Best Practices Often Fall Short

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For many leaders, the allure of so-called “industry best practices” is strong and leads to expectations for results that are unrealistic. Why? Executives tend to take the value of best practices as a given. They have an abiding faith in the idea that the most direct route to improved performance is to study what the most successful companies do and copy them.

Best practices certainly do have their benefits. In Bordeaux, France, for instance, many wineries now follow practices recommended to them by winemaking consultants, such as micro-oxygenation, a technique that involves injecting controlled doses of oxygen into wines during fermentation. Micro-oxygenation softens tannins, which minimizes the need for long-term storage and makes wines easier to drink at an early stage. For most vintners, this leads to an improvement in quality. But there is a downside: Micro-oxygenation also makes wines taste more similar, and thereby reduces brand distinction and competitive advantage.

This phenomenon isn’t peculiar to winemaking. After following the outsourcing, franchising, and wine industries closely for the past fifteen years, Professor of Business Strategy Jérôme Barthélemyhas come to the conclusion that adopting a best practice is a great way to achieve average results. In fact, as he explains in the Spring 2018 issue of MIT Sloan Management Review,adopting a “best practice” that is wrong for your company can destroyvalue.

Managers often assume that everything a successful company does is a best practice. But many such practices aren’t actually critical to the success of the organizations that embrace them. For instance, a best-selling author once claimed that creative companies such as Pixar Animation Studios all have centralized restrooms. He argued that locating the restrooms in the middle of a company’s offices fosters creativity because it leads to chance encounters among employees from different departments who might not otherwise mix with one another. In reality, the practices that explain a company’s success are rarely that obvious. Nor does correlation prove causation: Many analysts believe that Pixar’s creativity owes more to its nurturing peer culture, which allows employees to...

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