Best management practices refer to the processes, practices, and systems identified in public and private organizations that performed exceptionally well and are widely recognized as improving an organization’s performance and efficiency in specific areas. Successfully identifying and applying best practices can reduce business expenses and improve organizational efficiency. Best practices we have identified in our work resulting in recommendations to the defense community include: (1) relying on established commercial networks to manage, store, and directly deliver defense electronic items more efficiently; (2) using private sector food distributors to supply food to the military community faster and cheaper; and (3) adopting the use of supplier parks to reduce maintenance and repair inventories. Most of the Defense Management and NASA’s (DMN) best practices reports have focused on using best management practices to improve a specific the Department of Defense (DOD) process. DMN has also reported on management concepts that are important in successfully implementing best management practices throughout an organization, such as reporting on techniques companies use to achieve and manage change. See appendix I for a list of the reports related to the use of best management practices and additional information on each report’s findings. DMN chose initially to look at applying best management practices techniques in the area of supply management, because DOD’s supply system has been an area with long-standing problems in which proposed solutions seldom corrected the conditions identified. Also, DOD’s supply management is a large budget item so the potential for large dollar savings was present. DMN believed that comparing DOD’s supply management practices to those that had a proven track record in the private sector would provide a picture of what improvements were possible and indicate proven strategies. A GAO consultants’ panel, consisting of retired DOD officials and logistics business and academic experts, agreed that looking at private sector practices would help us find ways to improve DOD operations, because many private sector companies had made fundamental improvements in logistics management. DMN’s best practices work can result in radical changes in certain DOD processes, as well as substantial dollar savings. Since 1992, as a direct result of our recommendations, the Defense Logistics Agency (DLA) has taken steps to have private sector vendors supply pharmaceutical products, medical supplies, food, and clothing and textiles directly to military facilities in lieu of the traditional military supply system. As a result, by 1997, DLA expects a 53-percent reduction in its 1992 inventory level of these items. With fewer days’ worth of supplies on hand, DLA depot overhead costs will decline also. Other examples of results of best management practices reviews are shown in figure 1. Why Use the Best Management Practices Approach in Evaluations? Deciding whether to use a best practices approach involves considering a number of factors. Our experience shows that the following questions can serve as a guide in making the decision. Have GAO and others reported on the acknowledged problem areas before, and to what extent has there been attempts to make the process work as designed? In our case, GAO had reported on DOD’s inventory problems for over 30 years, and DOD had generally agreed with our observations and had often taken steps to improve the process. However, improvements were incremental at best and failed to achieve significant gains in effectiveness or dollar savings. Is there a process with similar requirements that can be compared to the one being examined but is implemented in a way that provides significantly better results? For example, a military and private hospital both depend on timely and accurate delivery of supplies. Do the areas being considered have an established counterpart in the private or public sector that will provide evidence of the benefits of a new process? For example, we compared the way DOD procures, stores, and delivers food to base dining halls to the way institutional food users in the private and public sector obtain food. Other areas looked at, such as medical, clothing, and spare parts inventories, also allowed us to make comparisons with processes with similar objectives in the private and/or public sector. A best practices review can be applied to a variety of processes, such as payroll, travel administration, employee training, accounting and budgeting systems, procurement, transportation, maintenance services, repair services, and distribution. You may consider looking at an area where the agency has already begun to implement some best management practices, but with limited success. Additional work in the area may provide a crucial boost to an agency’s efforts. Looking at current industry trends in contracting out business functions (also referred to as “outsourcing”) can also suggest areas that could benefit from a best practices review. For example, private sector companies are beginning to outsource logistics functions, primarily transportation and distribution, and data processing functions. When Is a Best Practices Approach Appropriate? objectives. Ask questions like (1) What drives the costs in a particular process? and (2) Is the process effective in achieving its goals? An initial step is to determine all the variables that contribute to the expenditures associated with the area. Another early step is to start with the areas that the customers think are of major importance to the organization being reviewed. Identifying the scope of the process you plan to review is not always easy. It is not always clear where you begin and where you stop when you decide to benchmark a process. It is important that the entire process be