Established practices are the policies and procedures used by companies in the past, providing a basis for projecting the reaction of company executives to certain events. While they provide stability, blindly following them can undermine a company’s ability to adapt to new market situations.
Also known as past practices, established practices are the activities of business companies based on the policies and procedures implemented and used by those companies in the past. The general concept can be applied to a wide range of situations outside of the business world, including government operations or even in the medical field. Sometimes expressed in direct terms in legally binding contracts, established practices can also be apparent based on the company’s history and how company executives applied policies and procedures to specific events.
The value of established practices is that everyone involved with the company has some basis for projecting the reaction of company executives to certain events. Based on how the business functioned in certain economic situations or dealt with changes in its internal structure, it is easier for employees, investors and other stakeholders to anticipate how the business will react to a current developing situation. As these past practices may be confirmed in the company’s founding documents or at least widely used in past situations, taking them into account can be very helpful in planning to face future events and deciding to maintain an interest in the business.
There are several benefits to established practices. The existence of time-honored ways of doing business helps provide some degree of stability to the business operation. For company employees, this means a reasonable concept of what to expect from one day to the next. Often, what has gone before can provide a great deal of information about how to handle anticipated changes in the marketplace. Investors can also look at past performance and relate that history to the future when deciding to buy additional stocks, hold stocks already purchased, or sell all or part of the stock in anticipation of some future market movement.
While there are several advantages to established practices, there are also some liabilities to consider. Following past practices without considering a new approach can often undermine a company’s ability to adapt to new market situations. The end result can be loss of turnover and market share, leading to company failure. A good compromise is to always explore established practices in order to determine the degree or relevance to new challengers and then make adaptations or changes as and when necessary to meet these new circumstances.
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