FROM THEORY TO PRACTICE: HOW CAN I MANAGE THE DISCONNECT?
Any professional will concede that the world between the classroom theory (or the textbook) is often far disconnected from the reality we encounter in the real world. ‘Are You Preparing For Exams Or, Career Success?’ Off course, employers know this too well, but, faced with fierce competitive pressures to deliver to key stakeholders (e.g customers or suppliers), there is often insufficient time and resources devoted to your readiness to translate that ‘theory’, to help solve the real world problems -for which you were, or will be inevitably hired. In fact, most employers expect that you would have mastered this already from school; which is often not necessarily the case – see ‘Are You Preparing For Exams Or, Career Success?’
As opposed to the pure sciences or the liberal arts, the field of finance and business is a social science -so, one could underline some broad presumptions to clarify the disconnect between the theory and the real-world. In this piece, we delve into these broad presumptions, and then, in subsequent editions, we explore the disconnect between the main theories that underpin each field of study, and the real world practice –starting with Accounting and Financial Management; and then offer some career tips to effectively transition you!
THE APPROACH TO REASONING REQUIRED TO GRASP THE THEORY AND, WHAT IS REQUIRED TO PRACTICE -ARE FUNDAMENTALLY OPPOSED TO ONE ANOTHER
A theory is a Body of Knowledge, typically codified in a textbook, usually, a system of ideas or mental models of perceived reality (assumptions, principles, rules, formula, conventions, propositions, or hypothesis) that attempt to account for a situation, or provide a plausible, scientifically-accepted or rational explanation of cause-andeffect (causal) relationships among a group of observed phenomenon -and hence, useful in justifiably prescribing a course of action. The development of theory in the social sciences field broadly, and in particular, the accounting and business fields, relies on 2 broad strands of reasoning -deductive and inductive reasoning:
1.Deductive Reasoning: The basic premise of deductive reasoning (sometimes called inferential) is basic logic or rationality of the form: if A is bigger than B and B is bigger than C, then C must be bigger than A. Alternatively, if we assume the pass mark of an exam is set higher at 60% instead of 50%, then the student will work a lot harder to pass the exams. Deductive reasoning moves from the general to the specific –we want the students to study harder, so we raise the pass mark, and say teach better; and then we prescribe the assumption that the students will do what is necessary to pass exams!
Let’s relate that to finance and business a bit:
"...If we accept the premise or assumption that a business exists to maximise profit, then we can deduce -even without ever having worked in any business -that it will be seeking at any given time, to grow its revenues and minimising its costs. This means effectively, you are studying a range of ideas, assumptions and propositions about what you expect to find in the real-world upon your graduation!..."
2.Inductive Reasoning: Under this premise, things move in the opposite direction to what deductive reasoning prescribes, that is, from specific to general. The precondition is that you observe a real world phenomenon e.g a meticulous analysis of the financial data of a company in one’s mind could be seen to form some patterns which one then uses to form some principled predictions about the future performance of the company, or in some cases, develop new thoughts for further testing.
Obviously, the financial data itself may be linked to non-financial or other data not apparent in the observations -hence the principles or conclusions drawn may be false, yet the iterative learning process of drawing such conclusions, from observing real world phenomenon, improves (or, helps to validate the theory) or, forms new theories that enriches the transition from theory to practice.
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