By Harry Chopra and Carolyn Bancroft
You can walk into any sales organization and approximately 15 to 20% of productive time will be spent developing a 30/60/90 forecast every month by the “sales chain of command”. Sales team leaders want to know what they will deliver, because their sales managers have to predict the same and so on. The larger the organization, the greater the game of “Chinese Whispers”.
If you consider that the average sales person is productive 1600 hours per year, that is approximately 40 weeks or 200 business days, at 15%, the cost of sales forecasting is approximately 30 business days per year. Then you multiply this with the time it takes to create the spreadsheets with probabilities factored in by the sales chain of command, need we say more.
Is forecasting important to a business? Absolutely. So what can be done to improve an activity that is largely looked upon as drudgery by most sales professionals. From our experience, here are a few ideas that you could consider for your organization.
The Human Factor
If an activity is looked upon as drudgery it is because the individual (or team) cannot connect the task with furthering their own aspirations or success. A quote that explains this principle is as follow:
Tell me and I forget. Show me and I remember.
Involve me and I understand
In the sales profession making the connection between executing your organization’s sales process and the forecast simply being an output of this process is the shortest mechanism to get the people on board.
The best way to do this is to give people the opportunity to input in developing your sales process. If people participate in the decision making around process this fosters a sense of ownership on that process. This sense of ownership can then translate to accountability for the outcome when the individual puts in practice that process.
The key is to make the connection. Most sales organizations assign responsibility for a group of accounts in a geography with a set book of business and prospects. The job of the sales person at the base level is to protect and grow the revenue in a given territory and book of business. The best way to make a connection to the task of forecasting is to instill a culture of entrepreneurship and ownership.
Successful business owners have a business plan and under that business plan are the roles and responsibilities of the employees along with the tactics to execute to generate success against that business plan. Similarly, sales professionals are business owners of their account base. This can be an individual representative’s territory or from a sales manager’s region. The sales professional at any level needs to create, own and take responsibility for their Territory and Account plan (business plan) to execute on the objectives the organization has delineated for them. This cannot just be words. The organization at all levels needs to guide this plan and be careful not to dictate the plan and allow creativity. This will foster a real sense of ownership and accountability for success. The other critical element is to be sure the resources needed to execute the plan are available. Thus, creating the connection, as numbers in a sales professional’s forecast are the quantitative results of how well they are executing as business owners on their Territory and Account plan that they created and own. The sales professional is responsible for those results so if they don’t like what they see as the business owner of that plan they should make the appropriate changes utilizing the resources the organization has provided. And if they like what they see in the forecast they should keep doing more of it and share that with the sales team at large.
30/60/90 day Forecasting is not drudgery when you connect the results to a quantitative assessment on how well we are doing executing on the business plan that we were involved in creating and hence understand and support. “Involve me and I understand”. It provides us all with the ability to identify quantitatively what is working and what is not in our selling practice and take responsibility for that outcome.
Scratch a sales professional and you will find an individual who is trying to work their incentive plan to maximize their earnings potential. Thus any activity that detracts from this task takes away from earnings. By making it explicit that a monthly set of figures that depict business in the contracting, developing or being qualified phase, preferably automatically generated by a CRM system are defensible will have an impact on a stated year end incentive can focus the attention of a sales organization.
So let’s assume we put a process in place that has clear definitions for the final three phases of your sales process and generates contracting, developing and qualifying figures by a CRM system. That is a very good start, but we are not yet ready to forecast anything.
Going For The No
One of the reasons why sales forecasts are viewed with a grain of salt by most organizations, is that the focus is on generating figures versus having clarity on what opportunities do we discount versus where do we “engage to win”. If an opportunity is qualified, meaning we understand the decision making process, the key decision makers, we have a competitive offering and the customer is going to make a decision within a sales relevant timeframe, this is the time to engage to win. In other words, all other opportunities that don’t meet this simple criterion should be excluded or discounted. This approach would force the sales organization to go for the “NO”. That means either we qualify ourselves to be competitive in this situation or we make a conscious decision to not pursue the business. We can practically guarantee that after a couple of calls with your sales leadership, where you discuss the criteria, bubble up a small set of opportunities that need to be driven, the quality of your forecasts will improve dramatically. This technique would force the sales organization to represent their opportunities in the best possible light, forcing them to abandon wishful thinking and pipeline dreams!
