The objective of the rainmaker – the high-end salesperson – is to bring in sales. High quality sales, of course – work the firm can actually deliver, in areas of strategic importance with target clients. But at the end of the day the their overriding objective is to bring in as many sales as possible.
The sales manager, on the other hand, often works to a different agenda. They care about accuracy – will we hit the numbers? Those who work for publicly quoted companies know the extreme pressure to hit quarterly revenue and profitability forecasts to meet City/Wall Street expectations. Often (very, very often in my experience) , the focus of sales or pipeline meetings is less on figuring out how to sell more and more on getting an accurate forecast.
Now in theory, those aren’t incompatible objectives. Strive to sell as much as possible and provide an accurate forecast as to how we are most likely to do.
In the real world however, human psychology acts to make it very difficult to achieve both.
By nature, successful salespeople are optimistic. In fact, Ford Harding’s research for his classic work Creating Rainmakers highlighted optimism as the first and most striking defining attribute of a Rainmaker. Optimism is vital because it causes the Rainmaker to interpret events in positive ways that encourage them to keep progressing and chasing opportunities long after the rest of us have given up. It gives them a thick skin which allows them to brush off the rejection that’s inevitable in sales and to keep knocking on doors, picking up the phone, and heading out to networking events. Developing the relationships necessary to deliver sales in complex, service oriented business such as consulting, law and accounting takes time – much, much longer than most people realise. And it’s only the optimistic salespeople that hang in there long enough to reap the rewards.
The side effect of this optimism shows up in forecasts. Rainmakers are inherently prone to be optimisitic and overestimate their chances of winning a deal. Despite the fact that “sandbagging” (deliberately producing a low and easy to beat forecast when setting sales targets) can be very lucrative – in fact the vast majority of forecasts I’ve experienced in my many years selling, managing and consulting in professional services have been significantly overoptimistic.
So how can we square this circle and produce accurate forecasts despite the inherent optimism of successful Rainmakers?
Well, here’s how not to do it: grill the Rainmaker, question their judgement, highlight all the risks and potential slip-ups, and browbeat them into lowering the forecast.
Apart from royally pissing off the Rainmaker, dampening their optimism damages their ability to sell. All of a sudden, they stop going the extra-mile – because they’re not quite so certain the client is going to buy. They stop making quite so many calls, or going to quite so many networking events. Their dampened optimism even projects itself to client prospects who notice the Rainmaker doesn’t seem quite so confident: perhaps his firm can’t help after all?
Now, I’m not saying that analysing and qualifying opportunities is a bad thing – far from it. Done in the context of identifying the actions the Rainmaker needs to take to win the sale, or to help him focus his time on the highest payoff activities, it is tremendously helpful. But using it as a hammer to beat down the Rainmaker’s optimism in order to produce a realistic forecast can have the side-effect of killing his effectiveness as a salesperson.
So what’s a a more effective approach?
Well, one option is to lessen the need for accurate forecasts. This is easier done in partnerships than in publicly quoted companies who live or die by hitting their quarterly numbers. But remember – these are aggregate numbers for the whole company. An accurate company-level forecast is not necessarily one that is built from highly accurate micro-forecasts from each salesperson. When aggregated, forecast inaccuraces can balance out, and optimistic biases can be corrected for. In many leading consumer goods companies for example, sales forecasts are not calculated by asking each salesperson to accurately forecast then rolling them up – they are calculated statistically using overall demand and environmental factors – and are often far more accurate than salesperson projections. It also makes sense to reduce the firm’s reliance on accurate forecasts by thinking through: apart from our external reporting – why do we need accurate forecasts? Capacity planning is an obvious reason – but often, accuracy is not needed so far in advance – and clients can often be surprisingly flexibile over scheduling & start dates. Outside of that, there are often few reasons to maintain an accurate forecast (especially in professional firms) – other than the fact that it gives leadership a feeling of “being in control”.
Another option is to remove responsibility for forecasting from the Rainmaker. The Rainmaker’s job becomes one of selling as much as possible (of course, at bare minimum hitting the sales targets). Forecasting becomes the responsibility of the sales manager or a staff function – who are measured on the accuracy of the forecast. It’s their job to understand the pipeline – and the Rainmaker – enough to make an accurate forecast. It’s not the Rainmaker’s job to hit the forecast – it’s the Rainmaker’s job to sell as much as possible.
