Recently I decided to propose the use of a framework in the spreadsheet modelling process in my business unit. The idea for the framework is based on the slightly dated but still excellent document Spreadsheet Modelling Best Practice, available for download through the European Spreadsheet Risk Interest Group website. Basically, my motivation was provided by one particular modelling process I saw in action recently, where someone with no real skills in spreadsheet design (let’s call them Noddy) was tasked with building a model. This model is going to inform several key internal and external stakeholders in our business about downstream effects of a significant change to a business process. High visibility, high risk. The thing is, I know I’m going to be called upon at some stage to help out with this, and I also know it’s going to be a hard ask to get details from Noddy – I’ve seen some of what he calls documentation, and it’s nowhere near as specific as it needs to be.
With all this in mind, the question for me is: how can we avoid this situation in the future? The Best Practice paper seemed to offer a nice framework to ensure that two things are guaranteed from any modelling process:
- Constructive engagement from everyone that needs to be engaged; and
- Documentation which allows for ease of testing, maintenance and re-use.
The core idea is simple – any model built according to best practice goes through a six-stage life cycle, as follows:
This is iterated as required. The outcomes from each stage are concrete, and serve as inputs into later stages – for instance, the outcome of the specification stage is an unambiguous statement of how the model will calculate the results required – this guides how the model is designed and then built, and serves as a framework to test against.
One of the key weaknesses with our current setup is that people like Noddy often charge into the build stage without any regard for the first three stages, which in my opinion are the most important to getting the model right. Building a model in Excel, once you know the questions it has to answer, have the data you need, know exactly how you’re going to answer those questions, and what it’s going to look like, is a trivial process (given, of course, a fair knowledge of worksheet functions and the Excel UI).