Norms & Standards
Norms and standards draw on shared professional experience. They include benchmarks for comparison, rules for acceptable behavior, and established procedures. Assess their usefulness, credibility, independence, and impartiality before using them as evidence.
THE IDEA
Norms & Standards
Norms and standards collect practical knowledge developed through shared professional experience: rules of thumb, established procedures, and benchmarks. Trade groups may publish them formally, or practitioners may share them informally. In Figure 7.10, the category includes benchmarks, norms, and best practices.
Benchmarks are points of reference that can be used as basis for comparing or assessing outcomes of interest,15 and describe experience that may help form expectations. They are often quantitative. The source gives examples of approximately 4% shareholder litigation risk for a publicly traded US company and acquisition costs about four times those of retaining a customer. These figures need a defined population, period, and method before they can guide a particular decision. Norms prescribe acceptable behavior. They may be internal rules or external requirements, such as securities rules governing insider trading. Best practices are procedures considered effective through professional experience or testing, such as established insurance claim-handling procedures. Their usefulness still depends on the task and setting.
FIGURE 7.10 Extracting Evidence from Published Norms & Standards.
Informal benchmarks can be hard to evaluate. The Pareto principle, for example, suggests that roughly 80% of effects come from 20% of causes, but that ratio need not fit a particular market or process. A familiar rule of thumb is not evidence of its own accuracy. The author recommends four questions:
- Utility: Does it apply to this decision?
- Credibility: How was the information compiled, and how sound was that process?
- Independence: Was it developed free from undue pressure or influence?
- Impartiality: Whose interests or assumptions might have shaped it?
After assessing suitability and reliability, summarize the material in a form that helps the decision. As illustrated in Figure 7.10, the author distinguishes standards, such as measurable response or conversion benchmarks, from means, such as templates or transferable process steps. Both should meet the emphasis on objectivity and verifiability discussed in Chapter 5, when they are used as evidence.
When to use it
A marketing manager decides whether to adopt a standard customer acquisition cost benchmark for budgeting; they evaluate its credibility and applicability to their specific industry.
An insurance firm uses established claim handling best practices to streamline operations, but must periodically assess whether those practices remain optimal given changing market conditions.
A compliance officer implements SEC insider trading norms (a mandatory norm) within the organization, using them as a clear behavioral rule for employees.
A founder considering a public listing investigates the source’s 4% shareholder litigation benchmark, including its time horizon, sample, and relevance to the company, before using it in a risk estimate.
FROM THEORY TO EVERYDAY LIFE
In practice
Shareholder litigation benchmark
The source offers approximately 4% shareholder litigation risk for a publicly traded US company as an example of a quantitative benchmark. The excerpt gives no period or underlying sample, so the figure needs context before use.
Customer acquisition cost rule of thumb
The source gives a rule of thumb that acquiring a customer costs about four times as much as retaining one. A business should check its own costs and customer behavior before using that ratio in a budget.
Pareto principle misapplication
The 80/20 rule is often assumed in promotional planning, but its actual effect-cause relationship can deviate significantly from the norm, highlighting the need for critical evaluation.
A MOMENT TO REFLECT
Put it to work.
Identify a benchmark or rule of thumb you rely on in your work. How would you assess its utility, credibility, independence, and impartiality?
Think of a best practice in your industry. Is it truly backed by evidence, or could it be a legacy habit? What specific evaluation criteria would you apply?
When faced with a decision that involves an organizational norm, how can you distinguish between a prescriptive rule (norm) and a descriptive reference (benchmark)?
CONTINUE THE CONVERSATION
Source texts
- Evidence-Based Decision-Making How to Leverage Available Data and Avoid Cognitive Biases (Andrew D. Banasiewicz)