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Our recent benchmark research project, Spreadsheet Use in Today’s Enterprise, demonstrated that some companies have made modest progress in addressing spreadsheet issues, but there’s still much left to be done. Desktop spreadsheets can be an important source of productivity but, as I’ve noted, you need to understand their limitations and understand the practical alternatives. Users underestimate the impact of spreadsheet problems on their productivity because they tend to overlook the myriad little issues that constantly crop up. Being human, they overlook the ill effects that occur when spreadsheets are misused, and may be spurred to look for alternatives only when disaster strikes (as it did for one major bank).
Productivity is the reason why spreadsheets became popular, but when used improperly spreadsheets sap productivity. Spreadsheets are seductive because most people have a basic understanding of how to use them, enough so that they find them easy to set up for even moderately complex models, and to do analysis and create reports. However, after more than a few people become involved and a file is used and reused, cracks begin to appear. Very quickly, our research confirms, a large percentage of the time spent with a file is devoted to finding the source of errors and discrepancies and fixing mistakes. When it comes to important spreadsheets that people use over and over again to collaborate with colleagues, on average people spend about 12 hours per month consolidating, modifying and correcting the spreadsheets. That’s about a day and a half per month – or about 5 to 10 percent of their time – just maintaining these spreadsheets. The burden is heaviest on those that use spreadsheets the most. We estimate that those that spend all or most of their time working with spreadsheets spend 18.1 hours per month (that is, more than two standard workdays) maintaining just one spreadsheet – the most important one used in their job. For those that spend more than half their time the total is almost two days (15.7 hours) per month. Even casual users, those that spend less than one-fourth their time, must devote about one day (8.6 hours) per month on this spreadsheet.
Participant responses varied in regard to how long it takes to address issues caused by spreadsheets. A bit more than half (55%), including some heavy users, said they spend little time dealing with problems in spreadsheets. Among the rest, 11 percent said spreadsheet issues consume a significant amount of time and reduce their productivity, while 31 percent said they consume a noticeable amount of time but have a minimal impact on their productivity. It’s difficult to take this last response at face value – something that takes a noticeable amount of time probably has a greater impact on productivity than individuals assume. Unless your job description includes “fiddling endlessly with spreadsheets as if there were nothing better to do,” this is a problem.
Our research and experience have led us to identify several factors that cause people to underestimate the negative impacts of spreadsheets on productivity. Generally, while the consequences of problems with spreadsheets can be broad and persistent, they are rarely catastrophic and infrequently serious. Thus, while people may be aware that they are losing time, each loss is a small one that they may soon forget. Moreover, since people (especially heavy and/or long-experienced users of spreadsheets) have adapted their work styles to deal with these issues, they may not view this chore as interrupting productive work. Finally, senior executives and decision-makers are not likely to be concerned by the increments of time that spreadsheets occupy people, especially since those whose careers go back to the beginning of spreadsheets still perceive them as productivity enhancers relative to paper-based systems.
Spreadsheet users tend to mentally minimize the impacts of spreadsheet errors. Errors in spreadsheets are common and may remain in place even when spreadsheets are checked and, indeed, audited. Yet few of our participants (even the most experienced and proficient users) said they do rigorous checking to ensure accuracy of the data; half check only when something doesn’t look right, and when they do check they look only at selected cells. This likely is another reason why most people see no impact on their productivity from problems in spreadsheets; they simply don’t spend a lot of time checking for errors. It also may explain why mistakes have a limited impact on businesses – even the selective “eyeballing” method of checking for accuracy is likely to spot many of the blatant mistakes that would have a significant impact on business.
Spreadsheets also routinely pose productivity issues when they are used to collect data for use in collaborative processes. Such sharing is not confined to internal activities: Two-thirds use spreadsheets to collaborate with people outside the company frequently or occasionally. Such interaction often requires bringing together multiple files. Most (81%) of the participants and 88 percent of heavy users have to combine data from two or more spreadsheets (often from multiple contributors) to perform some business process. On average, people combine five spreadsheets at a time, although more intensive users combine somewhat more – approximately six compared to five for lighter users. More than half of users (56%) say that combining spreadsheets is a time-consuming chore.
Because desktop spreadsheets are so handy for so many purposes, many people use them in all sorts of ways when they should be using better alternatives. Spreadsheets were designed to be a personal productivity tool, good at prototyping models, creating simple analytics for decision support, performing one-off analyses using simple models and storing relatively small amounts of data for analysis and decision support. They weren’t designed to be used in collaborative, repetitive, enterprise-wide tasks. Especially in large organizations, desktop spreadsheets exacerbate data accuracy, availability and timeliness issues. They make managing any collaborative process more difficult than it should be. Corporations need to review their use of desktop spreadsheets in their most important processes to identify ways to reduce their use or eliminate them.
Robert Kugel – SVP Research
I’ve been using electronic spreadsheets for more than 30 years. I consider this technology among the 20th century’s top five most important advances in business management. Spreadsheets have revolutionized every aspect of running any organization. A spreadsheet (specifically, VisiCalc) was the original “killer app” that made business people feel the necessity to buy a personal computer.
