Forecasting Games

We’ve all been there, we’ve played the same games.  It’s about the forecast–the monthly, quarterly, annual forecast.

We’re pressured to commit.  Ultimately, we agree on a commitment, “Lock me in at $10M for the quarter, boss!  I guarantee you that I’ll make it.”

At the beginning of the quarter, we kinda-sorta see the path.  We know “these deals” will come in, we’re hoping we can make these “other deals” happen, and we’re crossing our fingers that good luck and clean living—well good luck and wishful thinking, will somehow help us bridge whatever gap.

Then midway through the quarter, we have a forecast update.

We reassess things, inevitably going through an “Oh Sh*t!” moment.  Some of the deals we thought were sure things have slipped, some of our wishful thinking was more wishful than thinking.  We scramble to close the gap.  We find new deals, cross our fingers on others, and say, “Boss, count on me, I’m going to hit $10M!”

And toward the end of the quarter, our whole lives flash before our eyes again.  We’re scrambling to back fill those deals we had previously committed, we pull deals in from the next quarter, we plea/beg/cry to our customers, “Pleeaaassse give us that order……I’ll give you 15% off if you do it this quarter……I really need it……”

Quarter ends, we miss the forecast, but not by too much.  And our managers always know we were going to miss, so they committed less to their managers, all the way up the food chain.

And we start a new quarter and the games start all over.

But we made our forecast–or did we?

I argue, this process means we are actually underperforming the potential!  As a result, we are actually cheating ourselves and the company!

A great forecast can’t be just about hitting a certain dollar commitment!  It has to be about hitting a deal commitment!

For example, if our original forecast was primarily for product line A, and what comes in at the end of the quarter are orders primarily for product line B, we’ve created a huge problem for our companies.  We may have the wrong inventory and can’t build the products, the resources we need for product line B are different from the resources for product line A, but those resources aren’t available and the resources planned for product line A (our original forecast) are sitting around doing nothing.

And then there’s that stuff that we used to fill in the “gap.”  If we thought we could leverage these opportunities, then why didn’t we commit them to the forecast in the first place???

While we have hit that revenue goal, we’ve failed miserably!

Yet 80% of the forecast reviews I sit in are doing exactly this.  They are focused on hitting a number with zero attention to how we are hitting that number and the composition of the deals being committed to hit the number.

From a business management/stewardship point of view, forecasting cannot just be about hitting a certain revenue goal.  It has to be about committing to certain deals, that aggregate to achieving the revenue goal.

What games is your organization playing?