The difference between theory and practice in management

I did a lecture to the Newcastle business school on this subject and my recent Camino brings it all back into focus.

At the time I'm I tried to describe what management was. In economic terms we had everything from managing a task to a business. We had the marketplace, the capacity to expand or contract and this led into the times marginal costings marginal revenues vs the average cost and revenues.

We had the personnel, the skills gaps, the recruitment, the branding of our people with our philosophy.

I could go on but I need to take it back into the Camino.

The difference between theory and practice is in theory you choose how much to carry knowing that you can carry this. In practice many people ignore the theory and carry 2 litres of water from town to town. They buy bananas and fill their pack.  They spot a tee shirt they like. They pick up foot cream, sun cream and after sun. What was a well organised 3kg pack becomes a 6kg pack so quickly.

The difference is reality. You have one hot day where you run out of water and you'll always carry more than you need.

In the work place I often did tenders where I sit and explain why I used average not marginal costings. I explained to the class that while our profitability did come from the marginal costings at the extremes of one additional unit, in practice tenders were for 590 units with delivery on request. As a stockbroker that meant us staffing to answer calls. Far from squeezing one extra deal that day out of our staff we may have to relocate the whole business because of capacity issues in our building. If the tender was seismic, 10%+ to our existing volume, not only was average cost right but it's was AC+. The plus referring to the additional management disruption large expansion would bring.

We were one of the best in the industry at this expansion. This was quite simply because we recognised it existed. It is probably the most obvious between theory and practice as capacity constraints are so varied.

When I put my rucsac on at home with 3kg, I can walk 20 miles in 6 hours. Notwithstanding the terrain, if I double the weight my time will change. We factored this into the plan whenever we did a tender. 

I remember standing firm on a huge potential partnership with Standard Life for their SIPP Business. They wanted unit pricing which was fair but not when they wanted it at marginal not average ratea. I quoted AC+ owing to the level of ambition they had. My side as well as their side were raging with me as I stood firm at £20 while openly saying £11.78 was the marginal cost of one more transaction.

They just didn't get the difference between MC and AC. If we gave them the MC we would've been out of business in under 2 years. In my opinion it is the job of the supplier to stay in business so they can fulfil a contract.

They used my figures to secure a deal with another party. Within 18 months they were back at our door having put the other party under so much pressure they buckled. We got our AC+ and their customers got a service we were able to fulfil.

So I carried a laptop, plug and adaptor on my Camino this year. I also had 5 cotton tee shirts and an army of useless stuff including books and past Compostelas. I thought I would write using the laptop. I hadn't factored in that I was totally goosed from having carried it. 

I thought I'd read the book and teach myself more basic Spanish ....

Every day I walked and thought aboutt the difference between theory and practice is.......