5 epic spreadsheet fails


Spreadsheet-based computer programs have been around for the last four decades, and have had a major impact on the digitisation of business. For many they’ve become indispensable, and have revolutionised whole industries. Sadly, however, they are not immune from human fallibility and there have been some notable examples of situations in which spreadsheets have landed businesses and individuals in some seriously sticky situations. As technology progresses, the spreadsheet is becoming an increasingly antiquated business tool that wastes time, is susceptible to human error and has the power to do real harm.

We’ve all heard the horror stories – the kind that keep business administrators and HR professionals up at night. Like the one about the HR manager who emailed an entire company a spreadsheet that contained hidden (and easily un-hidden) columns showing all employees’ salaries and benefits. But that’s nothing compared to some spreadsheet gaffes. Here are SMB.co.uk’s top five favourites:

1. Reinhart and Rogoff learn a lesson

The Reinhart-Rogoff paper ‘Growth in a Time of Debt’ was an influential report on the relationship between government debt and GDP growth. However, it was found that the Harvard economist authors had used faulty Excel sheets to analyse their data. To make matters worse, the errors were spotted by an economics graduate student. The embarrassment caused by this little spreadsheet cock-up went beyond the report’s authors, as before the error was spotted this lacklustre, faulty research was touted by economists and politicians around the world as proof of the need for austerity.

2. Fannie Mae’s billion dollar blushes

When Fannie Mae was in the midst of changing its accounting system, the finance team used spreadsheets to make some of the calculations required by the new system. The only problem was that these spreadsheets contained an error that threw some of the results off by over a billion dollars. A few embarrassing audits later, Fannie Mae made a major restatement.

3. Kodak recounts its losses

Another company that had to make a very public restatement – this time of its losses in Q3 2005 – was Kodak. Some $9 million had to be added to its posted losses, following a previous error made on (you guessed it) Excel. A spokesperson gave a full and all too familiar explanation: There were “too many zeros” in a cell.

4. Emerson’s spreadsheet shock

Construction company Emerson found it had come up short in estimating the total cost of a contract bid – to the tune of $3.7m. All because one little cell (which held costs for electrical work) was not included in a spreadsheet formula. A shocking oversight, indeed!

5. Nevada flushes $5m down the toilet

Citizens and councillors in the City of Nevada saw an unexpected $5m deficit in the water and sewer fund when the 2006 city budget was published online and distributed for a council meeting. The reason for the drop? Yet another spreadsheet slipup!

What can small businesses learn from these multi-billion-dollar fails? That spreadsheets excel at landing businesses in awkward – and sometimes very expensive – messes. This can’t go on. One of the founding principles of SMB.co.uk is that small and medium-sized businesses’ employee management should never have to risk these administrative anomalies and face the same sorry fate as the hapless spreadsheet victims mentioned above.

There’s a new way to do business, and HR management software is at the heart of the revolution. Employees deserve to know that their data is managed in a secure and reliable environment, accessible from the cloud 24/7, and that intelligent systems are in place to minimise the potential for human error. Fundamental processes like absence management are too important to be put at risk by inefficient, outdated and error-ridden technology. Shred the spreadsheet: HR belongs in the cloud!

To move your HR to the cloud with SMB.co.uk, sign up for a free 14-day trial today.

GBS_2074 By Tony Dillon, CEO, SMB.co.uk