10 Sep The Root Causes of Missed Forecasts
Why do only 33% of organizations “have a rigorous forecasting process that drives forecast accuracy”?
 The unfortunate answer is that while AI and other technologies are used to improve forecast accuracy, the underlying cause of forecasts missing their mark lie in the biggest variable any sales force faces – the behaviors of salespeople.
Below we list the three most harmful behaviors:
Sandbagging – Can you blame a top performing salesperson for withholding information on a deal until they are fairly certain the deal is going to happen? Unfortunately this is the reality of many CRM systems, that top performers withhold deal information to avoid the scrutiny that comes with visibility. Once a deal is in the pipeline for sales managers and sales leaders to see, it becomes fair game for those same managers and leaders to “chase” the status of the deal relentlessly, filling up top performers’ days with unending status reports and phone calls until the deal is either won or lost.
Pipeline and Sales Process are Different – In most cases we have analyzed, the way people sell (the sales process) is quite different than the CRM pipeline, both in terms of human behavior and in terms of stage definitions and probability. In a recent case, where we objectively scored deals in a client’s pipeline, the difference in actual probability versus CRM stage-triggered probability was a full 42% higher. This meant that, even with the 20% “haircut” management traditionally gave all forecasts, the firm was forecasting a number that was off by 22%.When using our objective deal scoring methodology to create an objectively weighted forecast, the firm came within 5% of target versus being under by 15% from their carefully constructed forecast. In 2019 this would have been the kind of offense that might have cost an CRO his or her job – in the second quarter of 2020 it might mean the firm would go from cash-flow positive to cash-flow negative, without adequate warning to put counter-measures in place.
“Hope is Not a Strategy” – With proper credit to Rick Page, we don’t mean to steal his book title to make a point, but research by Daniel Kahneman and Amost Tversky shows that people tend to be loss averse. While most salespeople know when a deal is lost, they often fear, with some validity, admitting to a sales manager or to their peers, the reality of the situation. Many times a deal will sit in the pipeline, and the forecast, long past a time when most of us would know that a stale deal is really a lost deal. The more “hope” you have in your pipeline, the more inaccurate your forecast.
We hate to say that you will recognize these behaviors, but it is almost certainly true that you would.
In the next article, we will look at some best practices to avoid these pitfalls, and give you line-of-sight into a real forecast. Make no mistake, these best practices will give you an honest assessment, so if you want real information to manage your business, it will most certainly give you some valuable insights
 CSO Insights, 2019 Best-in-Class Sales Practices Study
 HBR, Sales Teams Aren’t Great at Forecasting