Is Your Company Placing Faith in Faulty Spreadsheets?

5 min read

We all know that numbers don’t lie. Or do they?

In 2010, two economists published a paper that drew links between high levels of national debt and low or negative economic growth. That research, titled Growth in a Time of Debt, has since been widely cited by politicians and pundits, who jumped on it as proof of the need for austerity budgets, slashed expenditures, and reduced budget deficits.

Everything hinged on figures plugged into a spreadsheet, which the paper’s authors thought to be irrefutable data. The problem? Some rows of data were missed in the final calculation.

The problem with this paper is that it seems to have been based on faulty spreadsheet formulas. Not all of the data “facts” made it into the spreadsheet, which resulted in totals that  just did not add up. But by the time the flawed formulas were discovered, their flawed conclusions had already been popularized. (You can read about some of the spreadsheet errors in Ars Technica’s recent article, “Microsoft Excel: The ruiner of global economies?”)

So What?

So what’s so surprising here? In a way, nothing. After all, the results of any spreadsheet depend on the data that its creators plug in. The surprise, then, is that we’ve been reminded of what we already know.

Now consider this: If a faulty spreadsheet has the potential to shape the beliefs of our country’s economists and politicians about a topic as important as our national budget, just imagine what it could do to the shape of your company’s budget.

Spreadsheet errors can carry far-reaching consequences when it comes to your organization’s bottom line. For example, relying on spreadsheets to pay out sales commissions and bonuses is a dangerous game for several reasons:

1. Formulas are fragile

One incorrect keystroke can destroy the integrity of a document, without providing any clue that something has gone awry.

2. Humans Make Mistakes

When busy sales reps and team leaders plug information into spreadsheets in a hurry, the chance of human error increases. Let’s face it, spreadsheets are dizzying to read. Unlike CRM-based sales performance management software that features an eye-friendly dashboard, spreadsheets lack visual cues that train eyes on the important information.

3. Spreadsheets Aren’t Critical Thinkers

Even when numbers and  formulas are plugged in and applied correctly, someone still needs to interpret the results. Because spreadsheets can be hard to read, it’s easy for managers to misinterpret critical data.

4. Sharing Spreadsheets is a Losing Game

When your sales department’s protocol is to pass spreadsheets around between reps and managers, there’s always a risk that individuals will write over essential information. Like playing Telephone, your original spreadsheet slowly morphs as it makes the rounds, and the final recipient is unaware of the difference.

Relying on spreadsheets to track vital financial information within your company might be costing you more than you think, and not just because you are at risk of paying out higher incentives than planned. Spreadsheet errors also can affect morale—the very core of your sales team—if they result in lower incentives than reps deserve, and they can even put you at risk of breaking Labor Standards Act compliance laws. Sales performance management relies on accurate incentive compensation tracking, so using the right tools is crucial.