What are the problems of standardization?

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Standardization is the process by which a company makes it methods, especially its production processes, uniform throughout its organization. Standardization helps cut costs by eliminating duplicated effort and allows a company to take advantage of economies of scale when purchasing supplies. Another goal of standardization is quality control, according to the Corporate Finance Institute.

However, some advantages may be lost when a company decided to standardize its operations. Understanding why companies focus on standardizing their processes, what the benefits are and what the disadvantages are will help you decide which of your company's processes and procedures you want to standardize.

Loss of Uniqueness

If a company builds a customer base that values its unique niche products, or if the company serves a specialized market, standardizing its processes may mean it loses some of its former customers. For example, if a restaurant builds its reputation on a varied and exotic menu and then changes to a standardized menu to provide a more predictable customer experience, its former customers may defect to competitors who provide more variety.

Standardization can also make it more difficult to segment a marketplace, making one version of a product for its main customer base, and one or two other versions of the product for secondary customer segments.

Loss of Responsiveness

When a company expands into new markets, especially in foreign markets, standardization may work against the firm. While it may be cheaper for a restaurant to buy its trademark hamburgers in bulk, if it expands into a new market where people buy chicken much more often, its standardization measures may make it slower to respond to market conditions and end up costing money.

Unsuited to Some Aspects of Business

Standardization may be advantageous in some areas of business, such as production, but some aspects of a business should be tailored to the customers' needs. Customer service, advertising, distribution and product pricing must be driven by local market conditions to be successful. When using contractors, companies can run into violations of IRS rules if they require these workers to perform their jobs in a very specific manner.

Stifles Creativity and Response Time

Standardization has the potential to get a business into a rut. Standards, once implemented, soon become the status quo and may become entrenched in the corporate culture, making them hard to change when change is needed. However, market conditions often change, and companies that change quickly are best positioned to take advantage of them.

Standardization may also stifle creativity, particularly in product design. Employees who work in a business that's focused on standardizing as many procedures as possible might feel they are taking an unnecessary risk by volunteering new ideas or requesting changes to long-accepted policies.

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