Thou Shalt Not…
So let’s imagine that we have a CRM system that generates a monthly set of figures for you, where only the most qualified, developing and contracting opportunities are continuously updated, what could possibly go wrong? The last step in this process is to tie the opportunity in the CRM system to the order and fulfillment process within your organization. In other words, no sales credit or compensation is given to a salesperson, until the opportunity is closed in the CRM system and the data transfers to your order management team. Let’s face it, if there were no corners, people would not be cutting them. In a sales organization, giving sales professionals a choice to circumvent the “system” is a recipe for incomplete data in your CRM system. Of course we all have our doubts that the day will arrive where your CRM application reconciles completely with our Order Entry and General Ledger, but preventing orders to be processed unless opportunities are closed on the CRM application – you will come pretty close !
Analyze That !
Now let’s assume everything is hunky-dory. All sales professionals have created territory and account plans that they understand as authors and take ownership of. They have made the connection that forecasting is critical to measuring the success of their plans or the need to adjust their plans. All CRM definitions are clear to the sales organization, the incentives are in place, we are going for the NO, we are engaged to win, we have the order processing mechanism down pat. Now we can begin to see the data trend and begin to answer the question: on average, how much of the business that is in the contracting phase gets to close on a month to month basis. Our experience says that if 75% of the business that is in the contracting phase closes for your organization, you have just arrived at sales forecasting nirvana: in other words, freedom from drudgery in forecasting- you have taken into account the human element and made the connection on why forecasting is important to your success and enacted a system for automation that has governance guidelines so the data that is output for forecasting is transparent and reliable.
Similarly, we can ask the question by each sales territory: what is the amount that needs to be generated in the developed and qualified phases of a sales process to move opportunities to a contracted phase such that if 75% of these opportunities deliver for the business in line with the monthly run rate. If you get to this state, then your focus moves from “the drudgery of sales forecasting” to working with the sales manager on developing the pipeline. Adding value is a lot better than executing drudgery !
Harry Chopra leads the global sales and client services function for S&P Capital IQ and he brings 28 years of sales, marketing and client services experience to the role. Over his career, Harry has had the opportunity to work in multiple industries, including Telecommunications, Technology, Payment and Billing Systems, Asset Management and Financial Technology. Besides experience in the North American marketplaces, Harry spent 8 years in a sales capacity in the Asia Pacific region. His current role at S&P Capital IQ entails the delivery of financial markets and customer intelligence to Financial Institutions, Investment Management organizations, Investment Banking organizations, Private Equity organizations and Corporations. Harry has a bachelor’s degree in mathematics from the University of Delhi and an MBA in marketing from the Ross School of Business, at The University of Michigan. Most recently, Harry was sponsored by S&P to be a part of the Columbia Business School’s Executive Education program designed around the challenges of leading large organizations.
Carolyn Bancroft is Managing Director and Head of Sales for the America’s Sales organization at S&P Capital IQ. Carolyn brings more than 25 of years of sales and sales leadership experience in the financial markets to the role. Carolyn has experience in creating both direct and channel sales organizations in an industry that lives the word “coopetition”. In the past three years, Carolyn has successfully integrated sales cultures, compensation systems and forecasting methodologies across four distinct teams to lead an organization that consistently meets sales objectives for the firm. Carolyn is an active member in the mentoring program of the McGraw Hill Financial’s Women’s Initiative for Networking Success (WINS). Carolyn has a Bachelor’s Degree in Economics from St. Michael’s College and lives with her two children and husband in Boston.