considered, rather than just part of the process. For example, in reviewing DOD’s food supply, we examined the entire food supply system, including buying, storing, and distributing food rather than just a part of the system such as distribution because these parts are interconnected and changes in one part will impact the others. If you fail to capture the entire process then you may push costs into another section of the process or create an improvement that is inhibited by trying to marry old ways with new ways that are in conflict with each other. However, you cannot look at everything. At least initially, select a process which is about ready to accept change. Under a best practices review, you are forced to consider new approaches. Specifically, you will compare how an organization performs functions with one doing them differently—such as a function in a unique government agency with a company performing the same or similar function in the private sector. The different approach may turn out to be a much better way of performing a function. Implementing this better way to perform a process throughout the organization is what allows an agency to make meaningful changes. In identifying best practices among organizations, the “benchmarking” technique is frequently used. In benchmarking with others, an organization (1) determines how leading organizations perform a specific process(es), (2) compares their methods to its own, and (3) uses the information to improve upon or completely change its process(es). Benchmarking is typically an internal process, performed by personnel within an organization who already have a thorough knowledge of the process under review. Our approach is similar. However, GAO’s role is to look at the process from the outside, much like a consultant, and determine if that process can be improved upon or totally changed. The best practices evaluation will look not only at quantitative data, such as costs, but also at how other processes and aspects such as organizational culture might be affected by change. In our work, we have found several elements that any best practices review should include. These elements are listed below and then discussed separately in detail: (1) Gaining an understanding of and documenting the government process you want to improve. (2) Researching industry trends and literature, and speaking with consultants, academics, and interest group officials on the subject matter. How Do You Perform a Best Management Practices Review? (3) Selecting appropriate organizations for your review. (4) Collecting data from these selected organizations. (5) Identifying barriers to change. (6) Comparing and contrasting processes to develop recommendations. The first step in beginning a best practices review is to thoroughly understand the government process you are reviewing before you go out to speak with officials in various organizations. This will help not only to fully understand the process but to recognize opportunities for improvement. Understanding the process will ease your analysis by defining a baseline for comparison and providing more focus to your questions when you make inquiries on the best practices identified in other organizations. Further, a good depth of understanding is essential to selecting appropriate comparison companies. Discussing the process in detail with agency officials and flowcharting the process will facilitate data gathering from the comparison organizations and the comparative analysis. Preliminary planning and research are key elements in preparing a best practices review; both must be done before selecting the organizations for comparison. Performing a literature search, researching industry trends, and speaking with consultants, academics, and industry/trade group officials will provide valuable background information on the process under review. It will also provide you with the names of leading edge companies and public sector organizations. How Do You Perform a Best Management Practices Review? The people you speak with before selecting the organizations for comparison can give you useful information on the best practice you are reviewing, as well as the names of leading edge organizations. They may also be able to provide you with a contact into an organization. You will find the names of consultants, academics, and industry/trade groups during your literature search. Other resources for finding these names range from telephone book listings of industry groups to faculty rosters for schools that specialize in the area you are evaluating. Obtaining company annual reports or other background information on the organization before your visit will help you to prepare for your meetings with officials. Most of the leading edge organizations receive calls from many others to learn about their practices. Therefore, they will only provide you with a limited amount of time. Having a thorough background on the issue, including the government’s process, will allow for an effective use of both parties’ time. After you have reviewed the literature and after all of your discussions with consultants, academics, and industry/trade group officials, you will have compiled a list of many organizations cited as “best” in their respective industry for the process you are reviewing. The next decision is determining how many organizations to visit. In our best practices reports, we visited an average of nine companies per job. Visiting too many companies can cause “analysis paralysis,” according to benchmarking experts. These experts say to keep the number of companies to a manageable number, which can be as low as five. Officials from each organization that you speak with will also be able to tell you which companies are the best in a given area. You may want to add a company to your list if it is one that you keep