Saturday, December 07, 2013

Time to Clean the Shed!

Having worked with many organizations both nationally and internationally in the area of financial and asset management, one thing seems to tie so many organizations together – their hesitation to change.  Several years ago I addressed organizational change more from a systemic perspective.  However, systemic behavior is a culmination of behavior of each of its parts.

Although I have seen the same behavior through my decades of work with organizations, I somehow passed off the behavior as being native only to private organizations.  However a recent article broke this myth and demonstrated that all organizations fall into the same trap.  The article Long Live Spreadsheets by Kathleen Hoffelder examined the outcomes of a recent Price Waterhouse Coopers study on the ‘tool of choice’ in corporate tax departments.  

The joint study conducted by Price Waterhouse coopers and the Manufacturers Alliance for Productivity and Innovation surveyed 100 tax professionals in the area of their tools for managing and reporting on data.  Of the respondents, 60% said that they continue to rely on spreadsheets as a provisional tool in their tax departments.  Although 60% is a high number, what makes the response more interesting is that spreadsheets were used amid the use of more complex tax-technology tools.  The report goes on to demonstrate how many companies are using spreadsheets as significant data storage and reporting tools.   The study reported that nearly 70% of respondents from mid cap to large cap firms continue to use spreadsheets to perform ongoing legal-entity reconciliations.

Based on personal experience, I have found that private organizations rely on spreadsheets at least as much as public companies.  Although the technology exists to use specialized tools for reporting and the like, organizations continue with the gymnastics of ‘massaging’ data in spreadsheets.  I have personally experienced organizations that have and continue to swim in the sea of spreadsheets.  Not surprisingly to the point of keying and re-keying data when the facility of electronic data transfers exists!  The room for error in this environment is tremendous, in my opinion.

The article revealed that spreadsheets have become the ‘life support’ systems of many tax departments, and I would add accounting/finance departments.  Michael Burak, U.S. and Global Industrial Products Tax leader at PwC indicates “The use of spreadsheets is a reason why tax departments spend a significant amount of time gathering data instead of just analyzing data”.  Statements like these lead one to question if the problem is with the user or with the technology.  , the user doesn’t want to give up the old tools of their job, management likes the reports the ‘old way’ or the technology is simply not available. 

My experience suggests that the issue is two-fold and thereby begs a two pronged solution.   The primary basis is the user and management.  Management must look toward the information of reporting rather than the esthetics of reporting.  Insisting on higher demands on the analytics rather than the esthetics will drive line departments to add more value than ‘fluff’.  User departments must more fully explore the tools of their current methods and technology, provide analytics and secondarily to provide feedback to technology companies to produce the tools they need.  Todd Bixby, tax technology leader at PwC contends ‘Companies would be better served by streamlining the entire process with better data integration’.   My take away, organizations should look toward a more holistic approach to data, reporting and analytics.

Several years ago I wrote an article ‘So what, Now what’, looking at the need for reports to motivate decision makers to act.  It is in the quality, timeliness and intelligence of the report that drives decision making not the ‘esthetics.  Organizations are spending an inordinate amount of money on producing reports using highly labor intensive tools.  When instead they could repurpose that cost of keying and rekeying data to analytics – adding intelligence to the reporting!

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