Navigating the Norms

Being a successful business owner typically means operating within a certain set of norms. That certainly seems easy enough, but the challenge is that norms and the trends they are linked with can be ambiguous.

On the surface, the definition seems quite simple. Psychologist Francesca Cancian said, “Norms are interpreted as shared conceptions about what identities or roles exist and what actions and attributes define a person as a member in good standing with a particular rank.”

Norms are ubiquitous in life. Every time we enter a room, open our mouths to speak, walk down the street or conduct a meeting, norms are in play. Without norms, it is doubtful that there could be such a thing as a free market economy or democratic politics or indeed society as we know it.

For business owners, evaluating the norms can be complex. We find ourselves not only asking what the norms and meaningful trends are, but also how they’re measured and how long must they be measured to be meaningful. Norms span all aspects of our operations. What are normalized interest rates? What are normalized margins? What are normalized sales?

However, norms can be mysterious beasts. David Nelson, a director of several industry study groups, said, “I think of normalize as reverting to the mean.” He added that normal weather would be average weather for the time of year it is being reported on while the normal or natural rate of unemployment is the long-term average rate of unemployment, which averages 5 to 6 percent in the U.S.

Nelson said normal interest rates would be something like the rate of inflation (or anticipated inflation) + the real rate of interest, which is around 3 percent for low risk. “Crude prices are trickier but looking at the inflation-adjusted real price over time would give some idea of whether the real price of oil is higher or lower relative to historical norms.” [See chart above].

New norms emerge when fundamental circumstances are permanently, as opposed to temporarily, altered. It’s often argued that all trends revert back to a norm, and staying current on trends and peeling back the layers involved in them is crucial to meeting our customers’ needs.

When examining what might be a new norm, I often think of a quote from Benjamin Disraeli (1804–1881): “There are three kinds of lies: lies, damned lies and statistics,” he said.

Ultimately, norms are guidelines or expectations that are constantly changing, so we must be vigilant in asking three questions: Is this a new norm? Who declared this a norm? What normalization methodology was used?

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This article originally ran in Stop Watch magazineStop Watch provides in-depth content to assist NATSO members in improving their travel plaza business operations.

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Tom Heinz

Tom Heinz is President of Heinz, Inc. and Coffee Cup Fuel Stops & Convenience Stores, Inc. Tom’s thirty-seven year business career has been in different segments of the petroleum industry. Tom’s primary business and day job began 31 years ago as co-founder/owner of Coffee Cup Fuel Stops www.coffeecupfuelstops.com. Tom received the following degrees: Bachelor of Science in Business Administration, Master of Science in Human Resources, and Master of Business Administration from Beacom School of Business at the University of South Dakota. Presently, Tom serves on the University of South Dakota Foundation Board of Directors, Vermillion, South Dakota, NATSO Foundation Board of Directors, Alexandria, VA, Dakota Hospital Board of Directors, Vermillion, SD., and is a member of David Nelson Petroleum Marketers 300 Study Group.More
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