hearing about. Getting the names of other leading edge organizations from these officials will also help to confirm that you selected the right companies to visit and provide additional leads on others. Depending on the process under review, you may want to select companies that are geographically dispersed. We used this criterion for the selection of companies in the DOD food inventory report. You will need to determine the criteria that best meet your needs. How Do You Perform a Best Management Practices Review? organizations. In these cases, what is important is to find companies that are considered by experts to be among the best at the process you are reviewing. Such companies may be able to give you more time than the very best, which may be flooded with requests to study them. After you have researched and begun planning your review, you should develop a list of questions to use as a guide for discussions with the consultants, academics, and industry/trade group officials. You may need to refine the questions after these discussions and prior to your first interview with private sector company or public sector officials. You may also need to refine the questions again after your first interview with these officials. A standard list of questions will ensure that you are obtaining comparable information among the organizations you speak with. As with the process of the agency you are evaluating, you will need a thorough understanding of the process in the private sector before you can compare and contrast the two and make effective recommendations. The list of questions will help you obtain the information needed from all sources in order to make a detailed analysis. Your analysis will involve looking for common practices and characteristics among the organizations you have identified as having best practices in the selected function you are reviewing. A major challenge to ensuring that your final recommendations will be implemented and effective lies in identifying the barriers to change, whether real or perceived. Your discussions with agency officials and your background research should provide information on such potential sources of barriers as regulatory requirements, organizational culture, and the impact of the change on the agency and its services. Government agencies often must operate under many statutory requirements that do not exist in the private sector. While such regulations do not always prevent the use of best management practices, they may make change difficult. For example, DOD officials were concerned that using private sector distributors to deliver food to base dining halls would eliminate the participation of small businesses. This concern was alleviated when we demonstrated that most private sector food distributors were already small businesses. How Do You Perform a Best Management Practices Review? Organizational culture may be a major obstacle. In our work, we were faced with the fact that DOD has been doing business the same way for over 50 years. Such an entrenched system could make changes difficult to implement. As a way to encourage and support new ways of operating, we did a review on how leading edge companies were able to change their organizational culture in the face of radically new operations. The report provided an impetus for DOD to think differently. However, this work also showed that immediate and comprehensive change is unlikely in any organization: it can take 5 to 10 years or longer to change an organization’s culture. A paramount consideration should be the effect of recommendations on the agency’s future ability to provide its service. For example, if your review leads to recommending that a function be privatized, you will need to consider the impact this will have on taking the function away from the government. You will need to raise—and answer—such questions as what would happen if a strike should occur at the company that takes on the function, a natural disaster destroys the company building, or the company goes out of business. However, it is likely that the private sector may provide information on these instances since the same events would equally have an impact on the private and public sectors. The final step in the best practices review is to compare and contrast the agency’s process to the processes of the organizations you benchmarked, and to decide whether the agency would benefit from implementing new processes. If the answer is “Yes,” remember that flexibility is a key theme, as it may not be possible for the agency to do things exactly as they are done in the other organizations. A successful recommendation strategy in our work that encourages the idea of change is to give the agency a “basket of ideas” from which to choose and adapt to their unique operations. Demonstrating possible savings and recommending key steps for change will help to promote that change. Photographs of the consequences of the government’s process versus the private/public sector’s process are a convincing tool to illustrate the effectiveness of a recommended change. How Do You Perform a Best Management Practices Review? In addition, we have tried to help DOD one step past issuance of the report. Specifically, we have tried to use the knowledge gained during the review to help in facilitating the change. For example, we have met formally and informally with key officials to discuss how the change can be implemented. We also made presentations to groups affected by the change. In work such as this, “follow through” means staying in touch and educating and influencing with whatever assistance can be provided. At the same time, we maintain our ability to critique the results in a constructive way. Perhaps the most convincing argument for implementing recommendations for radical change lies in the environment of tight budgets. At