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7 Organizational Best Practice – Accounting, Purchasing, Sales, Manufacturing, HR, Organizational Structure, and Organizationwide.

7 Organizational Best Practice

Best Practice Structure

The first step in a successful quest for best practices is to define the company’s desired best practice areas as related to their reasons for existence, basic business principles, mental models, belief systems, performance drivers, and so on.

These best practice areas typically encompass the organization as an entity as well as its major functions. An example of such an organizational best practice structure is as follows:

1. Organizationwide

  • Operate all activities in the most economical, efficient, and effective manner as possible.
  • Provide the highest-quality products to customers at the least possible cost.
  • Satisfy customers so that they will continue to use the company’s products and refer the company to others.
  • Convert the cash invested in the business as quickly as possible so that the resultant cash-in exceeds the cash-out to the greatest extent possible.
  • Achieve desired results using the most efficient methods so that the company can optimize the use of limited resources.
  • Maximize net profits without sacrificing the quality of operations, customer service, or cash requirements.

Organizationwide best practices set the pace for all other best practices

2. Organizational Structure

  • Clear lines of authority.
  • Proper division of duties and responsibilities.
  • Communication between functions—across, upward, and downward.
  • Minimal use of personnel and only as needed.
  • Proper delegation of responsibilities and authority.
  • Management able to effectively control the sphere of its operations and results.
  • Management and other personnel clearly understanding what is expected of them and the results to be achieved.
  • Organization established based on the principles of the three Es—economy, efficiency, and effectiveness.
  • The right-size organization for what needs to be accomplished.
  • Minimal levels of nonvalue-added employees and management.
  • Organization no larger than it has to be to accomplish results.

The organizational structure establishes how the organization works together

3. Sales Function

  • Make sales to the right customers that can be collected profitably.
  • Develop sales forecasts that are realistic in that the forecast results in a present or future real customer order.
  • Sell those products as determined by management to the right customers, at the right time, in the right quantities.
  • Actual customer sales should directly correlate with management’s long-term and short-term plans.
  • Sales efforts, and corresponding compensation systems, should reinforce the goals of the company.
  • Customer sales should be integrated with other functions of the company such as manufacturing, engineering, accounting, purchasing, and so on.

The sales function delivers the who, what, when—amount and price—of desired sales

4. Manufacturing

  • Operate in the most efficient manner with the most economical costs.
  • Integrate manufacturing processes with sales efforts and customer requirements.
  • Manufacture in the most timely manner considering processes such as customer order entry, timely throughput, and customer delivery.
  • Increase the productivity of all manufacturing operations on an ongoing basis.
  • Eliminate, reduce, or improve all facets of the manufacturing operation including activities such as receiving, inventory control, production control, storeroom operations, quality control, supervision and management, packing and shipping, maintenance, and so on.
  • Minimize the amount of resources such as personnel, facilities, and equipment that is allocated to the manufacturing process.

Manufacturing best practices provide for least cost, greatest efficiency, best quality, and timeliness

5. Personnel

  • Provide only those personnel functions that are absolutely required as value-added activities.
  • Maintain the levels of personnel at the minimum required to achieve results in each functional area.
  • Provide personnel functions such as hiring, training, evaluation, and firing in the most efficient and economical manner possible.
  • Develop an organizational structure that enables each function to organize in the most efficient manner for its purposes.
  • Minimize the hiring of new employees by such methods as cross-training and interdepartmental transfers and other best practices.
  • Implement compensation systems that provide for effective employee motivation and the achievement of company goals.

Personnel practices ensure the least number of quality personnel

6. Purchasing

  • Purchase only those items where economies can be gained through a system of central purchasing.
  • Implement direct purchase systems for those items that do not need to be processed by the purchasing function such as low dollar purchases and repetitive purchases.
  • Simplify systems so that the cost of purchasing is the lowest possible.
  • Effectively negotiate with vendors so that the company obtains the right materials at the right time, at the right quality, and at the right price.
  • Maintain a vendor analysis system so that vendor performance can be objectively evaluated.
  • Develop effective computerized techniques that provide for economic processing, adequate controls, and reliability.

Purchasing efficiencies create overall efficiencies

7. Accounting

  • Analyze each of the accounting functions and related activities, such as accounts receivable, accounts payable, payroll, budgeting, and general ledger, as to their necessity.
  • Operate each of the accounting functions in the most economical manner.
  • Implement effective procedures that result in the accounting functions becoming more analytical than mechanical.
  • Develop computerized procedures that integrate accounting purposes with operating requirements.
  • Develop reporting systems that provide management with the necessary operating data and indicators that can be generated from accounting data.
  • Eliminate or reduce all accounting operations that are unnecessary or provide no value-added incentives.

Accounting best practices make accounting functions a profit center