Standardization

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DEFINITION of 'Standardization'

A framework of agreements to which all relevant parties in an industry or organization must adhere to ensure that all processes associated with the creation of a good or performance of a service are performed within set guidelines. This is done to ensure the end product has consistent quality, and that any conclusions made are comparable with all other equivalent items in the same class.

INVESTOPEDIA EXPLAINS 'Standardization'

An example of standardization would be the Generally Accepted Accounting Principles to which all companies listed on U.S. stock exchanges much adhere. GAAP is a standardized set of guidelines created by the Financial Accounting Standards Board (FASB) to ensure that all financial statements undergo the same processes so that the disclosed information is relevant, reliable, comparable and consistent.

Standardization can be found in business processes when companies require that a consistent level of quality be achieved. For example, many fast food franchises have detailed processes documented to make sure that a burger is prepared in the same manner regardless of which chain in its franchise a consumer visits.

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