Large corporations have long relied on so-called “Best Practices.” All of the related initiatives such as ISO 2000 and Six Sigma began in the big business environment. In reality, however, small businesses may need best practices more and can meet their demise in the absence of them. This is particularly true across key categories of financial management, information technology (IT) systems management, human resources, marketing, and risk management. Understanding the intent of best practices and basic principles to follow within these categories and on an overall operational basis is vital.
What is a best practice?
Simply stated, a best practice is a policy and/or procedure which improves a specific business process or operational area. It is accompanied by benchmarking to assure that the practice is being followed and is meeting its intended goal.
Best practices are designed to achieve one or more of the following goals:
-Improve accuracy and prevent errors
-Increase performance and productivity
Where do best practices come from?
For small businesses, they are often borrowed from bigger companies or competitors. Unlike large companies with quality control departments for which a best practice initiative would be a natural assignment, small businesses often must engage their top management and key staff in areas of finance, marketing/sales, customer service and IT. These individuals typically have a full plate already and may not have the time to devise new ideas, particularly when best practices can be borrowed from other organizations.
Getting started, one area at a time.
So where does a small business begin in developing its best practices? One good place is with its industry association. Often part of the value-add an association provides its members is market research, survey results, white papers and special reports that take the pulse of industry members. Many organizations will canvas their members regarding operational improvements. In addition, direct networking and conversations with industry colleagues can be very helpful in identifying shared problems and solutions that may have worked for another company. A company’s trusted advisors and outside consultants in the areas of accounting, law, insurance/risk management, human resources, IT and marketing can also bring a wealth of sound ideas which can evolve into best practices. Finally, a small business CEO should reach out to its employees for suggestions and conduct its own market research into best practices recommended by neutral small business advocacy groups such as the National Federation of Independent Businesses, the Small Business Administration, SCORE and Small Business Development Centers.
To get started on a best practice program, take one area of operations at a time. Consider first the components which can be improved, determine how, and then develop corresponding policies and procedures to facilitate the improved business process.
Benchmarking is key.
Create a metric by which to measure the results of the improved practice. This benchmarking should be performed on a monthly a quarterly basis. Once best practices have been determined and implemented in one area, advance to the next area and so on until all core operations have undergone a best practice makeover.
Remember, today’s best practice may not be tomorrow’s. In addition to monthly and quarterly benchmarking, evaluate all practices on an annual basis to make sure they remain the “best” practice for that area or consider adopting new ideas or technologies in order to maintain peak efficiency, productivity and profitability.
Core Area Best Practices.
To get started on a best practice initiative, consider these following core areas and basic measures recommended by leading industry groups and experienced consultants:
-Find a Certified Public Accountant experienced in small business finance and taxation matters. This individual could be an outside accountant or of the company’s controller. The accountant’s role will encompass tax compliance, preparing financial statements, cash flow statements and projections, break-even analyses and assisting in financial planning all in accordance with General Accounting Procedures (GAP).
-Consider hiring a bookkeeper to oversee accounts payable, accounts receivable, banking processes, and financial statements.
-Purchase a financial management software program to automate management of the books, accounting transactions and financial statements.
-Establish financial controls to ensure that all transactions are properly recorded and that records are maintained accurately. These controls should cover all financial activities from establishing a chart of accounts to checkbook entries, bill paying, collecting receivables and financial audits.
-Create budgets specific to: operations, special projects and contingency needs.
-Form a relationship with a reliable IT service provider for regular system maintenance and monitoring to avoid unnecessary downtime.
-Apply standard network management practices and where possible, apply standardized software which will facilitate upgrades, patches and more readily provide access to support when needed.
-Institute a software deployment and auditing policy to keep track of licenses, new releases and upgrades, and avoid unnecessary copyright infringement liabilities.
-Back-up data on a regular basis and/or consider having a data center resource for this purpose.
-Take all measures available to secure the network (e.g., optimize the system’s security configurations, maintain up-to-date virus protection software, institute password protection and limited website access policies, optimize the system’s security configuration, encrypt sensitive data, prevent unauthorized devices and control the installation and removal of software, etc.).
-Develop a disaster recovery/business continuity plan.
Insurance & Risk Management
-With the assistance of an insurance specialist, identify all of the business’ exposures (i.e., losses related to property, business interruption, public or employee liabilities, key persons, employee injuries, automobiles, and criminal activity) and related insurance which covers these risks (e.g., property and casualty, employment practices liability, professional liability, business interruption, etc.).
-Establish a risk management program that encompasses your various risks, the use of insurance to cover those risks and policies/procedures to minimize or prevent these risks.
-Avoid activities that are risky (e.g., could result in injury to employees or customers, could pose third-party risks such as the use of uninsured or under insured sub-contractors, etc.).
-Minimize risks by implementing risk management procedures (e.g., installing state-of-the-art smoke and fire detection systems, automatic sprinkler systems, security systems and lights, locked areas containing valuable items, etc.).
-Purchase insurance which transfers risks and related liabilities to another party (i.e., the insurance company, another policy holder such as supplier or sub-contractor).
-Maintain insurance where required by law such as workers’ compensation and motor vehicle insurance.
-Rely on insurance providers that offer policies designed to meet the needs of the small business market in addition to claim management, loss control and inspection services.
-Create workplace which demonstrates that management values its employees, recognizes the importance of work-life balance, has family friendly policies, and strives to maintain satisfied employees.
-Have an open door policy where employees have access to top executives and can share their views regarding policies, procedures, challenges and concerns.
-Offer employee incentives and rewards for strong performance and performance improvements.
-Evaluate employee performance on a regular basis and share feedback with the employee in a constructive, non-confrontational manner.
-Provide employee training, continued education and mentoring programs that facilitate employees’ growth, development and career advancement.
-Sponsor team-building and camaraderie-boosting events like company picnics and offsite retreats and trips that enhance communication on a cross-department basis and through all levels of staff.
-Work closely with an employment law attorney to ensure full compliance with all workplace legislation.
-Conduct an audit of all of your existing marketing materials, from stationery and business cards to brochures, flyers, website, advertisements, trade show booth and signage.
-Evaluate all marketing materials against key criteria: Does it communicate our current brand? Does it market effectively to our intended target market(s)/customers? Does it champion our strengths and that which differentiates our organization from competitors?
Collectively, do our materials present a unified brand, corporate identity and message?
-Establish an annual marketing budget by first taking account of all marketing expenses from materials as noted above to personnel, trade show exhibition and travel costs, association membership fees, mailing lists, market research and any retainers paid to marketing consultants. Review these costs in the context of annual sales and net revenues to project a realistic marketing budget.
-With the support of a marketing professional(s), develop a marketing plan which leverages a marketing mix including the use of low cost Internet marketing and public relations (i.e., free news releases and features in news, business and trade publications, speaking engagements, etc.), traditional advertising and direct mail, as well as website enhancements such as Search Engine Optimization.
The Role of PEOs in Best Practices
One resource many small businesses find indispensable in helping them adhere to best practices across various areas of operations, particularly human resources and regulatory compliance, is a Professional Employer Organization (PEO). The PEO, serving as a co-employer to its clients’ employees, provides comprehensive human resources services including: payroll and tax administration, employee benefits design and administration, regulatory compliance and value-added employee services.