I enjoy nerding out on spreadsheets. They’re excellent for financials, basic data analysis, and modeling. However, managing complex work with spreadsheets is tempting fate. Managing complex work at scale with spreadsheets is dancing with the devil in the pale moonlight.
Once your business gets to a certain level of complexity and/or scale, you’re going to need a better tool.
In this blog post we touch on the shortcomings of managing work with spreadsheets under two scenarios: 1) as complexity increases and 2) as businesses scale. The aforementioned are intricately related. For simplicity’s sake we consider each in turn.
As complexity increases
Increases in complexity can take many forms – things happening at a faster pace, the introduction of more variables, the changing of linkages between variables, playing Calvinball, etc.
Consider the following relationship:
What does the above mean? Complexity is inversely proportional to robustness. Increases in complexity result in decreased robustness. Conversely, more robustness reduces complexity. Another way of thinking about it is:
Complexity is directly proportional to fragility. As complexity is introduced to a system, inelastic parts strain and make the whole system more fragile. This is especially true when accounting for velocity; rigid parts of systems are put under added duress when complexity intensifies quickly.
The same is true from the other direction. Introducing fragility to a system increases complexity.
Applying the above to spreadsheets
As the work you track becomes increasingly dynamic (i.e., complex), more resources must be allocated to manage that work. The spreadsheets used to manage the work need to evolve to keep pace. Progressively more resources are required to manage the spreadsheets versus managing the actual work.
The further operational complexity outpaces the spreadsheets designed to manage it, the more fragile the entire system becomes. Suboptimal management introduces errors, delays, and waste. To quote an executive I recently spoke with: “I’ve seen complex processes managed on spreadsheets that bordered on negligence.”
For businesses using spreadsheets to manage work, important questions need to be addressed. At what point is the complexity of what is being managed greater than what spreadsheets can handle? Does it make sense to manage greater workloads on something that becomes increasingly brittle? What are the multi-order effects when spreadsheets can’t keep pace?
To compound matters, spreadsheets themselves are more fragile as they increase in complexity. Story time!
I worked at a company specializing in economic analyses. One morning, we arrived at the office to find one of our more intricate econometric models, built via a series of interconnected spreadsheets, was completely broken. Hosed. FUBAR.
It took a week of sleuthing for a team of economists to discover the havoc was because Analyst X accidentally deleted a single cell during a sleep-deprived haze. That deliverable was late and over budget. The incident demonstrated we deployed inadequate tools, had brittle systems, and failed to satisfactorily mitigate risk. To put it another way – we danced with the devil in the pale moonlight.
[For those interested in a much juicier example, check out this article on the infamous Reinhart-Rogoff error.]
As businesses scale
Closely related to the diatribe on complexity above is spreadsheets’ inability to keep pace as organizations scale.
Managing operations with spreadsheets at scale becomes more difficult as both the number of users requiring access and things needing to be managed increase. Suboptimal collaboration tools and lack of automation quickly emerge as bottlenecks.
While the cloud and shared repositories have eliminated basic version control issues, collaboration issues with spreadsheets still persist. The ability to simultaneously access a single document was a big first step. But without the ability to tie in alerts, communications, and other fundamental collaborative functions, spreadsheets fall woefully short.
We recently heard a firsthand account from a global manufacturing company operations meeting. Every week during the videoconference call the ops lead screen-shared a master spreadsheet so all meeting participants could manually update their versions. I don’t know how it came to that but…wow.
It goes without saying that growing organizations require tools that seamlessly grow with them.
There are many things spreadsheets are good for – or even “good enough” for. However, the more complex your work, the more likely spreadsheets are to become brittle and introduce fragility and waste. As your business grows, spreadsheets don’t do well past a small number of users and things to track.
Don’t temp fate. And definitely don’t dance with the devil in the pale moonlight.