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Originally published junio 24, 2010
Consider the ubiquitous spreadsheet. What’s not to love about the spreadsheet? The spreadsheet puts the user in charge. The spreadsheet is easily changed. Put simply, spreadsheets put people in control of basic computer processing. The spreadsheet makes every person in control of their own information processing destinies. And this control must be very popular because the spreadsheet is found everywhere.
So what’s not to love about the spreadsheet? What’s the problem here? In fact, is there a problem at all here? The answer is that given a true corporate perspective of information, there is much to be desired in the environments where management relies on the spreadsheet for basic decision making.
To understand the perspective that questions the value of the spreadsheet, consider this not-so-far-fetched dilemma. A corporation decides to hold a management meeting. Each of the departments attends and brings their best, most up-to-date information – all based on their own departmental spreadsheets. Management goes around the room. Sales paints a very rosy picture. Revenues are up and are projected to be going even higher. The sales department suggests that a new plant be opened and the sales force be increased by 50%.
Next, marketing speaks from their spreadsheet. Marketing sees that there has been an increase in revenue. Marketing's numbers show that revenues will be slowing. Marketing suggests no new increase in hires or plant capacity.
Accounting starts to give their perspective. Accounting has spreadsheet figures that show that there has been no increase in revenues. In fact, accounting shows that there has been a downturn and suggests that there be a layoff.
Manufacturing notes from their spreadsheet that costs of manufacturing have been dramatically increasing. The rise of fuel prices has made the cost of manufacturing go up significantly. The profit margins have been steadily decreasing. Based on manufacturing’s spreadsheet, there is no plan for any new plant capacity. In fact, manufacturing suggests that it may be wise to outsource some manufacturing processes.
Finance comes along with their spreadsheet. Finance looks at revenue, decreasing margins, manufacturing costs, and sales productivity. Finance suggests closing a plant and laying off 10% of the workforce immediately.
So there you have it. The management suggestions go all the way from hiring 50% more people and opening a new plant to laying off 10% of the work force and shutting down a plant. And all of these suggestions are backed by spreadsheets that have been laboriously and assiduously prepared. Each department has its own figures on their spreadsheet and each department is convinced they have the right and true information.
What is management to do? Management can make any decision it wants, and there will be a spreadsheet to back it up. The problem is that in the real world making any decision is not proper. There will be one proper path for directing the affairs of the business, and spreadsheets have not helped one iota in making or even discovering the proper decision to be made.
It is at this point that the corporation discovers that there is nothing magical about the spreadsheet. Management discovers that it is the information on the spreadsheet that is what is important. The spreadsheet is almost worthless if it doesn’t have the right information. The spreadsheet, in fact, may be a liability when incorrect information is presented on it. When incorrect information is presented on a spreadsheet, it achieves the cachet of credibility, even when it is not credible information at all. And wrong information with credibility is worse than no information at all.
So what is needed for the information that goes onto a spreadsheet? What is needed is that information across the corporation be:
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