DOD, such constraints have forced DOD officials to look toward new ways to do business and, in turn, save money. Consequently, most officials have been receptive to many of our streamlining recommendations. Much of what we have learned about doing best practices reviews goes into any evaluation-related work. However, we have some specific practices that were so useful to us that we created an ongoing list of helpful tips. These should help in planning the review and in establishing productive relationships with the selected organizations. We used two different approaches to arranging a meeting with the desired officials of the target organization. First, if you have a contact’s name, you can call the person directly and request an interview. You might either call first or send a letter followed up with a call. Second, if you were not able to obtain a name through the literature or through your discussions with the consultants, academics, and industry/trade officials, you can contact the office of the president of the company either by phone or by letter. This office will be able to direct you to the appropriate official(s). With either approach, your letter or your phone call should state your purpose very clearly and ensure them that the information will only be used for benchmarking. Send a copy of the questions to the organization’s officials before your visit. This will allow them the opportunity to prepare for the meeting, gather requested information, and invite pertinent personnel. If the list of questions is long, you may want to consider sending a shorter version. After you have set up a meeting time, date, and place, it is best to mail (or fax) a letter of confirmation. Your questions can be sent with this letter. It is also a good idea to reconfirm the meeting a few days prior to your scheduled time. After the meeting, follow up with a thank you letter. On average, plan to spend between 1/2 day to a day and 1-1/2 days with the company. However, the amount of time a company will give you will vary. DMN’s experiences have run the gamut from a 1-hour phone interview to a 2-week detailed look at a company’s operations. If you plan to use the organization’s name in the report, ask for permission. Inform all interviewees that you will be providing them with a draft or relevant portions of the report for their review. This will help ensure that you correctly interpreted the information obtained from interviews. It also allows the company the opportunity to ensure that they did not give you any proprietary information during the interview. What Else Do You Need to Know? Plan for your review (planning, data collection, and analysis) to take an average of 12 months. As pointed out above, these reviews take a lot of up-front work, and getting into leading-edge companies can take a long time. Nonetheless, we have found that the results of these reviews have justified the time spent. Throughout the review, pay attention to establishing good working relationships with these organizations. As in any evaluation, this provides a sound foundation for future contacts.

Summary: GAO reviewed best management practices to make government operations more efficient and less costly, focusing on those approaches adopted by the Department of Defense (DOD) that other federal agencies could use to improve their operations. GAO found that: (1) best management practices refer to the processes, practices, and systems identified in public and private organizations that performed exceptionally well and are widely recognized as improving an organization's performance and efficiency in specific areas; (2) successfully identifying and applying best practices can reduce business expenses and improve organizational efficiency; (3) best practices GAO has identified in its work resulting in recommendations to the defense community include: (a) relying on established commercial networks to manage, store, and directly deliver defense electronic items more efficiently; (b) using private sector food distributors to supply food to the military community faster and cheaper; and (c) adopting the use of supplier parks to reduce maintenance and repair activities; (4) deciding to use a best practices approach involves considering a number of factors and several questions can serve as a guide in making the decision, including: (a) Have the acknowledged problem areas been reported on before and to what extent has there been attempts to make the process work as designed? (b) Is there a process with similar requirements that can be compared to the one being examined but is implemented in a way that provides significantly better results? and (c) Do the areas being considered have an established counterpart in the private or public sector that will provide evidence of the benefits of a new process? (5) a best practices review can be applied to a variety of processes such as payroll, travel administration, employee training, accounting and budget systems, procurement, transportation, maintenance services, repair services, and distribution; (6) the decision to use a best practices review should be made in a larger context that considers the strategic objectives of the organization and then look at the processes and operating units that contribute to those objectives asking questions like: what drives the costs in a particular process; and is the process effective in achieving its goals; (7) it is important that the entire process be considered rather than just part of the process; (8) failing to capture the entire process may push costs into another section of the process or create an improvement that is inhibited by trying to marry old ways with new ways that are in conflict with each other; and (9) not everything can be looked at so, at least initially, a process which is about ready to accept change should be selected.