The Hidden Cost of Using Spreadsheets

Close-up of US $100 bill

Most jobs today require basic spreadsheet knowledge as an entry level skill. Spreadsheets are everywhere in the business world.

In March 2016, Microsoft announced that there were over 1.2 billion Microsoft Office users worldwide. That doesn’t include Apple Numbers and Google Sheets users. Studies estimate between 80-90% of businesses use spreadsheets to run their operation.

Free to Use ≠ Free

Performance management consultant and founder of Hired Brains, Inc., Neil Raden wrote: “The benefits of spreadsheets are undeniable; however the drawbacks can be significant.” According to Raden, people have a tendency to be more aware of upfront costs than of the ongoing maintenance costs of using spreadsheets. For most organizations, the problems often arise when spreadsheets grow from a personal tool into a team or departmental solution.

The Spreadsheet Value Proposition

The reason spreadsheets have gained such popularity in businesses stems from these qualities:

  • Ease of Use – small learning curve; most students are learning this in school
  • Availability – essentially, free with a Google account or most computer operating systems
  • Flexibility – even non-technical people can feel in control without learning to program

Due to these reasons, spreadsheets have low startup costs and have thus become the project and financial tracking tool of choice for many teams – large and small.

Identifying Icebergs

There are a variety of hidden costs associated with using spreadsheets in an organization.

Wasted Time

Spreadsheet users waste time consolidating information from multiple sources and transferring data from one spreadsheet to another. Some also waste time trying to improve their less-than-ideal interface by resizing columns and rows, justifying text, and many other attempted beautification activities that don’t add real value.

Keeping data updated and in sync can be tedious at best, with multiple spreadsheets and duplications of data. At worst these inaccuracies may never get corrected and create unnecessary risk to the organization.

Documentation regarding how these delicate spreadsheet-based systems are maintained is rare. New hires often research and revisit these systems, or they are left to setup their own version of a working system.

Inefficiencies

Spreadsheets can be the source of inefficiencies and inaccuracies. Human error aside, teams who are not using a cloud-based, realtime spreadsheet system must share spreadsheet versions whenever changes are made. This often means emailing each new version, which introduces a time lapse between when the spreadsheet was updated and when it is received. This lag leads to delays in making decisions and completing work.

As colleagues request slightly different views of the information, the number of spreadsheet versions and views can become quite unwieldy. Teams can find themselves managing massive spreadsheets over time with no thought to the value of the additional data or the compounding issues.

Having all of the data does not always lead to better decisions. What we need to see is the correct information, and having to distill that from a spreadsheet takes time and discipline.

Unnecessary Risk

In addition to the risks mentioned above that result from inaccuracies and time-sensitivity, spreadsheets rate very poorly at the organizational level when it comes to security. Without doubt, the use and communication of spreadsheets can lead to higher risks for data security. With the portability of spreadsheets, it is very difficult to control access to them, both internally and externally. It is very easy to send a spreadsheet to a destination outside an organization’s control, whether intentionally or accidentally.

Solutions that Scale

It is easy to see why close to 90% of organizations utilize spreadsheets. They are a great solution for personal productivity because of their availability, ease-of-use and flexibility. They will always play a part in business for certain types of reporting and analysis. However, it is important to recognize that they are not free of cost. They can become very expensive when used incorrectly.

It does not take a huge productivity gain to justify the cost of some of the more affordable software solutions on the market. If your employees waste as little as one hour per day with organizational spreadsheets, the payoff can be substantial.

The popularity of spreadsheet solutions is an indication that there are unfulfilled needs. It is also possible that there may be resistance to a software-based solution and the move away from the more familiar spreadsheet. Although it is difficult for any software solution to meet the same ease-of-onboarding standard as spreadsheets, the solution must be as simple and easy-to-learn as possible.

When considering alternatives to spreadsheets, finding the right approach is everything. Understanding your team’s pains and fears, and determining the right roadmap is essential to gaining traction and finding long-term success.

Talk to us about how to approach the conversation with your team.