Definition:
Best Practice Analysis is an activity where a search is made of the best methods, processes, and technologies within an industry, function, or associations. The process of contacting a company and comparing your processes to theirs is called Benchmarking.
- What it is: A best practice is the methodology, technology, or process used within an industry or function that is recognized as the standard, or is considered to be superior to other methodologies, techniques or processes. A best practice analysis is an effort to determine if your company or organization's operating practices are up to the industry standards, or the best practices of the leading companies or organizations they compete or compare with. Cataloging and categorizing existing practices creates the opportunity to compare and contrast those practices to determine which most effectively achieves the desired outcomes. This is accomplished by searching publically available analysis or benchmarking with companies to compare their practices with those of your company or organization.
- What does it do: It allows a company to determine where they are Deficient or superior compared to competitors, partners, or other organizations within their industry or community. If there are best-practice standards in the industry, then a company can determine if they are in compliance. It can also determine if other organizations have practices in place that allow an internal organization to be more cost-effective. Thereby creating the opportunity to define improvements that bring a company up to the best practices available.
Uses:
Best Practice Analysis is used to make sure that you are meeting minimum industry standards, are not competitively disadvantages compared with competitors, or use a benchmark to determine what you have to do to achieve a competitive advantage in your practices.
- How is it used: Best Practice Analysis is used to determine if your internal processes meet industry standards or are cost-effective compared to other companies and organizations with similar internal processes. It is often used to determine if a cost center or function in a company is cost-effective compared to competitors or others. The Best practice can also be measured based on the outcome of the internal organization or function in achieving desired goals (with or without consideration of cost-effectiveness).
- Where: Some of the most common areas for best practices and benchmarking analysis is to find out if an internal (non-profit center) organization or function is competitive with other organizations in achieving their desired goals:
- Human Resource (HR) Functions are classic internal organizations that do not have profit-centered outcomes. It is considered a shared service within the company or organization that is in place to meet the necessary organizational requirements. There are questions about what it costs to hire a new employee, are we compensating our employees enough to not lose them, but not so much that we are losing money compared to others, what is it costing us to meet government regulations, do we have a good process to compensate and promote our top employees, what is our succession planning process to replace executives, etc. Understanding your costs and outcomes of the HR processes compared to other competitors increases your capability to manage your competitive advantage position in your industry.
- Training Programs are a rich opportunity for best practice analysis. Do our training programs achieve the desired changes in employee behavior and performance? How cost-effective (compared to others) is the training program in achieving the desired performance improvements. Do we have all of the needed types of training programs in place to achieve the performance we desire in our employees?
- Website aesthetics and performance in meeting the desired outcomes. Websites have a number of performance criteria with attracting people to the website (e.g. Search Engine Optimization), converting them to customers or donors, and then providing opportunities to monetize customers for further revenues and referrals. Monitoring the practices that the best websites utilize can provide a plethora of ideas for improvements to existing websites.
- Supply Chain processes and costs. Shipping processes and costs, inventory management, operational processes, packaging, and label design, purchasing processes, accounts receivable and accounts payable processes, etc. These types of best practice analysis can be purchased as multiclient students, benchmarking with other companies, or through expert interviews.
- Customer Satisfaction Analysis: How do your customers see your performance and how do you gather that information. Secondary research can tell you a lot about other companies, but expert interviews and benchmarking can be helpful.
- Market Research and Competitor intelligence is important and can be expensive. Best Practice analysis can identify the best ways to gather and analyze the information in the most cost-effective way.
- Why: You do Best Practice and Benchmarking Analysis to be sure you are not falling behind competitors and others in the quality of your functions or program, and the cost-effectiveness of your activities. Another concern with Best Practices is that they can become limiting. If you follow the best practices in your industry you will never have a competitive advantage. Use best practices as a minimum standard, but continue to look for ways to exceed the current best practice levels and processes.
Limitations:
- Where it shouldn't be used: When the comparison group is small, secretive, and unwilling to share information, it can become very expensive to gain best practice information. It may not be cost-effective to complete the analysis in such a community or environment. In this case, you may want to look for more available standards and extrapolate them to your comparison group.
- Any restrictions: None noted
- Warnings: Be careful of collecting existing secondary research that could be dated and no longer represent the best practice of today. Recognize that some companies may be secretive or even deceptive about their practices so as to maintain their competitive advantage, or make people believe they are more advantaged than they are.
Step-by-step process:
- Gathering data
- How do they do the processes within the functions, who do the tasks, and what do they accomplish (ask for swim charts of the process)
- What are the outputs of the function, what are their primary goals and how successful are they in meeting their primary goals
- What does it cost to meet the goals? What costs, what resources, and how many people are involved, and how long does it take
- Other questions that will meet the individual needs of your best practice and benchmarking analysis
- Which function, process, or programs do you want to find the best practices for.
- Try to identify how your company or organization currently operates the function, processes programs
- What are the factors that you want to compare across the industry, competitors, etc?
- Secondary research through library and database services can help find factors to measure and companies to benchmark
- Search the internet for factors to measure and companies to benchmark
- Find conferences, associations, websites, books, etc. on your factors and industry participants
- Identify experts and have interviews to find the most important factors and who is the best company for each factor
- Network with knowledgeable people in the field to learn as much about the factors you wish to compare and the companies who are the best on those processes and factors
- Search industry publications and the minutes and proceeding of associations and conferences
- Find the leading companies and ask to benchmark with them on the function, or process you want to measure
- Develop Questionnaires to gather data from each company with whom you will benchmark
- Analysis of data
- Compare each practice from each publication or company, define the range of processes and approaches
- Compare the costs and the level of efficiency of each practice and company
- Compare the output of the process and the minimum level of performance and the value of exceeding the minimum standard
- Consider the "Bang for the Buck" or how much value is created by achieving the highest level of performance.
- Interpretation of results
- Find where the highest performing functions are found and how these functions achieve their superior performance
- Determine which companies and functions have the lowest cost of meeting the minimum level of performance
- Who has the highest efficiency in meeting the optimum level of the performance of the function
- Presentation of results
- Show the functions considered and the companies measured
- Show the highest efficiency and optimum value created by the function
- Be sure to show measurements of both the performance of the function and the cost factors that drive the cost-efficiency measurements
