Wednesday, October 19, 2011

The Five Ways You May Be Wasting Money in Performance Measurement (#2)

#2 Using spreadsheets to maintain your GIPS composites

The Spaulding Group began surveying the industry on the presentation standards (initially the AIMR-PPS(R); later GIPS(R) (Global Investment Performance Standards)) in 1994, and we've done it several times since then. We have always been struck by the large percentage of compliant firms who use spreadsheets to maintain their composites. And while we can understand why this was common in the early 1990s (given the dearth of software packages), this is no longer the case, and hasn't been for some time.

Years ago, when doing talks on the standards, I would tell participants that when they hear a voice in their head suggesting that they put their composites on a spreadsheet, that this was the voice of the devil. Spreadsheets are:
  • time-consuming
  • error prone
  • cumbersome
  • manually intensive
  • and not a data base.
It is virtually impossible to include the artificial intelligence-type logic in spreadsheets that can help firms tremendously to maintain their composites. In addition, it's typical for packaged software to produce presentations, saving users the trouble of gathering data from multiple sources, and using MS/Word or MS/Excel to put presentations together.

Okay, and so now I can hear you ask "you're suggesting that we SPEND money; how is this 'wasting money.'"

Good question. Because you're wasting money on the manpower that today must maintain these spreadsheets. These folks are usually highly trained and educated individuals whose time could probably be better spent (invested) in more analytical-type work. In addition, the potential errors that can arise from spreadsheet-based composites is huge.

So why bother? Make the investment of money in software, not people's time. Use these human resources in better ways, that will likely give them more job satisfaction and provide additional benefits to the firm.

p.s., Are there exceptions? Yes, of course! Many smaller firms cannot justify the expense of a packaged solution, and so spreadsheets may be their only option. Or, if the firm has but a few composites and a limited number of accounts, then spreadsheets may be okay. But in general, firms should seek out a packed solution.

p.p.s., In general, spreadsheets shouldn't be used for "systems." Especially when there are programmed systems available. This applies beyond the area of GIPS compliance.

p.p.p.s., Reminder: there's still time to sign up for next Monday's free webinar on the GIPS Standards. To register, please contact Jaime Puerschner or Patrick Fowler (001-732-873-5700).


  1. I'm pleased to see this. Here is a document that gives some hints about the dangers of spreadsheets (in a slightly different context):

  2. Pat, thanks for your comments and the info! I look forward to reviewing it.


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