Companies spend countless hours each year developing the business plans, forecasts, reports and analyses they depend on to drive strategic decision-making and performance management. It follows that these critical documents be based on information that is accurate and timeous and that they can be easily updated as conditions change. However, where spreadsheets are used to deliver these documents, this ideal is often little more wishful thinking.
"Spreadsheets are notoriously unreliable, error-prone and inefficient, and can severely hamper corporate performance and credibility," says David McWilliam, managing director of Cognos South Africa, an IBM company, "yet organisations continue to use them due to the perception that they provide flexibility and the ease of access necessary for collaboration - both vital for enterprise planning. Nothing could be further from the truth."
While spreadsheets offer some flexibility for planning, they offer no structure - and without structure, modification and revision of plans become a hit and miss process. McWilliam explains: "Spreadsheets can easily model a number of business scenarios, for instance, but modifications such as revising goals or adding products are a complex, time-consuming undertaking that requires great care since it isn't always clear what change may be needed or where.
"For instance, to make a simple addition of an expense item to a typical business plan, a user must manually navigate through the numerous workbooks, worksheets, rows and columns and enter the data or calculation. Alternatively, the user can write a macro - which must be tested, debugged and run. The entire model must then be reviewed manually to ensure the desired result has been achieved. If not, a rework is required. Hardly an efficient process." Other critical processes that are vital to accurate planning and performance management, such as collaboration, workflow, aggregation and modification of plans in real-time, are also hampered by the use of spreadsheets for enterprise planning.
"Collaboration is essential to successful enterprise planning," says McWilliam. "The greater the cross-enterprise input, the greater the accuracy and insight a plan will deliver. However, since error frequency is high and there are often difficulties with the deployment of spreadsheets, the planning process is constrained and centralised, typically representing only a small part of the organisation."
Spreadsheets also typically cannot track contributor progress so ensuring contributions and submission are made becomes the task of the manager, he notes. As participation increases, the volume of spreadsheet contributions increases and tracking contributor progress becomes more difficult. Of course, aggregation difficulties increase as the number of spreadsheet contributors grows. "Even if individual spreadsheets are error-free, consolidation can lumber on for weeks," says McWilliam. "In addition, there is no guarantee that everyone is working on the latest version of the spreadsheet. Poor version control will result in a consolidated plan based on inaccurate data or - owing to the mismatch of model structures - the inability to consolidate at all."
As numerous research houses, such a Metagroup and PricewaterhouseCoopers, will tell you, spreadsheet planning and analysis process simply does not permit companies to alter plans, reforecast or modify budgets in real-time. Says McWilliam: "The effort to consolidate hundreds (or thousands) of spreadsheets inhibits quick reaction to changes in the economy, market conditions or competitive conditions. And, when real-time information is lacking, executives may be forced to rely on educated guesswork or gut reactions.
"In fairness, it must be said that spreadsheets have proven to be useful productivity tools, but they are not for enterprise planning. They can assist to manipulate numbers, but their limitation lies in their reliance on fallible human users to generate complex formulas and macro routines. And, since they work poorly in collaborative environments, they are unable to access and aggregate data from disparate sources - hardly what you would expect of an enterprise solution."
There is an answer to this dilemma, however. Says McWilliam: "The solution is to be found in performance management platforms that assist organisations to integrate operational and financial planning in real-time for immediate visibility into current and future business performance."
These platforms, or solution suites, enable localised responsibility for planning processes across functions, geographies and business units, and provide powerful modelling capabilities that give organisations the flexibility to devise, compare and assess alternative business scenarios, conditions, cases and assumptions. In addition, managed workflow and collaboration, data management, version control and modelling flexibility support integrated enterprise planning.
The result? True predictability and accountability across the enterprise, says McWilliam. "With one version of the truth, you can spend your time making business decisions, rather than debating accuracy," he concludes. "It is certainly an worth investigating making an investment of this nature - it not only ensures accuracy but establishes the foundation for better performance management and ensures the organisation can meet good governance requirements."
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