Saturday, September 02, 2006

Whither Forensic Forecasting?

You might agree with me, that sales people cannot be left alone when it comes to forecasting. There needs to be management adjustment.

However as a sales executive be warned. Not all adjustments you make are reducing or eliminating bias and thus reduce forecasting errors. There is an easy test to determine whether you as an executive add value to the forecasting process. Just compare your adjusted forecast with a naïve forecast. The simplest form of the naïve forecast is the random walk. You take the known sales number from the previous period and declare this the forecast for the next period. Do not be surprised if your forecast scores worth with respect to forecast error than the random walk. The literature on business forecasting is full of examples of this phenomenon.

If you have to face the hard reality, that your contribution to the process actually makes the forecast error bigger rather than smaller as it was your good intention, forecast experts are telling you stop doing it. How do I dare making such a suggestion? Forecasting is one of your key ingerdient of your sales manager’s toolbox.

I can understand this anger especially if you are an adept of what I call Forensic Forecasting.

You are using the forecasting process as a stick. You make it as painful as possible an experience for a sales person to having to admit to you not having made his/her forecast.

If you are using the committed to forecast functionality offered in sophisticated CRM systems, this might be a symptom that you adhere to Forensic Forecasting. What you are hoping to achieve, is by applying pressure to your sales people, they will put more effort in first delivering you an “accurate” forecast and then do all that is needed so that actual sales will match the forecasts.

If you have the tendency to shorten forecast cycles if sales do not develop as expected (I have seen extremes of several forecasting rounds per week) this might be another symptom of Forensic Forecasting. You might though argue that this will help you to discover potential problems earlier. Just remember, this does not come for free. You reduce the time your sales people can spend in front of the customer. It might be just that what is however needed for you and your people to make the numbers.

Don’t get me wrong I am all for accountability. I just would not try to get it with these practices. They tend to be a waste of time.

Forecast meetings with managers adhering to Forensic Forecasting tend to be centered on questions to find out why things have not turned out as forecasted. What you get from such discussions are probably explanations how circumstances over which the sales person had no control lead to the fact that the deal did not close yet. Rarely will these meetings be used to find out how the process of forecasting itself could be improved to reduce forecast errors. Let alone will you find fruitful discussions to find ideas how a critical deal could be moved forward.

At best you might end up being asked, or you come to the conclusion, that is now time that you go see the customer yourself do understand what is really going on and close that deal. This reaction could turn out to be another symptom that you are suffering from Sales Executives Tunnel view. I know I still owe you an explanation for this term. Please be patient Rom was not build in one day either.

P.S. There are another 199 nine cartoons in the book the "Sunny Side of Selling " published by the Selling Power Magazine.

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