Robert Kugel's Analyst Perspectives

Make Spreadsheet Competence a Priority

Posted by Robert Kugel on Jul 13, 2012 11:52:35 AM

I’ve written frequently on issues that confront desktop spreadsheet users, such as business modeling and capital investment, as well as the risk and control issues spreadsheets pose and their contribution to paralysis by analysis. I focus mainly on the technology aspects of organizational challenges, and I usually recommend replacing stand-alone desktop spreadsheets with more appropriate tools. Yet there are many instances where spreadsheets work well, and in other cases people continue to use them when they shouldn’t. For these reasons, executives and managers must pay attention to spreadsheet training. Many people who use spreadsheets have overblown estimations of their own competence, often those who use them all the time and have years of experience. With these and other tools, unless people are tested and trained on a recurring basis, one can never be sure how well they perform. The consequences of poorly trained spreadsheet users can be significant, both in terms of their impact on direct productivity and in relating to the capabilities of the spreadsheet files they construct and the potential for errors in poorly crafted ones.

In some parts of a business, such as Finance, almost everyone must have at least basic spreadsheet skills, while other departments need to have only some employees competent in spreadsheet use. Executives and managers need to understand the spreadsheet skills required for the positions in their organizations. Basic knowledge is fine for casual users, but others need to know and be able to do more. This is why organizations should test people to determine that they actually have the specific skills that are needed for their jobs and provide them with ongoing training to attain those skills.

Unfortunately, in many organizations, training is usually informal. Some employees may have the motivation and ability to learn from the many how-to books on the market, but most others learn from their peers. If a company has skilled users and the people who need to improve their capabilities have access to them and their time, managers may see no need for formal training. They may be lulled into thinking that their organization has the appropriate spreadsheet knowledge because the necessary tasks are performed, numbers are spit out and graphs and charts are created on time. Yet lurking behind the neatly printed documents and colorful PowerPoint slides may be a mare’s nest of messy, unnecessary complexity. Poorly trained spreadsheet users often apply brute-force methods because they haven’t learned more sophisticated capabilities. For instance, if they do not know how to use the vlookup function, they may create a complicated nested “if” statement and copy it endlessly. With the power of today’s computers, the performance penalty for such misuse may be trivial, but poor spreadsheet design makes it much harder to update or expand the set of conditions droving that complex “if” function and creates the potential for inducing errors that may be almost impossible to spot.

It’s a fact that spreadsheets are everywhere in business. More than 200 million people worldwide use them. Our benchmark research shows that about one-third (37%) of people spend more than half their working days using spreadsheets. This is a powerful personal productivity tool, but it’s important to avoid using it to support repetitive, collaborative, enterprise-wide processes. It’s equally important that when spreadsheets are used, they be used properly. All people who work intensively with spreadsheets should have periodic testing and training. Companies that do not have formal programs for assessing and developing spreadsheet skills should implement them immediately. It will prove to be a worthwhile investment.


Robert Kugel – SVP Research

Topics: GRC, Office of Finance, Operational Performance Management (OPM), Business Analytics, Business Intelligence, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, finance, Financial Performance Management (FPM), Training

Robert Kugel

Written by Robert Kugel

Rob heads up the CFO and business research focusing on the intersection of information technology with the finance organization and business. The financial performance management (FPM) research agenda includes the application of IT to financial process optimization and collaborative systems; control systems and analytics; and advanced budgeting and planning. Prior to joining Ventana Research he was an equity research analyst at several firms including First Albany Corporation, Morgan Stanley, and Drexel Burnham, and a consultant with McKinsey and Company. Rob was an Institutional Investor All-American Team member and on the Wall Street Journal All-Star list. Rob has experience in aerospace and defense, banking, manufacturing and retail and consumer services. Rob earned his BA in Economics/Finance at Hampshire College, an MBA in Finance/Accounting at Columbia University, and is a CFA charter holder.