A 2013 press release from WorldatWork declared that 90% of companies use Excel in their compensation processes. This became a (commendable) call to action for WorldatWork to beef up its emphasis on Excel training to equip rewards professionals with the skills needed to use its tool of choice.
But here is another 90% statistic. A study from the University of Hawaii suggests that 90% of spreadsheets with more than 150 rows have errors.
So if 90% of companies use Excel, and 90% of spreadsheets have errors, simple math suggests that 80% of companies have compensation process mistakes purely from spreadsheet errors.
There are other statistics that aren’t quite as scary. We’ve seen statistics suggesting “only” 40% of companies use Excel for merit processes, with a skew based on size of company. Perhaps it is fair to be skeptical about both ends of that spectrum, but we can all agree this presents a risk.
HR is not alone with this risk and error. There have been countless high-profile spreadsheet errors that have cost companies and tax payers hundreds of millions of dollars. In 1999, NASA lost a $125 million Mars orbiter due to a metric conversion error. Basic Excel flaws and incorrect testing led to JP Morgan Chase losing more than $6 billion in the London Whale trading disaster. Fannie Mae stated that it had discovered a $1.136 billion error in total shareholder equity due to “honest mistakes made in a spreadsheet”
There’s no question that spreadsheets are a powerful tool. “Chainsaws are also a very good tool, but who would use one without a chain guard,” says Patrick O’Beirne, Chairman of the European Spreadsheet Risks Interest Group.
It’s time for a new approach. HR needs to get better at articulating the business case for investment in process management tools, quantifying the risks we face today and the return on investment in new solutions.
Fortunately, today there are a variety of HR technology vendors working to eliminate these challenges, and many of them don’t require significant investments of time, money, and energy to implement. The “platform plus” model that many of us leverage today allows for blending a core HRIS with best of breed solutions to eliminate risks while engaging and empowering everyone in the organization to make better, more informed decisions.