In an April post, I looked at the financial impact human error can have on a company. With news of Best Buy’s recent web site pricing doozy, it seems only fitting to revisit the issue.
Yesterday, Best Buy shocked customers with a whopper of a deal: a 52-inch Samsung HDTV for $9.99. Orders came in and credit cards were charged. Some customers attempted to buy up to 10 televisions each.
Best Buy issued a statement saying it would not honor the pricing error, so it may have saved itself heaps of money. Some companies haven’t been so lucky.
It was a mistake, of course, and the company corrected it promptly. The sale price should have been listed as $1,699.99. Still, customers were miffed, and Best Buy had to get to the business of refunding credit cards that had been charged, and doing a little reputation management via its web site, on Twitter, and elsewhere.
Best Buy issued a statement saying it would not honor the pricing error, so it may have saved itself heaps of money. Some companies haven’t been so lucky. Foul-ups involving a few decimal places may seem innocuous, but even the smallest mistake can cause millions of dollars in damage.
Consider the results of a landmark Dartmouth College study, which I wrote about in April. It offers a clear picture of what’s at stake.
For the study, researchers looked at the quantitative impacts of errors in operational Excel spreadsheets from five different companies. Among the more notable findings:
- Within a single organization, spreadsheet practice can range from excellent to poor.
- Some organizations use spreadsheets that are riddled with errors and some of these errors are of substantial magnitude.
- There is little correlation between the importance of the application or the risk involved and the quality of the spreadsheet.
The researchers also identified the major symptoms of poor spreadsheet practice, including chaotic design and complex formulas.
“In the hands of experts,” the researchers state, “complex formulas can be used to great effect.” When novices get their mitts on them, however, errors abound.
And some of those errors can cost companies millions of dollars – in the study, researchers found at least one mistake that could have cost a company more than $110 million.
Although the study is two years old, its findings are as applicable today as they were when the researchers embarked on the project. They may be even more so in the current economic climate, in which companies have fewer employees and just as much work to be done. (Jen Darr)
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For those interested, the Dartmouth study can be found here:
http://mba.tuck.dartmouth.edu/spreadsheet/