The Hidden Costs of Spreadsheet Dependency

The first spreadsheets that got our attention were Visicalc and Lotus 1-2-3 in the late 70’s and early 80’s, and they worked well – if you could overlook the clunky interface and the humble functionality. We say “humble” because all we expected was for the software to replace mountains of manual accounting ledgers. Naturally, they were welcomed with open arms and the spreadsheet was here to stay. 

The Hidden Costs

Led by Excel and Google Sheets, they now include powerful computational and presentation capabilities that can be used in everything from multi-million-dollar companies to player schedules at your local tennis club. They have become part of our daily lives and still continue to evolve. So how did we function without them? The value is clear, but there are concerns that their proliferation conceals a hidden cost as their use mushrooms beyond the original applications into business processes where they may even inhibit growth. How did we get here and where should we draw the line? This article considers those questions.  

The Benefits

The benefits are many and with minimal training, anybody can quickly master them. They are easy to customize (too easy as we will discuss later), and convenient for sharing data amongst team members. The graphical and visual presentation tools have improved beyond measure, and it is simple to quickly build them into workflows throughout the business. The problem is that these attributes are also perfect examples of why they can lead us into big trouble if their development is left unmanaged. It is too easy to overuse them. 

They become ingrained in our workflows and employees get comfortable using even the complex functions within the software. And the low cost is super attractive, especially for small companies in their early lives. However, the ease-of-use does little to enhance data control, access control and data integrity. By contrast, integrated systems are expensive to learn, license and implement.  

The Downside 

Here is what often happens as small companies get larger. Most spreadsheets contain editable fields and sadly prove the old saying to be true, “If you make a field editable, it WILL get edited.” Editable data in spreadsheets can and will be overridden at some point. They are open to all kinds of unchecked human errors because there is only so much a spreadsheet can do to validate input data. “Fat-fingering,” is a problem. To be sure, there are many simple edits that a spreadsheet can perform on inputs, but these cannot compare to the sophisticated validation that occurs in more integrated software. There is more. When that unedited spreadsheet data is used as input to other spreadsheets in other areas of the business, it leads to streams of inter-related worksheets all reliant on each other, often with inconsistent use of data, where any sheet may be manipulated manually at any stage. Data is a shared company resource that no one owns but everyone must manage. That means standards and controls, and spreadsheets are notoriously difficult mechanisms in which to enforce standards. So, the data gets corrupted, and hence eventually, mistrusted. That often leads to “spreadsheet wars,” where each department trusts only their own data. And multiple versions of the truth lead to mayhem. 

The Value of Trusted Information – and the Reverse

There is an enormous cost to mayhem in an organization when nobody trusts any of the information that is presented to them. The company is flying blind and headed for trouble. 

They are highly susceptible to human error in input and interpretation, are often built and maintained in a vacuum, and sometimes understood by only a small percentage of the people using them. And in large companies with multiple product-lines and sales channels, maintenance of key spreadsheets becomes a costly and demanding chore.  

Scale Counts 

The problems mount as data volumes grow. When a company’s datasets increase in size as the company grows, spreadsheets are prone to freeze during computations. They are operating on one cell at a time and are not capable of extensive validation that is common in robust business applications, such as in many-to-many matches or hierarchical structures. Although joins and filters are useful tools, they are no match for what more controlled systems can achieve. And there are increasing concerns with data security, and inaqequate data recovery capabilities. 

The inevitable result is miscommunication, duplication, and damage to a company’s professional credibility. Eventually, the company will need to invest in a more controlled information system. This, at a time when employee trust in the information standards has dwindled to a low level, which raises the stakes for a successful outcome. Our recommendation for the use of spreadsheets is that they should be used for terminal data presentation only, i.e., for OUTPUT only, and never for furnishing other spreadsheets with data, either manually or automated. 

A State of Constant Readiness

So how does a growing company whose information systems have become trapped in a maze of spreadsheets, transition to a more controlled set of workflows? In this situation, it is important to create and maintain an organizational culture that is in a perpetual state of readiness for changes in informational processes, especially in the publishing industry where there are frequent demands made by innovative technologies and new industry requirements. This has the peripheral benefit of empowering employees to develop solutions independently to everyday questions. 

Business Process Optimization (BPO), is the name of this activity of modifying informational workflows to reduce costs and improve efficiencies. It is a process demanding a commitment to continuous improvement. Watch out for our forthcoming White Paper on BPO on this webpage. 

In summary, most companies recognize that spreadsheets have excellent value under controlled circumstances. They struggle to manage large datasets and are subject to human error, especially when strung together in interdependent workflows. They do have their place, but an integrated software solution whose best practices are built for your industry provides better data integrity, security, scalability, collaboration, and efficiencies for your core systems over the long run. knkMedia checks all those boxes and knk has excellent experience over the last 35 years in BPO, both as part of ERP implementations or as separate exercises