Forecasting or Balls...of a Crystal Kind, what else? or, should that be “Wishful Thinking”?

Hands up if you enjoy forecasting? Just guessing, not many hands up? If not, why is that? What is it about forecasting? At whatever level we operate, we all have to do it but...what is it that makes it so stressful?

When forecasts are missed the following stressful scenarios become all too familiar.

CEO’s and Senior Leaders relate to the statement that: “my forecasts are based upon the opinions of my salespeople” making reliable and accurate forecasting whimsical. Missed forecasts impact heavily upon credibility and tenure.

Sales Managers spend time being: “spreadsheet jockeys” reducing face time with their teams and customers.

Salespeople cry out: “what do you want me to do, fill out forms or sell?”

Marketing Managers come under pressure to deliver more “qualified” leads.

Finance Managers are unsure about how to manage cashflow given the uncertainty of when invoices can be raised because close dates constantly slip.

Professional Services Managers have little visibility into delivery dates impacting the utilisation of their consultants.

Ultimately, of course, if nothing is or can be done to improve matters the business will fail.

What, if anything, can be done to mitigate such stressfulness?

During the Christmas and New Year break, I was struck by two articles in particular.

In a parallel universe, that of economic forecasting, Ed Conway, Economics Editor of Sky News, in his article on page 26 of The Times Tuesday 05 January 2016, argues that economists get their forecasts wrong. He explains why this is so by citing that: “they, like the rest of us, cannot peer into the future. His real question is why we still pay so much attention to forecasts? He says: “there is no simple answer”. He poses some ideas: “Is it our preference for statistics over gut feeling? Is it the increased financialisation of everyday life? Is it the need for oracular figures in this godless society?” He finishes by saying: “Economists are brilliant at diagnosing entrenched issues facing the country. ...But predicting the future? Forget it”.

In another parallel universe, in his article on page 20 of the Sunday Times of 03 January 2016, Dominic Lawson, also discusses forecasting, this time in the context of opinion pollsters in regard to their track record in the General Election of 2015. He writes: “Their complete and undivided failure to foreshadow the Conservatives’ overall majority in May’s general election has done their collective reputation almost as much damage as the credit crunch did the bankers’”. He also poses some ideas as to why this should be so along the lines that perhaps, in my words now, some kind of “group-think” infuses the minds of those responsible for the forecasts. He says: “These very human instincts - fear of being an “outlier”, aversion to changing position and even an element of bias – are at the heart of many dud forecasts, not just those involving political elections”. Lawson delves deeper: he considers investigations by people such as Michael Lewis in his book: “The Big Short” and Philip Tetlock in his book: “The Art and Science of Prediction” that the likelihood is that the characteristics required for genuinely accurate forecasting are: “being driven by numbers, a dispassionate nature, not influenced at all by their political or moral opinions and being open to admitting they had got something wrong and then changing their approach”.

These two articles got, as the Belgian detective would say, my grey cells working.

When I reflect upon the challenges I have observed with forecasting, two stories suffice to illustrate.

A CEO was making her routine monthly forecasting conference call to her Chairman. She had missed her last two quarters’ forecasts. Her Chairman challenged her by asking her what evidence she had to support her forecast. Her response was: “you will just have to trust me”.

A Senior Leadership Team (SLT) were preparing for a key investor board meeting. For the past three quarters, they had been forecasting some twenty opportunities when in reality they only had seven genuine ones: the other thirteen were no more than expressions of interest. By way of rationale, they said that they could not possibly admit what the real situation was because they would lose all credibility. They had known the reality for some time but had been hoping upon hope that something would turn up and that they could “kick the ball down the road” until they had a genuine twenty opportunities. Later, “down the road” the ball had become “un-kickable” when they had run out of options. Their credibility was not just lost but completely trashed: heads rolled.

So, what is to do? How about these three?

Firstly, however reliable salespeople’s opinions are, their “gut-feel”, there must be objective data to support the forecast. At an individual level, gut-feel may work, but at a team/group level, it leads to inconsistencies and errors. Each person in the chain has their opinion and how do you obtain consistency of opinion: you probably cannot. Thus, there has to be another way. This is to have some objective data: what I call “Customer-Verifiable-Evidence” (CVE) to validate each stage of the customer’s buyers’ journeys. Based upon this, risk analyses can be produced. When gut-feel and CVE are aligned that is a powerful indicator, when they are not, then analysis should draw out the reasons that can then be addressed.

Secondly, the forecasting criteria must be based upon customers’ buyers’ buying journeys not upon sellers sales activities. These criteria will document between buyers and sellers such data as: a Key Performance Measure that is owned by a Key Player for which there is a Bad Thing That Happens if it is not addressed and for which there is a pressing Cost of Delay and that the Key Player has admitted to the seller that they can see how the seller’s solution (products, services and company) will provide a cost-effective mitigation and that both seller and buyer can facilitate the buying process to a successfully negotiated conclusion

Thirdly, group-think and resistance to change must be challenged. The likelihood is that there are insufficient genuine opportunities at any one time to meet the targets, hence the “inflationary” practices, the “kicking of the ball down the road” in the hope that something will turn up. When do you want the bad news? I would posit that the best option is always to go for: “Bad News Early is Good News”.

How would it be, then, if there was a selling process with data points that could be verified by the buyer to the seller in writing that reflected the buyer’s journey. And that the focus of the business and opportunity development was upon identifying the goals and business issues of key players. And that the salespeople were gifted enough to engage in conversations with the key players about these so that they were perceived by the buyers as helping them. And that the sellers had managers who could coach them, help them and develop them. And that CEO’s and their SLT’s could rely upon objective verifiable data, with accompanying risk analyses and profiles, when making their forecasts and could meet challenges to them by citing such data. And that seller, managers and directors all worked to the same process and knew their role in it. What kind of forecasting would that bring about?

Would that be Forecasting or Balls...of a Crystal Kind, Wishful Thinking or the Basis of Building a Solid, Predictable Business?

John,

If you are curious about this, register your interest by contacting me, John Busby, to discuss at: jb@bkc.net; + 44 7968 066 165

Copyright©2016 John Busby