The top three spreadsheet errors of the decade—so far
Spreadsheets have been a popular tool for budgeting, forecasting and planning for decades. But spreadsheet errors have been causing serious problems for finance professionals for just as long. One wrong keystroke and poof—major mistakes in even the most carefully crafted budget or forecast can occur.
The performance management experts at IBM have been raising the alarm about spreadsheet errors in financial planning and budgeting for a long time. And even though spreadsheets have improved over the years, serious problems persist. Truth be told, the fault is really neither with the spreadsheet nor the finance professional. The fault is simply the nature of any process that involves lots of manual cuts, pastes and inputs of data. When people perform hundreds of operations every day, mistakes will happen.
Three examples of spreadsheet errors made world headlines in recent years. In reverse order, here are the top three spreadsheet errors of the decade, so far.
3. Ten thousand angry sports fans
When thinking about the 2012 Olympics in London, many of us remember the great athletic performances, the music and pageantry of the opening and closing ceremonies and maybe James Bond paying a visit to her majesty the queen. But for 10,000 fans of synchronized swimming, their most distinct memory is probably the event that they didn’t get to attend because of a spreadsheet error. The event in question was oversold by 10,000 seats when a staff member made a single keystroke error.and entered 20,000 into a spreadsheet instead of the correct figure, 10,000, for the remaining number of tickets. The 10,000 oversold ticket holders were offered tickets to other—presumably less-synchronized—events.
2. Pundits and politicians: Do you know where your data is?
Pundits and politicians love to quote scholarly research to back up their opinions. After all, they assume that the experts who conduct that research have checked and double-checked their facts and figures before publishing their conclusions. But pundits and politicians would be wise to do some double-checking on their own.
In 2013, spreadsheet errors found in an influential study on the relationship between fiscal austerity and gross domestic product (GDP) made international headlines in what one economist called L'affaire Excel. The study’s authors “accidentally excluded some data in one case, and used some wrong data in another.” When they were discovered, the errors not only undermined the conclusions of the study, but they also embarrassed many policy makers around the world who had used the study to support their positions. But the gaffe did put a smile on the face of New York Times columnist Paul Krugman.
1. The $100 million oops
Companies are bought and sold all the time. And once the parties agree on a price, that’s usually it. However, in October 2014, the number of outstanding shares of Tibco Software was misstated because of one small spreadsheet error. As a result, the sale price of the company—a price all parties had agreed to—was overstated by $100 million. When the transaction was completed, the acquired company’s shareholders received $100 million less than they expected. The only folks smiling here were the litigators.
A spreadsheet error at many organizations may never get the headlines. But even small errors can cause headaches and embarrassment, and they can be suboptimal, career-wise. Nevertheless, spreadsheets are still a useful tool—just not for enterprise-scale budgeting, forecasting and planning.
Download the white paper, Spreadsheets for planning? A popular tool needs help,” to learn about the causes and consequences of spreadsheet errors, and discover how IBM solutions help organizations overcome the shortcomings of spreadsheets without having to abandon the familiar interface. And register for Virtual Finance Forum 2015 September 22, 2015.