A third option is for the Rainmaker to retain responsibility for the forecast – but for firm management to be more hands-off in how this is done. Allow the Rainmaker to manage their own pipeline “in private” and pass up forecasts (either per major opportunity, or just overall). In this case the Rainmaker can keep their own optimistic perspective on the opportunity 90% of the time, but is asked to pass a number upwards which they can “guarantee”. The sales manager (or managing partner/practice head in a professional firm) will work with the Rainmaker to give coaching on how to progress each opportunity – but they don’t browbeat the salesperson into changing their forecasts.
Now these methods aren’t perfect. But individually, or in combination, they are a lot better than the traditional approach of beating up salespeople in pipeline meetings to get accurate forecasts – and actually damaging their ability to sell.
Ian
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Ian,
This is fantastic! Having been on all sides of this fence, yes front, back, dancing on the edge, and buried under it, I could not agree with your thoughts more.
Rainmakers are the bane of wall street and the joy of young companies. Rainmaking is an art that is not appreciated in the corporate world and your suggestions would make for a happier environment for these superstars of the industry.
Excellent points, Ian.
When I was a sales manager, I kept track of forecasts and actual sales on a spreadsheet. I was able to identify a “Forecast Accuracy Quotient” for each salesperson by comparing the two numbers over time. What I found was that the inaccuracies of particular salespeople were remarkably consistent over long periods of time (optimism kicking in?). This allowed me to adjust their forecasts by a certain percentage to give me a more accurate forecast for each salesperson.
Ian:
Many years ago I did a site selection project for a new manufacturing plant for a company expecting rapid sales growth. The VP Manufacturing took our work to the executive committee and said, “Based on Sales & Marketing’s forecasts and the location analysis, we want to invest $60 million in a new plant at Place X.” At which point the VP Sales & Marketing stood up and said, “Based on our forecasts you want to do what?” The new pant was never built.
People use forecasts for a number of purposes, and accuracy, though difficult, is sometimes important.
Good post.
Best regards,
Ford Harding
Ian,
You know how when you get busy delivering services to clients, you stop doing business development?
No matter how many times this happens to me, I still make the same mistake. I feel the pipeline getting empty, and then take another few weeks or months to distentangle myself from the details of the work I owe on existing engagements.
What I do next is:
1. Go into a panic.
2. Yell at my wife to get a freakin’ job
3. Then, realizing that I’m all alone in the universe, that I am responsible for my own reality, that bulldog tenacity has always paid off for me, I get to work.
4. I call old clients.
5. I write old clients.
6. I write articles, blogs, and Pointers!
7. Basically, I hustle, chew through doors, and devote the bulk of every day to tending my crop of satisfied customers (mixed metaphors.)
Somehow I always manage to pull out of the nosedive.
Whether we are optimists, rain makers, or just stubborn bull dogs, let’s hope that we can all stay aloft in 2009.
Sims
@Ford Harding – Lol – good point Ford – sometimes accuracy is important.
Although to some degree, your comment backs up my point. In reality, for a multi-million dollar investment – you shouldn’t be using the same forecasts you use week-in-week-out for the pipeline. You’d want to look at other factors that the salespeople weren’t focusing on: more macro-econmic factors and trends, competitor moves, etc. You’d probably want to play out a few different scenarios too and look at which option held out best under different forecasts.
As you say, forecasts are used for different purposes – I suspect that the bog-standard sales forecast is abused more often than not.
Ian
We used to require sellers to forecast their monthly sales. The number that I eventually rolled up was my best guess using the individual forecasts coupled with historical information and current pacing. Eventually, I just stopped asking the sellers and was able to deliver a number that was equally accurate. All of us were relieved at no longer spending time where it was least productive.
@Sims Wyeth – yeah Sims – but is your forecast accurate!
It’s nice to hear that someone with a pretty stellar reputation still suffers the same peaks and troughs and has to hustle the same way as the rest of us!
Ian
@Sales Loudmouth – Tim, Skip – really interested to hear your experiences. I have only done this “ignore (or at least significantly redo) the salespersons forecast” for a short period quite a long time ago and it worked pretty well. But psychologically is was difficult for the partners in my firm to accept. Very interested to hear that you two had similar experiences with being able to get a forecast without putting the sales team through the pain of the forecasting process!
Ian
As a sales professional I do believe that its the job of the sales professional/consultant to forecast accurately (and for the sales manager to ratify the forecast) and certainly within +/- 10% every month.
This stuff isnt rocket science these days there are enough opportunity qualification methodologies such as TAS (Target Account Selling) that will let you get a handle on this stuff and regardless of forecasting you should be using a methodology like this to help you get a grip on the sale itself.
Everything should come back to one question – what is the compelling event? Why do they need to do this now? What is the risk if they delay? Or pay back if they move now?