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Best Practice Or Not Best Practice? That Is The Question

We often look outside our organisation to find the best practice. But that may be very bad practice...

Benchmarking, best practice and best fit

Paul Hughes

Cranford School Of Management

Is a sales person closing deals worth ‘ten million’ doing a good job? At first glance, it’s impossible to tell. The first thing you need to find out is: what currency? A ten million deal in pounds sterling is better than a ten million deal in US dollars, but the latter is still a decent size. If the deal in question is worth ten million Japanese Yen, that’s not such an impressive number at all*. Though again, that depends on what the typical sale value is for your company. If the average is one million sterling, dollars or yen, then ten million is exceptional regardless of the currency, but it’s pretty poor if the average is 100 million.

It’s only by making the comparison that we are able to determine the level of value. We do it all the time and it is referred to as ‘benchmarking’, which can be defined as comparing an organisation’s metrics, structure and process with the appropriate best in class from the same or comparable industries. It allows organisations to make comparisons in order to determine if what they are doing is valuable or not. Your organisation might be averaging ten million deals all day long, but if the competition is averaging 20 million, you no longer look so good.

Or do you? You see, the most important word in the above definition of benchmarking is ‘appropriate’. If the competition has costs that amount to 15 million per deal while yours are four million, then you are making a million per deal more than them. Or they might be making a 12 million profit per deal while you’re making your six million, but if they close one deal per week and you close one per day, then you’re still on top, and so on. Comparisons can be helpful, but if they’re not appropriate, and fail to take account of costs, profits and sales volumes or neglect some other data, they can actually be quite dangerous and lead to some really bad business decisions.

What’s this got to do with in-house lawyers? Quite a lot, because I’ve noticed a growing use of the term ‘best practice’ in and around the in-house community. Those looking at what others do are undertaking benchmarking as a method of finding ways to add value. Discovering how others do it and then trying to replicate that in your own organisation is very tempting. But rather than being happy that in-house lawyers are being proactive, I’m becoming increasingly concerned that too few are asking the vital follow-up question about appropriateness: ‘Is this applicable here?’ Sure, best practice may be of general interest, but is it generalisable to another context?

Take the company ‘REG plc’ as an example. It hires a new GC who, following consultation with the board to find ways of adding more value, sets to work comparing the structure and processes of its internal in-house function with one of its competitors – searching for best practice solutions that can add value. The GC and their chosen team attend some conferences, have some conversations, gather ideas and make a decision. They will ‘right size’ the in-house function, based on the best practice they have seen in a similar company, ‘RON plc’. RON plc operates in the same industry and its in-house department deals with similar legal work. It lowered the number of full-time employees, moving many to part-time contracts, while implementing a new IT system to create efficiencies in parallel. As a result, RON plc saved costs yet delivered the same service, and had set the best practice for the industry. So off went REG plc to implement this best practice, scaling down or making full-time workers redundant in favour of part-time workers, while migrating a great deal of process to a new IT platform. Just as RON plc had done. The quality of the change project was, by all accounts, excellent, and everything happened on time and on budget. The IT system was effective and easy to use. The HR department worked hard to minimise impact and provide training. The results? Dreadful. Internal customer service plummeted, drafting of contracts and decisions backed up, sales were delayed or lost, costs rose and there were red faces all around. Why?

Because while they looked similar, REG plc and RON plc were very different. Put simply, the question ‘is this applicable round here?’ hadn’t been asked. All the early warning signs were ignored and everyone became convinced that the ‘best practice’ was the only way forward. Anyone who questioned the logic was a ‘dinosaur’ and was sidelined or moved off the project. But an incorrect comparison had been made at the start.

'Best practice may be of general interest, but is it generalisable to another context?'

RON plc, while being in the same industry, operated very differently to REG plc on a cultural level. While the legal work was similar, the way the in-house legal team interfaced with its internal customers was not. RON plc had operated quite a distant style of communication between the in-house legal team and the business. Therefore, when the systems changed it was, in many ways, an improvement on what had been before. But in REG plc, longstanding, close-knit relationships built on years of shared experiences, knowledge and trust were broken when the new systems came into play. People who usually spoke to each other every day had to use the IT system to communicate. Some ignored it and carried on using the phone, so things took longer to process.

Meanwhile, far fewer REG plc lawyers stayed through the transition to move from full-time to part-time. The newer lawyers lacked the relationships, while working with a system that was only partly populated with the right information. Much of the value added by REG plc’s in-house team came not only from the legal work they did, but from the way they did it, based on experience of the individuals in the organisation and their style of doing business. Those close connections suffered and the gains never materialised. Worst of all, REG plc’s GC didn’t have the close working relationship with the supply chain director enjoyed by RON plc’s GC. Thanks to that association, RON plc’s supply chain director applied personal discretion to coach the GC, went the ‘extra mile’ to ensure they met their own challenges, and adapted what they did to suit their context more than REG plc’s did.

Finally, in RON plc, the GC had a hidden asset: they’d done this several times before. Each time, they had learned from their mistakes and honed what they did, rather than slavishly shoehorning in a solution to a very different problem.

I came across REG plc a number of years ago. All the people involved were great, but they had set off down a cul de sac with all the wrong assumptions in place. And once things started to go awry, I saw no one willing to admit that they’d made some fundamentally wrong choices. Instead, the blame game crept in.

It isn’t solely the in-house world that suffers from lazy implementation of best practice. HR, IT, marketing, sales, design and so many others become lost in imitation games. Business schools and consultancies have spent decades earning billions shopping around the latest best practice. But for a long time, the value-creating ability of applying best practice has been under scrutiny. At a congressional hearing in 2007, Jeffrey Pfeffer (Thomas D. Dee II professor of organisational behavior at Stanford’s Graduate School of Business and a visiting professor at Harvard Business School, Singapore Management University and IESE Business School) gave evidence challenging the scourge of best practice, calling instead for ‘best fit’. He was bitingly clear in his view of what best practice was:

‘Mindlessly copying what other, apparently successful organisations seem to be doing, what people have done in the past and think has worked, what people are skilled and comfortable at doing, and what they hope will work’.

Yet despite this and many other well-reasoned arguments, the best practice gravy train rumbles on.

So, to avoid the trap, what can you do? Take a lesson from the GC of RON plc, who took the best fit approach. Best fit means looking at where the value in your organisation is being created, and then working out where there is opportunity to make improvements, rather than blindly copying something someone else has done.

Is seeking best practice wrong? Of course not – doing so has provided huge benefits to organisations for decades. But when no one asks ‘is this applicable round here?’ it can far too easily lead to bad practice.



How to use best fit as an alternative to best practice

1. Understand fully how your organisation is adding value to its stakeholders and customers.

2. Carefully map how your in-house function supports this:

  • What are the services?
  • Who is delivering them?
  • How are they being delivered?
  • What is adding the value and what isn’t?
  • How could you retain the value being added, but at a lower cost?

3. Only when you have done this can you start to compare what others have done:

  • Is it a genuinely comparable example?
  • Is it applicable here?
  • What benefits will I get from this approach?
  • What will not be appropriate here and therefore will not work?

4. Who can I work with to ‘coach’ my decision on this and help me to see if I’m missing something obvious?

These steps cannot guarantee success, but they will reduce the likelihood of a best practice failure.

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