Right way to do racial stat modifiers?

[Herbert_W]

...you need to decide to what degree the character creation of PC actually match the state of the universe. Just because roughly half of the PC do magic doesn't mean that half of the NPCs of the universe do magic. Same apply here, just because the average human has less Strength than the average dwarf does not necessarily mean that the average human PC should have less Strength than the average dwarf PC.

I think that this is the solution, right here - decouple PC and NPC creation mechanics. This checks all of the boxes that we're looking for.

• Fits with existing systems: PCs are already built differently from NPCs. It's widely acknowledged that a typical human adventurer is more capable than a typical human commoner. We're just applying the same principle in different ways to other races. Maybe dwarves tend to lack charisma, but as dwarf PCs are exceptional individuals this limitation does not apply to them.
• Verisimilitude: Depending on your setting, it might not make any sense for various humanoid races to all have the same range and variance of basic abilities. Heck, it might not even make sense for different humanoid species to have the same overall level of capability. To draw an example of two species of similar bodily shape from the real world, a jaguar would have a higher baseline in every stat than a sloth. (Sloths have other advantages that allow them to survive as a species, but that wouldn't make individual sloths balanced as adventurers in a party of jaguars.) Perhaps human PCs are exceptional individuals by human standards while elf PCs are average elves, so the game is balanced for players despite the average difference in capability between the species.
• Unique NPCs: You can have incredibly strong half-orc NPCs. You can have your players think "Well, the bandit with greenish skin probably has orc blood, so he's a priority threat." You can have all of this without half-orc PCs being strong enough to unbalance the game.
• Diverse PCs: Most players care about optimization as well as roleplay. For those players, racial ability modifiers restrict the range of race/class combinations that they might play - so without modifiers, you'll get a wider range of combinations (including odd combinations such as half-orc wizards).
• Leaves room for more interesting racial differences in PCs: Playing a tiefling should feel different from playing a human with cosmetic differences and slightly more charisma. If tiefling PCs don't have a charisma bonus, that leaves feature-space open for them to have more interesting abilities such as fire resistance or SLAs.

It might feel weird to have PC and NPC stats be completely disconnected, though. If half-orcs are supposed to be incredibly strong for example, then this should be reflected mechanically in some way - though preferably in a way that doesn't limit player choices significantly. Perhaps half-orcs should have a minimum starting strength that's not high by PC standards bus still a bit above the human norm - or, better yet, give players a choice by requiring half-orcs to start with either at least a certain strength or at least a certain constitution.