The argument for adopting “best practices” seems ironclad, at least on the surface. If you want your company to get better, you look at what great companies do (or at least companies that perform better than yours), and then copy it. This assumption is so obvious that most management writers, consultants, software vendors and gurus don’t even talk about it explicitly. They show you the differences, say, between firms that use Six Sigma, that fight the war for talent, that outsource IT or manufacturing, or that use their enterprise software, and those that don’t, to “prove” the value of their wares. This “follow the leader” strategy isn’t outright wrong, but trying to be just like General Electric, MTV, Procter & Gamble, SAP or whatever company you admire most isn’t as sound an idea as it might seem.
The first problem is that correlation is not causation, a mantra you’ve no doubt heard if you ever took a statistics class. Yet it is easy to forget that even the best-managed companies succeed despite rather than because of what they do. This point becomes obvious when you look at CEO behavior. Southwest Airlines founder and longtime CEO Herb Kelleher made no secret of his penchant for consuming large amounts of Wild Turkey whiskey—indeed, he repeatedly bragged about it to the press. Do you really believe that if your CEO starts drinking large amounts of Wild Turkey, your firm’s performance will improve? It sounds silly, but many companies borrow practices just because Toyota, Wal-Mart, Apple Computer and especially General Electric uses them. As I’ve mentioned before in this column, GE’s performance-evaluation system, where the “A Players,” the top 20 percent, get the lion’s share of rewards, has been copied by many companies. Unfortunately, controlled studies provide no credible evidence to support such beliefs. As long as a company’s business processes require that people share information and coordinate with one another, organizations that reduce pay differences between the top and the bottom tend to perform better over time.
How can you avoid the best-practices trap? My answer is to look at successful companies to spot ideas that might work.
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Robert I. Sutton is co-author, with Jeffrey Pfeffer, of The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action. He coleads Stanford University’s Center for Work, Technology and Organization. Professor Sutton’s next column will appear in May.
Illustration by John Kascht