those experiences. That said, simply following an industry recipe will do nothing to differentiate your business and may even lead you to adopt conventions that don't apply to your business or set of circumstances.
As with all business strategies, the most important question to ask before moving forward is "will it work for us?"
