The worrying truth: The business world runs on spreadsheets

Worker struggling to hold a number of folders

Worker struggling to hold a number of foldersI recently came across an interesting discussion on LinkedIn that highlighted the dangers of relying on spreadsheets.  The discussion made reference to an article on Fortune.com, which showed how a range of large and powerful organisations allegedly made significant analytical errors. These errors allegedly included the way they valued acquisitions and calculated risk, amongst other things.  One common cause that the article cites is simple: The organisations relied on spreadsheets for complex analytical calculations and data manipulation, and once errors had permeated into the spreadsheets, they went unnoticed until disaster struck.

 

The article reminded me of how many times I’ve seen and heard of spreadsheets being used in extremely important situations.  It never ceases to amaze me how many midsize and even multinational organisations use spreadsheets for very complex tasks, and I guess that everyone reading this will have seen at least one example where a spreadsheet is being used where a different tool would be better.  I remember once being told about a team relying on an extremely complex spreadsheet (with macros) that had been built by someone who had subsequently left, and nobody had any idea how the spreadsheet worked.  If the spreadsheet were ever to break, they would be in a very difficult situation indeed.

 

Of course, spreadsheets have their uses.  A spreadsheet’s beauty is in its flexibility, but there also lies a pitfall. It’s very easy to just start ‘building’.  If this pattern continues, then before long you are left with a plethora of separate spreadsheets maintained by disparate teams.  It can soon become someone’s full-time job to copy and paste data between the various sheets and interpret the results.  And with a veritable mixture of manual intervention and manipulation of data, there’s a real danger of errors creeping in, just as the case study above Illustrates.  These risks and these hidden costs can grow and can cause real organisational pain.  This growth in unofficial and unacknowledged spreadsheet-based applications often happens entirely under the radar, meaning that nobody really knows what it costs the organisation.

 

There has to be a better way

While spreadsheets are appropriate in some cases and certainly do provide one way to analyse and manipulate data, there are many other applications out there.  When we see our stakeholders reaching out for a new spreadsheet, it’s incredibly important to take a step back to ask “what are we trying to achieve here”, “what are our needs and requirements” and “is a spreadsheet the only (or best) tool”?  Perhaps there is a better solution.

 

It is extremely beneficial to ingrain this thinking early.  I’m sure many people reading this blog will have worked for large organisations that have a plethora of legacy IT and End User Computing applications.  Forward thinking small and midsize companies potentially have an advantage here—by thinking about how to manage data, analytics and processes better early, these organisations can avoid the pitfalls that their larger competitors may have suffered.  By avoiding ‘death by spreadsheet’, they can implement a more sensible solution from the start.  By establishing more appropriate analytic capabilities that help them to rapidly assess and understand their business environment they will be ahead of the curve and will steer away from the risks mentioned above.

 

The challenge of inertia

Having discussed the advantages of carrying out analysis and ensuring a suitable solution is in place, it’s important to recognise that inertia can be a significant inhibitor to change.  Sometimes, people simply don’t want to transition away from the pet spreadsheet that they have been carefully cultivating for years.   Spreadsheets often give the illusion of control – the owner of the spreadsheet can make changes whenever they need to, and there will certainly be a learning curve with any replacement.  People might feel that a replacement is too costly—yet it’s important to objectively try to quantify the cost and risk of doing nothing as well as the cost and risk of implementing a replacement.  Knowing how many days effort are spent each year tending and cultivating the existing set of home-grown spreadsheets can be a useful metric.  This might create a compelling business case for change.

 

In any case, it’s important to acknowledge and plan for this inertia when implementing any solution, particularly one that will change the way that people do their job or access their data.  It’s key to ensure that the relevant stakeholders’ views are heard and that their key requirements are captured.  It may be useful to ‘reverse engineer’ any existing spreadsheets to understand precisely what calculations and functions are taking place, and validate that they are still relevant.  This will help to add confidence in the new solution.  It will also be important to ensure whatever solution replaces the spreadsheet provides the required level of flexibility.

 

In summary:  Spreadsheets can grow to become unwieldy very quickly and there are other tools out there that can be more appropriate.  Up front analysis to determine what is required can pay dividends.  Organisations that ingrain analytics early may have a head-start, so overcoming the inertia early may be well worth the battle.  If nothing else, it will avoid an organisation ‘discovering’ it has thousands of unmaintained home-grown spreadsheets later down the line!

 

 

Have you come across challenges with spreadsheets or EUC applications? Or do you have a related story or comment? I’d love to hear from you.  Please feel free to add a comment below.

 

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This post was brought to you by IBM for Midsize Business and opinions are my own. To read more on this topic, visit IBM’s Midsize Insider. Dedicated to providing businesses with expertise, solutions and tools that are specific to small and midsized companies, the Midsize Business program provides businesses with the materials and knowledge they need to become engines of a smarter planet.

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  • Interesting thoughts here.

    I think that by providing guidelines about spreadsheet usage, we can reach a point where spreadsheets are kept under control, data is reliable and consistent, and where users can still enjoy the flexibility of a spreadsheet to answer their own needs.

    Even with advanced analytics tools, it won’t be possible to answer every user’s needs; spreadsheets will still exist, so we better deal with them 🙂

    Your post inspired my humble, latest blog post: http://www.ericthebusinessanalyst.com/dont-blame-spreadsheets-3-tips-avoid-losing-control-data/

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