One common thread we see among businesses is a heavy dependency on spreadsheets. We recently met with a company faced with this situation to discuss their “addiction” to the use of spreadsheets (their word, not ours). They wanted our opinion on what could be done about it. Here are some of the comments they shared:
- “I am totally reliant on 11 spreadsheets to do my job, but I only have a solid understanding of the calculations and logic for 3 of them.”
- “As the CFO, I spend more time making sure my spreadsheets are accurate than analyzing the data in them, which is ridiculous.”
- “When it comes to making important decisions, I’m really uncomfortable relying on figures spit out of a huge spreadsheet that 8 different people have worked on.”
- “It’s frightening that all these Excel spreadsheets are determining forecasts, monthly profitability and other things, instead of the systems we have which are supposed to be doing that.”
Over-dependence on spreadsheets occurs for one main reason: Excel is available on just about everyone’s desktop, and it can be used with little or no training. That’s great for ease of use, and for many purposes Excel functions as a powerful, flexible, accessible tool. But this can also lead to a lot of problems.
The problems start when Excel is used to do things it wasn’t designed for, especially when it becomes a workaround solution for ERP, CRM and other installed systems. Many businesses don’t take Excel’s limitations into account and stretch the software beyond what it was built to do. When this happens, considerable risk can be introduced. For example:
- A spreadsheet is the brainchild of one person. It was not designed as a collaboration tool, which is what commonly happens. The greater the number of authors, the more that invisible errors creep in and the harder a spreadsheet is to maintain. A spreadsheet with errors don’t tell anyone about them. They simply display the wrong numbers, which can obviously lead to bad decisions being made.
- The bigger and more complex the spreadsheet, the more fragile Excel becomes. It simply breaks at certain points, greatly increasing the chances for data corruption and lost data.
- Spreadsheets promote silos of information and decentralized data management in a company. When this happens, automating links between spreadsheets and applications is tough to do. It’s a main reason why so much costly, error-prone manual handling of data occurs in companies.
Breaking free of the addiction
If reliance on spreadsheet software is impeding growth and introducing too much risk to your business, we recommend these four steps:
- Assess spreadsheet use in the organization, at an individual level, group/collaborative level and business process level. Gain a clear picture of how spreadsheets are being used company-wide.
- With this inventory of spreadsheet usage in hand, determine where your larger exposures lie:
- Large/complex spreadsheets
- Spreadsheets whose originator is no longer at the company
- Business-critical spreadsheets that impact daily operations
- Spreadsheets where important financial or other data is stored
- Spreadsheets tied to manually intensive processes
- Spreadsheets whose data is pulled from or exported to other business applications
- Quantify these as much as possible from a risk and/or cost perspective.
- Establish a plan for migrating the high-risk and high-cost spreadsheets to a better solution. Bring in a 2nd set of eyes from the outside if necessary to help with this part. The objectivity and experience can be quite valuable if the pain felt by the organization is great enough.
Companies that have grown too dependent on spreadsheets need tighter controls on how they should be used, who has access to them and where data should be stored. Without these controls, it is very easy for management to lose sight of how the business is actually operating. You will inevitably end up with multiple views of the truth – sort of like using a broken compass to try and navigate the business. It also likely means your current systems that manage data aren’t cutting it, which may reflect people & process problems rather than technical shortcomings.