In 1951, Jay Gould wrote in the Journal of Marketing that “a sales forecast need not be merely the product of informed guesswork or hunches, but that such problems lend themselves to a systematic, quantitative appraisal in which the margin of error can be greatly reduced.” So, not exactly a new challenge for sales managers. In a recent survey, Gartner discovered that only 6% of sales leaders are confident that they will deliver against revenue goals. More anecdotally, a regional sales manager described how he takes in the monthly report from his team and then gives each forecast a “haircut.” He would have just laughed if I had asked him about a quarterly forecast. Yet, with the current post-pandemic effects and a potential economic downturn, many sales managers are trying to see how much pain or joy will show by the last day of the year.

It is not because they want to sabotage you

This sales manager I mentioned above was not trying to undermine his sales team. He understood that they wanted to give him the best possible picture, even if he did not always understand what was causing them to over-report (and even under-report). The reasons lie in how we think about and predict the future and ourselves. Anecdotally, salespeople explain that they are competitive, fear failure, and want their managers to like and approve of them. Your team is not out to make you look bad in front of your organization’s leaders. They are trying to look good to you and each other.

Andy’s Forecast

On one team we worked with, there was a rep (we will call him Andy) who would invariably report in weekly team check-ins that he would have 1-2 sales each month. And then, at the end of the month, Andy would have a 0, maybe one deal. His manager got frustrated with him and asked him how valid his forecast was. Andy explained that his forecast was aspirational and had some active deals in his pipeline. When pushed to explain some more, he said he did not want to look bad in front of his manager or the team, plus he was sure that one of the active deals would come through…eventually.

So, what gets in the way?

Sales forecasting has an element of educated guessing on a good day. Trends, confirmation from prospects about closing dates, and seasonal factors measure the likelihood that a certain number of deals will close. But there is still room for guessing, so it is not a huge stretch to realize that there could be thinking biases getting in the way. Confirmation bias, optimism bias, and the sunk cost fallacy are the most likely to create bad forecasts.

• Confirmation bias – This bias happens when we ignore any information that contradicts what we want to hear and/or believe.

In a pipeline review, this looks like this – A salesperson tells you that a deal is a “slam dunk” because the buyer already owns another product you sell. The fact that the buyer is hesitating or asking questions is ignored or overlooked.

• Optimism bias – We tend to look at the bright side of things, so we believe that positive things are more likely than negative.

In a pipeline review, this looks like this – A salesperson tells you that it is “selling season,” so they will close all of their active deals on time, even though there is current data that customers are slowing down their buying behavior.

• Sunk cost fallacy – This bias shows up when a person keeps investing in a strategy or course of action, even when it is going badly.

In a pipeline review, this looks like this – You see the same deal in consecutive forecasts. The salesperson tells you that “they are going to buy” and keeps calling and communicating despite the buyer not responding.

What is a manager to do?

Giving each forecast a “haircut” does not develop the rep’s forecasting skills. The other downside is that it puts the onus on the manager to make a better forecast. So, instead, the better practice is to use the pipeline reviews as more than information reviews. Use them as teaching or development opportunities.

In our work with sales teams, we introduce them to the Core Commitments© as a framework to check what information they have gathered and against their thinking biases. One of the Core Commitments© is the commitment to change what they are currently doing. Here is a sample of how to use the change commitment in a pipeline discussion:

The rep describes that the prospect may be ready to add your solution now or if they are considering options (aka kicking the tires). Next, the manager asks, “How do you know?” The rep then reports what the prospect (buying committee) stated publicly about their intentions to change to a new solution. When the rep says, “I think” or “I feel,” the manager can use the “how do you know” question again. This allows the rep to connect the dots with what was said in the sales conversation with the prospect with any potential biases that could cause the rep to forecast a deal that does not exist.

Bad forecasting is rarely about malicious behavior

It is more often about how salespeople evaluate their performance and their appearance of success and/or failure in the eyes of their manager and colleagues. It is just as easy to inflate a forecast as underestimate it. This leaves a place for our thinking biases to get in the way. Encourage your sales reps to check themselves with “how do I know?” and give you a better forecast. They will develop their skills, be able to adjust to current conditions with more agility and have more consistency in their forecast.

When you think about sales effectiveness at your organization, does it seem like you are close but just missing those unique elements that give you that competitive edge? Looking for a way to understand how your buyer thinks, decides, and reveals information? At The Nova Consulting Group, we believe that professional selling is a craft. With the Advanced Sales Conversation©, you have those missing elements that move your salespeople from competency to mastery. With our deep understanding of what makes and sustains high-performance organizations, we provide integrated solutions that do not replace your sales methodology and yet advance a progressive selling mindset. Be bolder, more insightful, and get results. To learn more about how to master the craft of sales and encourage sustainable high performance, call  (617) 933-7249 or email info@novaconsultinggrp.com.

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