A chief executive offi cer (CEO) spends months deciding on a corporate strategy. The plan probably includes a mix of changes in products, customers, and mar-kets, as well as demands for increased effi ciencies or information in a number of existing areas. The CEO then hands off the plan to a group of managers who are quite capable of implementing many of the changes, but who scratch their heads over how to squeeze greater effi ciencies or information out of existing depart-ments in order to meet their strategic goals. This is where best practices come into play.
A best practice is really any improvement over existing systems, though some consultants prefer to confi ne the defi nition to those few high-end and very advanced improvements that have been successfully installed by a few world-class companies. This book uses the broader defi nition of any improvement over existing systems, since the vast majority of companies are in no position, in terms either technological capabilities, monetary resources, or management skill, to make use of truly world-class best practices. Using this wider defi nition, a best practice can be anything that increases the existing level of effi ciency, such as switching to blanket purchase orders, signature stamps, and procurement cards to streamline the accounts payable function. It can also lead to improved levels of reporting for use by other parts of the company, such as activity-based cost-ing, target costing, or direct costing reports in the costing function. Further, it can reduce the number of transaction errors, by such means as automated employee expense reports, automated bank account deductions, or a simplifi ed commission calculation system. By implementing a plethora of best practices, a company can greatly improve its level of effi ciency and information reporting, which fi ts nicely into the requirements of most strategic plans.
One can go further than describing best practices as an excellent contribu-tor to the fulfi llment of a company’s strategy, and even state that a strategy does not have much chance of success unless best practices are involved. The rea-son is that best practices have such a large impact on overall effi ciencies, they unleash a large number of excess people who can then work on other strategic issues, as well as reduce a company’s cash requirements, releasing more cash for investment in strategic targets. In addition, some best practices link company functions more closely together, resulting in better overall functionality—this is
a singular improvement when a company is in the throes of changes caused by strategy shifts. Further, best practices can operate quite well in the absence of a strategic plan. For example, any department manager can install a variety of best practices with no approval or oversight from above, resulting in a multitude of
benefi cial changes. Thus, best practices are a linchpin of the successful corpo-rate strategy, and can also lead to improvements even if they are not part of a grand strategic vision.
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