When we talk to prospects about commission tracking, we often hear that people think it’s faster to set up an Excel workbook than it is to set up all of their data in a system. Even though Excel seems like a flexible solution, spreadsheets are extremely error-prone! And every time we talk to prospects, we find errors in their formulas. Every. Single. Time. There are a lot of spreadsheet fails out there to learn from, so let’s dive into the nitty-gritty of why spreadsheets are the wrong solution for managing comp plans…
1. Spreadsheets are Error-prone
We all know at least one person who considers themselves an Excel aficionado, but with spreadsheet territory comes human error. Excel formulas are complex and it’s incredibly easy for a simple formula to turn into chaos. When performing simple mechanical tasks, like typing, people generally make about 0.5% of undetected errors. When it comes to more complex logical tasks like spreadsheet development, the error rate jumps to nearly 5%.
Overall, close to 90% of spreadsheet documents contain errors. If you rely on a formula that introduces new figures, and you’re not sure if the decimal point is even in the right place, it can be really crippling to your data. Even a simple everyday task, like copying and pasting, can introduce new errors and result in major losses. Having hundreds of spreadsheets that you’re responsible for maintaining can get out of hand, and quickly, too!
Even the most well-known organizations can’t avoid spreadsheet errors… Here are the top 3 spreadsheet fails:
#3. How would you feel if your company unintentionally purchased 179 contracts due to a reformatting error in your spreadsheet? The people at Barclay’s Capital can tell you all about that pit in your stomach feeling. When Lehman Brothers went bankrupt, Barclays bought some of the company’s assets and, unbeknownst to them, someone had hidden the cells of the unwanted contracts on their Excel file instead of deleting them. We’re talking about a spreadsheet with nearly 1,000 rows and 24,000 cells. Once the spreadsheet was converted into a PDF, the cells magically reappeared. The error was only discovered once the file was published. Barclay’s Capital had no choice but to swallow the losses, costing them an undisclosed (but most likely considerable!) sum.
#2. Picture this- It’s 2012. You’re in London enjoying some afternoon tea celebrating the fact that you just scored tickets to an Olympic synchronized swimming event. But then, you get contacted by the game organizers explaining that, oops, they oversold 10,000 tickets for the event. The staffer responsible accidentally typed 20,000 instead of 10,000 when inserting the number of available tickets into their spreadsheet. As a result of this blunder, the ticket holders of the non-existent seats did receive an upgraded ticket but it was at the expense and embarrassment of the 2012 London Olympics Committee.
#1. Ever heard of the “London Whale” incident? JPMorgan Chase lost more than $6 billion due to Excel spreadsheet errors. Inaccurate equations were caused by copying and pasting a large number of cells from multiple spreadsheets. And this oversight could have easily been avoided in the approval process! But increased pressure to meet deadlines ended up costing this banking and financial services holding company some pretty major bucks- six billion dollars worth!
2. Spreadsheets are Difficult to Distribute
There’s no denying that a bunch of stakeholders are sharing the same spreadsheet in your organization. Part of the data gets shared with sales reps, part with managers, part with the operations team, part to accounting to cover ASC 606/340-40, and part to human resources to get the right commission on a rep’s paycheck…
Having to manually divide up and email compensation reports to the right contacts while omitting sensitive information for other individuals can be risky and a waste of your time. Is it even possible to have an easy-to-manage spreadsheet that serves all these masters?
Don’t forget about the secret shadow spreadsheets that sales reps are keeping on the side, too. Most reps track their results on a side spreadsheet to calculate how much they’re going to make. And usually, those calculations are wrong. CROs we’ve spoken with estimate their teams spend as much as 10% of their time on these ‘shadow spreadsheets’! You can’t distribute a spreadsheet every single time a rep closes a deal and this lack of transparency and traceability is doing your sales team more harm than good.
3. Spreadsheet Data Quality is Poor
If your data is scattered across your account system and a few spreadsheets, how can you really trust the figures? When your company grows, so will your numbers. By making changes, adding new transactions, and trying out different commission plans, your spreadsheet design ultimately becomes more complicated and the truth behind your original data gets lost. All the reorganization and modifications you make causes you to produce different versions of your spreadsheets and, now, you’re not even sure which one is correct! When your data changes, commission software can automatically calculate the changes for you, but a spreadsheet isn’t dynamic enough to keep up. Trying to figure out all the sorting and filtering is precious time you’ll never get back…
What’s Really Working and What’s Not?
Let’s take a look at the London Olympics spreadsheet fail… Sure, it can be argued that a spreadsheet makes sense in the context of tracking ticket sales. However, when you look at the bigger picture, a venue large enough to seat 10,000 people is a bad fit for a spreadsheet. The lesson learned here is that spreadsheets aren’t the end-all-be-all answer for everyone, especially when spreadsheet errors are costly and embarrassing!
If you’re still a stickler for spreadsheets when it comes to tracking commissions (and our spreadsheet fails horror stories didn’t spook you enough), it’s time you ask yourself a question… How do you know you’re getting the desired behavior from your comp plan using a spreadsheet? It’s necessary to evaluate the effectiveness of your comp plans and perform ongoing analysis of your data to make sure you know what’s working and what’s not. Sure, Excel is free but do you really have your comp plan spreadsheets under control?
Conclusion
Stop. Using. Spreadsheets.
So, how should you track commissions in spreadsheets? You shouldn’t. Excel lacks the features that commission tracking needs and, let’s face it, it’s an unproductive way to manage all of your comp plan needs. And we know that admins are tired of the back and forth, making manual edits, handling reconciliations, putting reps in different plans, and sending out statements… You deserve better! (And we don’t want to add you to our next list of spreadsheet fails!)
Next Steps
Are you rethinking spreadsheets yet? If you want even more answers about why you need to replace your spreadsheets with sales commission software, check out our Ultimate Guide to Sales Comp. With just one click, you can have access to the most comprehensive guide on incentive compensation.
