Best practice analysis

A best practice is a method or technique that has been generally accepted as superior to any alternatives because it produces results that are superior to those achieved by other means or because it has become a standard way of doing things, e.g., a standard way of complying with legal or ethical requirements.

Best practices are a set of guidelines, ethics, or ideas that represent the most efficient or prudent course of action in a given business situation.

Best practices may be established by authorities, such as regulators, self-regulatory organizations (SROs), or other governing bodies, or they may be internally decreed by a company’s management team.

Best practices are used to maintain quality as an alternative to mandatory legislated standards and can be based on self-assessment or benchmarking. Best practice is a feature of accredited management standards such as ISO 9000 and ISO 14001.

Some consulting firms specialize in the area of best practice and offer ready-made templates to standardize business process documentation. Sometimes a best practice is not applicable or is inappropriate for a particular organization’s needs. A key strategic talent required when applying best practice to organizations is the ability to balance the unique qualities of an organization with the practices that it has in common with others.

Good operating practice is a strategic management term. More specific uses of the term include good agricultural practices, good manufacturing practice, good laboratory practice, good clinical practice and good distribution practice.

Best practices serve as a general framework for a variety of situations. For instance, in businesses that produce physical products, best practices that highlight efficient ways to complete tasks might be given to employees. Best practices lists may also outline safety procedures in order to minimize employee injuries.

For corporate accountants, the generally accepted accounting principles (GAAP) represent best practices. GAAP is a common set of accounting standards which aim to improve the clarity, consistency, and comparability of the communication of financial information.

GAAP facilitates the cross-comparison of financial information across different companies within the same sector. This benefits investors and the companies they invest in by promoting transparency.

Investment managers may follow best practices when handling a client’s money by prudently investing in a well-diversified portfolio and adhering to a client’s risk tolerances, time horizons, and retirement goals.