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In: Accounting

Standards are everywhere! They exist in all aspects of the business with which we interact every...

Standards are everywhere! They exist in all aspects of the business with which we interact every day. Make a brief post (100 - 125 words) identifying two different 'standards' you have seen this week and how this 'standard' affects the associated company's profitability. For example, a company such as McDonald's has a 'standard' on the amount of beef that is contained in each hamburger product they sell. If they go over this standard amount, material costs go up and profitability goes down. If they go below this standard amount, profitability may go up in the short run from reduced costs, but long-term customer satisfaction could go down and negatively impact profitability.

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Expert Solution

Every business has their own characteristics and they are referred to as company standards. Our small business standards will likely mirror the personal standards, and customers, clients, and employees will form an opinion about our business – and our brand – based on these values.

Your standards define how your company acts, which, in turn, builds trust in your brand. They can be guidelines that describe quality, performance, safety, terminology, testing, or management systems, to name a few. They can comply with authoritative agencies or professional organizations and be enforceable by law, such as required medical degrees for doctors or credentials for financial planners. Or they can be voluntary rules you establish to create confidence among your clients that your business operates at a high and consistent quality level, such as a restaurant only using the highest quality, locally-sourced ingredients

For example, a company such as McDonald's has a 'standard' on the amount of beef that is contained in each hamburger product they sell. If they go over this standard amount, material costs go up and profitability goes down. If they go below this standard amount, profitability may go up in the short run from reduced costs, but long-term customer satisfaction could go down and negatively impact profitability.

If we want to increase the quality we must increase standards. If we increase standards automatically cost will go up. When we decrease quality, standards will go down and we may lose our customers due to poor quality products.

Standards are what your business aspires to, but they don’t guarantee performance. You need to create processes to control how your standards are implemented, and measure and evaluate how they help your business grow. Written guidelines, technical specifications, product inspection processes, management and financial audits, and even customer surveys can be effective performance indicators and help you determine if you’re meeting your standards, or if the standards need to be tweaked in some way.


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