I’ve just finished reading a wonderful book. It’s really helped me pull together my thinking on “best practices.” Before I tell you about it, let’s talk for a moment about this fabled treasure, “best practices.”
The term “best practices” gets batted around. Many writers seem to mean “good ideas.” Just as one encounters “style drift” in monitoring investment managers, one sees, especially here, “word drift.” Consider:
“The Vanguard Target Retirement target date funds employ best practices with low fees, a high level of transparency, and prudent investor-oriented management, according to Morningstar’s research,” reported an article in the Sept. 9, 2009 Investment News.
Other mentions refer to best practices without actually specifying them.
“More than 90 [percent] of wealth managers today make it their priority to learn and implement best practices of leading advisors,” wrote CEG Worldwide’s John Bowen in Financial Planning magazine.
In still other cases, one would have no clue how to implement a best practice.
“A common element of best practice advisors is their ability to self-actualize their practices. In essence, this means making the conscious decision to craft a business model that serves longevity clients, rather than simply accommodating the needs of retirees as part of a more generalized practice.” That was Dennis Gallant, right here at Research in February.
My question about best practices is simple: Where’s the beef? Are we dealing here with a case of the Emperor’s New Clothes?
Make a List
With this as background, let me now introduce you to one of the best books I’ve read in a while, The Checklist Manifesto by Atul Gawande, a surgeon (general and endocrine) at Brigham Young Women’s Hospital. A terrific writer too.
First let me address a likely question: Why read a book about checklists by a doctor? Answer: because his discoveries have a lot to do with any complicated industry.
In his book, Dr. Gawande tells the gripping story of how lives were saved and infection rates slashed by a device that may also prove useful in saving businesses: the lowly checklist.
Consider the story of just one checklist developed by a Dr. Peter Pronovost. He became concerned about infection rates when a surgical team inserts a central line into a patient’s body. He came up with this checklist.
- Wash your hands with soap.
- Clean the patient’s skin with chlorhexidine antiseptic.
- Put sterile drapes over the entire patient.
- Wear a mask, hat, sterile gown, and gloves.
- Place sterile dressing over the insertion site once the line is in.
Silly, right? We’re talking operating rooms in one of the great hospitals, Johns Hopkins. But consider: Dr. Pronovost asked the nurses to observe the doctors. In more than a third of the cases, they skipped at least one step.
Over the course of the year, the hospital administration empowered the nurses to ensure the checklist was done. The results were stunning. So-called “line infection” rates went from 11 percent to zero.
Hmm. That checklist looks like a “best practice” to me.
According to Dr. Gawande, here’s why a simple checklist is vital in any complicated activity: “We have accumulated stupendous know-how. We put it in the hands of some of the most highly trained, highly skilled, and hard-working people in our society. And, with it, they have indeed accomplished extraordinary things. Nonetheless, that know-how is often unmanageable. Avoidable failures are common and persistent, not to mention demoralizing and frustrating, across many fields–from medicine to finance, business to government. And the reason is increasingly evident: the volume and complexity of what we know has exceeded our individual ability to deliver its benefits correctly, safely, or reliably. Knowledge has both saved us and burdened us.”
Does this sound like an industry you know about? Then you will enjoy the chapter on “The Hero in the Age of Checklists.” In it, Dr. Gawande details how three investment managers use checklists to achieve superior performance.