Summarizing Norms & Standards
This framework organizes the evaluation of norms and standards into guidelines, conduct, and outcomes. It asks how evidence will be gathered, assessed, and checked for usefulness, credibility, independence, and impartiality.
THE IDEA
Summarizing Norms & Standards
The account uses the US Securities and Exchange Commission (SEC), established in 1934, as an example of oversight supported by industry norms and financial ratios. Measures of solvency, efficiency, and profitability can help compare organizations and identify matters for further investigation. They do not by themselves ensure a thorough or impartial assessment.
Organizations can use similar comparisons, but they need to specify which norms apply and how evidence will be evaluated. The proposed framework groups that work into guidelines, conduct, and outcomes. Across those groups, it calls for attention to usefulness, credibility, independence, and impartiality:
- Evaluation guidelines
- Evidence gathering philosophy
- Evidence gathering plan
- Enumeration of competencies
- Evaluation conduct
- Scope and objectives
- Timeliness and intentionality
- Methodology
- Communication and dissemination
- Evaluation outcomes
- Quality assurance
- Quality control
When to use it
Regulatory agencies using financial ratios to monitor compliance and detect anomalies across many firms.
Internal audit teams benchmarking operational processes against industry standards to identify inefficiencies.
Investors comparing a company's key metrics to sector averages to assess investment risk.
Non-profit organizations using norms for program evaluation to ensure accountability and effectiveness.
FROM THEORY TO EVERYDAY LIFE
In practice
SEC Oversight of Public Companies
The account describes the SEC’s use of ratios such as solvency, efficiency, and profitability to compare companies and identify issues for investigation. Such comparisons help direct attention; they do not establish that a company’s reporting is sound.
Organizational Benchmarking for Performance Evaluation
A company's internal audit team can apply the norms & standards framework to evaluate its departments by comparing key performance metrics against industry benchmarks, while documenting the choice of benchmarks and checking the quality and independence of the evidence.
A MOMENT TO REFLECT
Put it to work.
How can norms and standards help in evaluating an organization's performance while maintaining impartiality?
What are the potential pitfalls of relying too heavily on industry norms, as seen in the Enron scandal?
How would you design a norms-based evaluation framework for a specific domain like finance or healthcare?
CONTINUE THE CONVERSATION
Source texts
- Evidence-Based Decision-Making How to Leverage Available Data and Avoid Cognitive Biases (Andrew D. Banasiewicz)