What are Best Practices
Best practices are a set of guidelines, ethics or ideas that represent the most efficient or prudent course of action. Best practices are often set forth by an authority, such as a regulator, governing body or internally by management, depending on the circumstances. While best practices generally dictate the recommended course of action, some situations require that industry best practices be followed.
BREAKING DOWN Best Practices
Best practices serve as a general framework for a variety of situations. For instance, in the production process, a list of best practices may be given to employees, highlighting the most efficient way to complete their tasks. For accountants, the Generally Accepted Accounting Principles represent best practices for the profession. An investment manager may follow best practices when managing a client's money, by prudently investing in a well-diversified portfolio.
"Best practices" is a term that can be applied broadly and across industries. In the world of business, the term is used in connection with everything from project management to audit functions, to explain a best or most efficient way of completing a business task. For example, with the advent of numerous 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. These new standards are generally achieved by defining a problem, quantifying the problem, measuring the problem, testing the problem, and then implementing best practices as an improvement measure and a solution to the problem. These best practices in process improvements can help quality control managers share what others have learned across functions and teams, using a common language.
Best Practices as Industry Benchmarks
Best practices can also be used as a benchmark to share and compare business performance outside the company. This is particularity helpful with functional groups in different organizations within the same industry. Some firms are well known for certain processes or ideas. For example, assume a company wins an award for best-in-class distribution systems. When asked about best practices that help the company achieve best-in-class performance, the company says that it gives all its new employees red pens to use for signing off on an order or delivery. All orders with red ink are given a higher level of scrutiny than other orders, which reduces errors because more eyes are looking for errors when they see red ink. Companies share best practices all the time, but some best practices are considered trade secrets, which can mean that the process has been patented. These are known as utility patents.