The Risks of Using Excel for Your RFPs
There’s nothing like a few Microsoft Excel horror stories from Fortune 500 companies to make you question everything.
In business, we tend to exalt Excel as the ultimate calculation and organizational tool. But what about when our functions break or worse, we input the wrong data? These real-life spreadsheet nightmares from household name companies show just how much risk we take for granted every time we use Excel for our crucial business processes — like issuing RFPs.
Risk #1: Human Error
Awhile back Forbes posted a great article entitled Microsoft’s Excel Might Be The Most Dangerous Software On The Planet.
In it they shared a particularly terrifying story about investment bank JP Morgan and Excel horror story:
To translate that into the vernacular, the bank, JP Morgan, was running huge bets (tens of billions of dollars, what we might think of a golly gee gosh that’s a lot of money) in London. The way they were checking what they were doing was playing around in Excel. And not even in the Masters of the Universe style that we might hope, all integrated, automated and self-checking, but by cutting and pasting from one spreadsheet to another. And yes, they got one of the equations wrong as a result of which the bank lost several billion dollars(perhaps we might drop the gee here but it’s still golly gosh that’s a lot of money). [Emphasis added.]
As if that weren’t enough to scare us, here’s more true horror stories of faulty spreadsheets that lead to a $100 million error and a lawsuit.
Upon further examination, Tibco and Goldman discovered a key document – a spreadsheet – had overstated the number of fully diluted shares. This dreadful situation meant that the implied equity consideration was $4.14 billion instead of $4.24 billion. Moreover, this spreadsheet error led to a miscalculation of Tibco’s equity value, a $100 million savings for Vista, and a slightly lower payment to Tibco’s shareholders. The mystery regarding who created the $100 million spreadsheet error has yet to be solved. [Emphasis added.]
While Excel is inarguably an extremely powerful tool it still relies heavily on human input, meaning it’s fallible, and that’s something we need to take more seriously. Especially when it comes to critical data like financial or vendor information. Just because Microsoft Excel is familiar, doesn’t mean it’s effective or even safe.
Risk #2: Emailing Your Excel Spreadsheets
Okay, so we can all agree that when we use Excel for crucial business processes we’re risking broken formulas, human error, and incorrect data. But what about the risks in how we’re sharing our data?
That same spreadsheet nightmare article cites a Schwab Retirement Plan Services email disaster that affected 9,400 participants.
A spreadsheet containing personal information belonging to participants in a company-sponsored retirement plan serviced by SRPS was accidentally emailed through a secure channel to a participant in another retirement plan serviced by SRPS. Included in the spreadsheet were the names, addresses, dates of birth, Social Security numbers, dates of termination (when applicable), employment statuses, division codes, marital statuses, and account balances for each of the 9,400 participants. – Source [Emphasis added.]
Again, just because we might be defaulting to emailing spreadsheets back and forth, doesn’t mean it’s actually secure. On the contrary, most email platforms allow for few permissioning settings and little visibility.
Making a strategic investment in a more secure and transparent environment will help you avoid putting sensitive vendor data or internal information at risk. We’ve accepted our need for dynamic, cloud-based solutions for most of our key processes (Salesforce, CRM, analytics, etc.) why not then for some of our most critical information — RFPs?
Risk #3: Time
“Time is money” is the mentality we should all have when it comes to investing in business optimization. I’ve had the pleasure of working with several different types of consultants (Operations, Sales, Marketing) and no matter their particular expertise they’ve all helped us with one thing: figuring out where we needed to automate.
They justify the price of the tool/solution/software based on one of two things: A. the amount of revenue it will generate and/or B. the number of hours it will save.
They rightly see anything that wastes your time as both a profit loss and a risk to the business. Which is why the third risk of using Excel for your vendor selection is wasting time:
- Manual vendor score tabulations: not only does manual mean there’s more opportunity for a miscalculation, but it can also be a huge time-suck.
- Reinventing the wheel: any time your team spends looking for information, copy & pasting, or recreating work is time you’re not spending on core business.
- “Crashing”: Need we say more? You’re working and then suddenly, inexplicably, the system crashes. And since Excel doesn’t have an auto-save, your hours of effort are completely wasted.
In other words, if your purchasing managers are routinely completing tactical tasks (like calculating scores), it’s probably an opportunity for better tools and more automation. In a fast-paced technological age, none of us can afford the luxury of wasting time.
Read how NFP decided to move away from using Excel RFPs in order to make their RFP process more efficient.