There are only two ways to set the chain tension that are correct. One is with the bike on the stand according to the manual. The other is to compress the rear suspension by some means (remove the spring, have a fat guy sit on it, whatever) so that the centers of the output shaft, swing arm pivot, and rear axle are aligned with one another. This is the tightest point in the swing, and at that point, you need 1/2" of true slack (up and down).
If I adjust my bike to where it's correct and then put it on the stand, the chain looks horribly loose.
Any other method is wrong, because it isn't repeatable. The method outlined in the manual is how the chain will measure on the stand when it's been set by the second method (which is ultimately the single most accurate method), and is the recommended procedure because it's simple to do, and reliably repeatable.