Best Practice is Worst Practice  ／2017-09-27／Nick Sallnow-Smith

One common addition to business jargon over recent decades has been the term ‘best practice’. It has also become one of those ‘apple pie’ nostrums to which only the insane would object. Well, let me have a go at some insane objections to it.

On the face of it, what could be wrong with establishing the ‘best’ way of doing something and then sharing that procedure with others, thus raising ‘standards’? First, the assumption that there is always only one ‘best’ way of achieving an end. There could be many. But by focusing on the idea of only one, there is an implied loss of diversity. Broad promotion of a claimed ‘best’ solution will tend to encourage all to copy one approach. In large businesses in particular, the ‘IBM syndrome’ is very common. By this I mean the classic experience in the 1970’s and 80’s when IT departments of large corporations frequently bought an IBM solution to their needs. ‘No one ever got fired for buying IBM’ was the refrain in those days. Even if the choice turned out to be a mistake, the IT manager could save his job by pointing out that he was simply following what everyone else was doing. Most consultants would have recommended the same ‘best practice’. Herd instinct was encouraged, not innovation or change. Notice that there are two problems here. First, an innovative solution may be avoided in order not to risk criticism. But second, and in my view even worse, the manager concerned is incentivised not even to think about alternative ideas.

The consequence of this approach over time can be expected to be a uniformity of product or service, and a loss of creativity and initiative in large organisations. Think about car design for example. Back in the 1960s, the variety of styles and design was remarkable. This applies not only to the shape and engineering of the car but even the instrumentation. The experience in the driver’s cabin could be quite different in every car. Now the convergence of best practice has led to the convenience of being able to get into almost any marque and drive it away without reference to the manual. For the hire car business, this is naturally an advantage but it has led to a dull uniformity. Is that car ahead of you a BMW or Mercedes, a Hyundai or a Lexus? Hard to tell on a dark night. While this may seem to be a small loss when setting against convenience, I believe it to be at the heart of a much more concerning conforming approach to business. Products look and feel more and more similar (smartphones anyone?) Genuine choice and diversity is eroded. Let me give you a more serious example than car design. My personal ‘bete noire’ is the now ubiquitous MBA. Fifty years ago, senior financial managers in corporations in Europe and the US would have had a range of backgrounds and experience. As a consequence, many took differing approaches to the financial challenges of their businesses. Today it is rare to find anyone senior in such roles who has not gone through the MBA or Executive MBA indoctrination. Please note, I am not arguing that the syllabus of such courses is ‘wrong’, rather that they inevitably promote the financial best practice. As a result, when businesses hire for financial positions their ‘choice’ is inherently restricted. They are hiring ‘groupthink’. This is compounded by financial regulation having drifted in the same direction, towards a global conformity. Not many decades ago, the approach of the Bank of England to its mandate would have been quite different from that of the Banque de France. Now G20 task forces in this area are pushing for global conformity in financial regulation. (Market-based thinkers should be concerned that the Beijing authorities are amongst the most enthusiastic supporters of this approach.) From financial regulators’ perspective, this is aimed at risk mitigation. In practice, it drives risks much higher. Increasingly, there is no diversity in either the way in which banks are run or in the way they are regulated. If the balance sheet ratios or risk weightings ‘advised’ by regulators turn out to be misguided, the problem will be global, not local. Once again the temptation to assume that there is only one ‘best’ way is leading not only to uniformity and dullness but to risk as well.

Oddly, most governments’ attitude to the private sector is to fear, and indeed try to defeat (by regulation), any uniform and monolithic way of doing business. The EU’s attacks on Apple, Google and other large companies are typical. Antitrust crusaders emerge immediately any business sector becomes dominated by a single large company. Amazon is the latest target. Diversity appears to be the watchword for the Government’s model for the private sector. Yet every action government takes through regulation of the private sector works against diversity. Not only in banking but, to take another example, property. Building controls, planning regulations etc. all reduce the ability of business to find different solutions to real estate problems.

In the public sector of course, diversity is resolutely opposed. In education, all children are taught the same syllabus in the same way. I heard recently of a child having her maths homework marked wrong, not because the answer was wrong but because she did not use the approved method to reach that answer. The school method was of course ‘best practice’.

In recent years, ‘best practice’ has even seeped into the emotional sphere. Today, if there is a natural disaster, it is politically vital for any leader to ‘tweet’ appropriate condolences instantly. The phrasing must be in keeping with ‘best practice’. It must have the politically correct emotional tone. The days when different characters responded in different ways, and a more stoical less emotive approach would be accepted, are over. Emotional conformity is here too.

In our emotional life, we need space to be ourselves and not conform to an imposed formula for living, otherwise we risk psychological problems. So too in our economic life, we need space to try different solutions, or we risk the economic problems of lower growth, lack of creativity, reduced choice for consumers and employees. It is both sad and ironic that governments always pay homage to the need for these things, yet pursue policies that generate the opposite. London, regarded by many as a creative city, bans Uber. Homeschooling, which would permit diversity of learning, is criminalised in many jurisdictions. In the name of “safety” or “best practice”, diversity and choice are being steadily eroded at a severe cost to the health of our community.

Nick Sallnow-Smith (Chairman)

September 2017

The Lion Rock Institute