Thursday, October 18th, 2012 | Author: Mike Mann
Your business idea and even your business model are only part of what it takes to get a company off the ground. Many a great idea has failed to take off, or the business built around that idea failed, because an entrepreneur didn’t develop the best practices that build efficiency and help a company to thrive.
The operating procedures and practices that you lay out can determine the success or failure of your business. Just by examining, refining and standardizing the way you do things, you’re gaining understanding of your industry and giving yourself a competitive advantage. Here are the guiding principles you should follow to develop best practices for your growing company.
Top-Down Hierarchies Can Stifle Change
Notice that I wrote that top-down management structures “can,” not “do,” stifle change. There has to be organization, but avoid the top-down approach whenever possible, especially when it comes to the best practices that make up the bulk of labor that’s actually being performed in your organization.
The inability for information to flow upward in a company is the bane of large corporations. They can’t assimilate feedback from the people on the ground, so they can’t adapt to the changing conditions in their actual marketplace; management and executives become disconnected from the realities of their business. They miss huge inefficiencies that their top-down changes to best practices create and demoralize their workforce by not allowing them the freedom to adapt those practices to the realities of their jobs. More flexible competitors, from smaller companies with better communication, step in to eat the lunch of these inflexible giants.
The antidote to this is to become less prescriptive with best practices as your organization grows. First and second-level managers should drive the bulk of change in best practices, coordinating between departments through the next level up to smooth over conflicts and prevent changes in one part of the company from sabotaging the success of another part.
Smart Best Practices Are Like Weapons
Efficiency and skill are what allow smaller competitors to undercut the big guys. Mike Mann sees the inflexibility that I just mentioned as an opportunity for you to use your superior best practices as weapons to battle it out with larger companies in the marketplace. Less adaptable companies simply won’t be able to compete with a team that has done their homework to develop a faster, smarter way of doing business.
Best Practices Aren’t Set in Stone
The marketplace naturally filters out inefficient business models and operating procedures that don’t improve a company’s profitability, similar to the way in which natural selection eliminates species that cannot adapt to changing environmental conditions.
Insightful entrepreneurs will develop new ways of doing business, and less efficient firms will simply be left behind. That’s just the way that the marketplace evolves, naturally selecting companies and ideas the work the best. The music industry is a good example, here.
Developing and implementing new best practices must be an iterative process, in which you review and revise your best practices continually, implementing new ideas on a regular basis. Trying to constantly change your process on the fly quickly becomes cumbersome as your organization scales. And immediately implementing every idea you have will quickly eat into the actual day-to-day work that you need to get done.
Best Practices Require Self-Examination
Developing a standardized set of best practices is a process that forces you to look at your own operations and streamline them in a way that maximizes the benefit/profit that you get from a certain activity. That process of detailed reflection and analysis also helps you discover the strengths and weaknesses of your particular business model. You can see what you’re doing right, and how certain activities could go wrong.
You can’t afford to be too optimistic or self-deceptive during this process, though. It’s tempting to ignore certain inefficiencies, or to put seemingly small problems on the back burner. But even small problems start to add up. Sooner or later, you’ll come crashing hard into reality, and your best practices need to be lean and mean enough stand up to real-world competition.
Measuring Performance against Standards
A company’s best practices help you set a benchmark against which to measure people on your team. There’s no use in having a standardized way of doing things if the people on the ground aren’t going to follow along. Mastery of best practices and standard operating procedures should be a prerequisite to advancement in your organization. And the feedback that you get from insightful team members about reforming your procedures can help you to identify talent that you otherwise might have overlooked in your organization.