Yet, as enthusiastic as I am about spreadsheets, I know they have their limits. If you fail to respect those limits, you wind up paying for it, either in obvious ways, as JP Morgan did when faulty spreadsheets used by its trading desk cost it billions, or in less obvious ways, such as in multiple business mistakes that go unnoticed and uncounted, or by hours lost trying to make spreadsheets do things they were never designed for, or in valuable opportunities organizations cannot take advantage of because they run out of time dealing with basic issues imposed by spreadsheets.
The essential problem is the disconnect between what spreadsheets were originally designed to do and how they are actually being used in corporations. Spreadsheets were designed to be a personal productivity tool, good at prototyping models and analytics used in processes, performing one-off analyses using simple models and storing small amounts of data. But many people run into issues using spreadsheets for collaborative, repetitive, enterprise-wide tasks. More than half (58%) of participants in our research said that the most important spreadsheet they work with is used in just these sorts of efforts.
One of the most serious, longstanding, but mostly overlooked issues is that desktop spreadsheets are error-prone. One-third of our research participants say that errors in data occur in the spreadsheets they use for their most important process, and a quarter say there are errors in formulas. Errors in spreadsheets are common, and may remain even when they are checked and, indeed, audited. The consequences of these errors can be catastrophic. Yet few of our participants (even the most experienced and proficient users) said they do rigorous checking to ensure accuracy of the data; half do checking only when something doesn’t look right, and when they do check they look only at selected cells. This likely is another reason why most people see no impact on their productivity from problems in spreadsheets: They simply don’t spend a lot of time checking for errors. It also may explain why mistakes have a limited impact on businesses – even the selective eyeballing method of checking for accuracy is likely to spot many of the blatant mistakes that would have a significant impact on business.
Productivity is one of the important reasons why spreadsheets became popular – but when used improperly, spreadsheets sap productivity. Spreadsheets are seductive because people are familiar with them. They are easy to set up to do even moderately complex models, perform analyses and create reports. However, after more than a few people become involved and a spreadsheet file is used and reused, cracks begin to appear. Very quickly, a large percentage of the time spent with the file is devoted to finding the source of errors and discrepancies and fixing the mistakes. Our research confirms this. When it comes to important spreadsheets that people use over and over again to collaborate with colleagues, on average people spend about 12 hours per month consolidating, modifying and correcting the spreadsheets. That’s about a day and a half per month – or about 5-10 percent of their time – just maintaining these spreadsheets.
It’s fairly common for there to be multiple spreadsheets circulating around an organization that are supposed to be the same, but that are different versions with different numbers in them. Long ago, this phenomenon got its own term: dueling spreadsheets. It happens because the data in a desktop spreadsheet is not bound to a single source that everyone is working from. It may be a single source, but the data may be collected at different times. There may be changes to formulas or additions or deletions that take place, and not everyone is on the same version. This is what happens when spreadsheets are used in repetitive, collaborative enterprise processes. It’s a problem that is more common in larger companies than small; 44 percent of companies with 10,000 or more employees – very large companies – say that it happens frequently or all the time, which is about twice the rate reported by small or midsize businesses, and for companies between 1,000 and 10,000 employees the percentage is about one-third. It’s also more commonly experienced in finance departments – which requires absolute accuracy. Sometimes the differences between spreadsheets are not that important, or you can work around them. But time is wasted as our research found – more than half of organizations (56% always time-consuming and usually time-consuming) spend significant amount of time combining spreadsheets.
But in many other cases it’s important to not waste time trying to resolve whose spreadsheet is right – because they all could be wrong.
People routinely communicate the results of their data gathering and analysis using spreadsheet charts and graphs as visual aids. Most (64%) research participants – and 80 percent of those who spend more than three-fourths of their time working with spreadsheets – find it easy or very easy to create graphs and charts in spreadsheets. Yet while it’s easy enough to create them, organizations find that these graphs and charts do not satisfy their needs for visualizing information. Only one-fourth said that these graphical elements are all they need to communicate information effectively in visual form; another one-fourth said that these graphs and charts are suitable for only some of their work. While one-third of those in small or midsize organizations said spreadsheet visuals are enough, just 18 percent from large and very large organizations said spreadsheets are a suitable visual communications tool. People working in larger companies likely have higher expectations for the quality of presentations and other such material and may need to convey more complex information. We conclude that the charting and graphing capabilities included in desktop spreadsheets (notably Microsoft Excel) are not adequate for communicating data and insights.
Today businesses have many more options than ever before to embrace and extend spreadsheets – to have the best of both worlds. Many new, affordable software solutions complement spreadsheets and address their shortcomings. Many applications use Excel as an interface – giving people a familiar look and feel while addressing key technological shortcomings of desktop spreadsheets that make them error-prone and difficult to consolidate or roll up. Spreadsheets are a leading reporting tool – critical for communicating results, forecasts, situations and risks. Yet even after all this time, when it comes to reporting, spreadsheets fall short because they can be time-consuming to update contain unseen errors and – even though it’s easy to create basic charts – they aren’t flexible or capable enough for even moderately sophisticated visual communications. Even with these drawbacks, people frequently choose to create reports themselves because the IT department takes too long to create and modify them: nearly half (46%) find this to be the case.
It’s important for senior executives to understand the limitations of spreadsheets and acknowledge their shortcomings. Spreadsheets are indispensible to any organization, but they must be used only for what they were designed for. It’s important not to abuse them and allow them to saddle your organization with hidden costs, risks, and poor or untimely decisions driven by spreadsheets.
Robert Kugel – SVP Research