Make Winning a Habit [с таблицами]
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Under the Sarbanes-Oxley Act of 2002, sales forecasts are now a serious issue in U.S.-listed companies. Companies have to be compliant and more transparent to stockholders. As a result, boards of directors want to know what sort of analysis is behind the sales forecast.
If the CEO says that everything is going to be okay and then gets embarrassed at the end of the quarter because some deals slipped and didn’t close, investors get surprised and now file lawsuits. It happens about once a quarter, and the result is a stock price that can fall 10 to 40 percent. These are high stakes for a weak forecasting system.
Why Forecasting Doesn’t Work Well
One source of sales discipline is the forecast itself — especially for product-oriented companies, where the revenue is recognizable when the sale is made. But most forecasts aren’t forecasts in the first place. Instead, they’re “pastcasts,” looking in the rear-view mirror at what has happened to date.
If the purpose of the forecast is simply to predict revenue rather than to manage and coach the pipeline, then it fails to reach its potential. In reality, many deals are already out of control by the time they hit the forecast and become visible to management.
In our experience, most forecasts don’t separate the issues of if and when you’re going to get the business. The flaw lies in the nature of competitive evaluations. Most CRM systems simply have line-item lists of opportunities, close dates, dollar amounts, and some sort of A-B-C or 50–70–90 percent ranking.
This is actually a percentage of expected value built on the confidence level of the manager, which may come close to the total company forecast by the law of large numbers. In reality, though, you don’t get a percent of a deal. You either win it or you don’t.
And we have seen newspaper article after newspaper article in which companies have a bad quarter attributed to “several deals that didn’t come in,” and their stock has fallen as much as 10 to 40 percent in a given quarter. These aren’t forecasts; they are simply wishes or guesses. Using a CRM system to automate them is just adding up bad numbers faster.
The closer you get to winning, the closer you actually get to losing because of the crucible effect defined in Hope Is Not A Strategy. As committees get closer to making a decision, politics erupt, the decision-making process breaks down, the issues change, priorities change, and the competition makes counterattacks once it realizes it is looking at 100 percent of zero.
Most forecasting systems are not tied to a methodology. They don’t reflect your strategy or the buying process of the buyer. Most sales reps are too close to the action, and their judgment is clouded by wishful thinking. So they don’t ask the tough, critical questions that challenge their strategy for fear that they will spoil a good forecast.
This is the sales manager’s job. It’s too important to delegate.
The best practice is a forecast that includes a line item but through which a manager can click and drill down to the decision-making process, politics, stakeholder analysis, source of urgency, action items, and value proposition to see what your true chances are of winning.
Then, if necessary, the manager can generate a phone call to the sales rep, which will be shorter and of greater value. Forecasts not built on methodology are a pack of guesses on which you bet your company every quarter.
Only by a forecast built on a detailed analysis of the account, reviewed in multiple coaching sessions by a front-line manager, the sales team, and perhaps some certified deal coaches can a sales manager sleep soundly at night.
Forecasting—If and When plus How
The best practice is to imbed methodology and sales process into your forecasting system. Although this is a best practice, we seldom see it used. Recently, we finished this process with Harcourt Assessment. Scott Sciotto, a sales manager there exclaimed, “At last — a methodology combined with a forecast system.”
There are two obvious benefits to this. We see people all the time who understand the six P’s as their sales process, still using A-B-C and 50–70–90 percent as their forecasting technique. But using phases alone fails to recognize the competitive risk in each deal. In a forecast, we need to know not only when the deal will happen but also if we are going to win it. Lumping the two together results in unpleasant surprises (see Figure 5–3).
As a salesperson, I hated my manager’s quarterly question of, “Is this deal going to close?”
My answer was always the same: “Are you asking me if I am going to win this deal at all, or am I going to win the deal this quarter? That is really two different questions.”
Forecasting using the law of large numbers has flourished to the detriment of quality forecasts at the front-line management level.
In addition, salespeople hide deals off the forecast so that they can turn them in at the end of the quarter and be a hero. Often they are awarded a bonus for this, which encourages bad behavior.
The Next Generation of Drill-Down Forecasting
While many sales managers have embedded their sales methodology into their CRM system, new “on demand” Internet technologies have significantly enabled the integration of methodology into the forecasting system. This can now be done without requiring any programming and while maintaining necessary security by keeping the data inside your firewall.
The success of Salesforce.com in penetrating larger enterprises has validated this approach. The ease of integrating CRM, forecasting, and remote coaching now allows for technology-assisted deal coaching and a new level of teamwork between sales rep and manager.