One Way to Fix Forecasting Inaccuracy?

 

Despite millions (hundreds of millions?) of dollars/pounds/yen/euros … being spent (invested?) on highly sophisticated CRM software, and hours of time being dedicated to endless business pipeline reviews, at least 80% of sales forecasts are still not accurate. Why?

To begin with, the fundamental flaw in all forecasting is that we are asking salespeople to report on their own performance. It’s a bit like the US Congress asking professional baseball players if they use steroids – note that I avoided any reference to cycling today!

If we ask salespeople to report that they are failing, frankly, we are kidding ourselves.

Most organizations and sales managers ask for a forecast and apply a lot of pressure in the process. For example, a Sales Director told me the other day that his team could not properly project their business. I asked what he had tried in order to improve forecasting accuracy. He said, “Last December I asked them all to commit to what they were going to close in the following 90 days.” I asked if that approach worked and he said, “No. They didn’t make the numbers they had committed to and they were their numbers!” I then asked him what they said when he debriefed their opportunities and walked them through a structured analysis of each deal in progress. He said, “I don’t do that.”

Let’s just think about that for a moment….

If you hired a golf coach who said, “Jono, the problem with your game is that the ball doesn’t go in the hole early enough and often enough.” What would you think of that golf coach?

You cannot coach based on outcomes. If you want to change an outcome you have to address the underlying behaviors.

When we beat them up with their own numbers, we aren’t adding any value and we are probably damaging their self-esteem. and this results in subjective and inaccurate forecasts.

So then we try a ‘uniform milestone’ grading scheme in an attempt to remove the subjectivity by establishing clear guidelines for what it means to be “at 80%.” This is better, but still more subjective than objective. These approaches fail because they try to solve the problem with tons of paperwork or lots of annoying buttons in a CRM system. The real problem is that salespeople gather all the information and then put it in a file or in a CRM system: They look at it as busy work and they do just what it takes to keep their boss off their backs.

Further, if you’ve ever been through an account or opportunity review as a salesman/saleswoman, you face a manager who keeps asking questions until he find one you didn’t ask. It’s reduced to a game of “gotcha.” Again, very little learning is accomplished and the salesperson’s self-esteem is bruised- sometimes irreversibly.

The state of the art is to use, what a very good chum of mine refers to as an Ultimate Contract. It is an agreement between the salesperson and the customer that outlines all of the key qualification conversations and the due diligence process that will lead to the ultimate ‘yes‘ or ‘no.’ The purpose of this document is to make sure you don’t develop a proposal unless you are certain you have captured the full set of requirements and that they are seriously considering buying from you.

“The greatest enemy of communication is the illusion of it.” – Pierre Martineau

The Ultimate Contract requires the salesperson to ask the tough questions. (Please note, another real problem is that salespeople don’t ask the tough questions! We need to help them learn how to do this.) The verbal agreement is then reproduced in writing and shared with the customer/client/prospect to ensure accuracy and clarity. Since you have to send it to the customer, it serves as a behavior trap that you set for yourself, to make sure you ask all of the tough questions.

Since the customer had to see it and agree to it, it adds the next level of accuracy to the forecast. Subjectivity is removed by verifying the conversations with the customer. The account review becomes an integral part of the sales cycle.

The manner in which you get to those agreements – tactically and conversationally – is the difference between being pushy and mutual agreement.

We use the term ‘contract‘ to emphasize that salespeople need to recognize that it is a two-sided agreement and that both parties should have an equal degree of commitment. Contrast that with a proposal – in which the buyer’s only commitment is to allow the proposal to enter their in-box. When you call to follow up, they say, “I haven’t had a chance to read it yet.”

It’s in both parties best interest that you reach an engaged agreement or pull the plug on a process that is going nowhere.

As with any sales tactic, if well-executed, it works well. If not, it comes across as pushy.

Having shared all of that with you, please don’t ever consider throwing that CRM system out of the window! Just make sure that you use it properly and attach an Ultimate Contract to every opportunity.

I do suggest that a verified, mutual agreement, is central to the original question about accurate forecasting.

 

News: Yes I realize I promised you a post all about arrogance today, but this idea consumed me, so arrogance can wait until tomorrow: Also tomorrow, news of two very special events coming up in London that you really do not want to miss – and a chance to meet up with me.

In the meantime, two new interviews are posted over at TSW and TSM – “Sales and Marketing Alignment – A Management Responsibilty?” with Tibor Shanto and “Are Your Salespeople Still Cold Calling? – The Ugly Truth” with Dave Kurlan

Comments

  1. says

    I’ve come to learn that forecasting is at the mercy of 2 very highly variable factors: prospects and sales people. Even if you get one of them stablelized, the other will always have variability and thus affect your forecast accuracy.

    And prospects themselves often have multiple layers, so you often are dealing with speculation on top of speculation on top of speculation….fun!

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