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Sales Forecasting: The Mushroom Syndrome
Blog / Sales Management / Feb 17, 2015 / Posted by Alyson Stone / 5498

Sales Forecasting: The Mushroom Syndrome

You may have heard of the mushroom syndrome. It’s where you’re basically kept in the dark and fed — well, let’s just say — fertilizer.

The mushroom syndrome as it applies to management is often called “mushroom management.” Unfortunately, it is more common than we’d like to believe– and can be disastrous

A fantastic example is how former Lehman Brothers CEO Richard Fuld “led” the bank prior to its 2008 bankruptcy. The bank had become overly involved with risky mortgage-backed investments—but only Fuld and a select few managers knew the true exposure. Some Lehman executives bragged they were much better hedged to weather the storm than competitor banks. By the time Fuld discovered how exposed his position really was, it was far too late. The employees, investors and the public at large learned about it long after anything could be done about it. This series of denials and amazingly stupid acts on Fuld’s part were the major contributors to one of the most tragic financial debacles in history.

Forecasting Failure

According to a recent benchmark study by Ventana Research, when it comes to sales forecasting, it isn’t just an issue of management treating their employees like those proverbial mushrooms. Unbelievably, it’s the entire company—from sales reps on up to management—that are actually treating themselves that way. In so doing, they seriously handicap themselves from full control of their sales destinies. As well as increasing bottom lines. And being as competitive as they actually could.

Let’s take a look at some numbers from the Ventana study:

  • 55% of surveyed audience says sales forecasts are important to their organization.
  • Despite this, 67% said they are not happy with the current process of obtaining sales forecasts.
  • The top 3 reasons they are not satisfied with current process, each of which measured over 50%, are
    • Process not reliable
    • Data not accurate
    • Process is too slow

This is clearly not just a management issue—this kind of failing requires everyone’s involvement.

But let’s dig a little deeper.

Slow Forecast

Let’s say you turn on your nightly news broadcast, and the weatherman is forecasting a cold front—for 3 days ago. Not in the least bit useful, right? Nobody got the information when they really needed it—back when they could have acted upon it and pulled out their snow shovels, tire chains, and ice scrapers.

Which leads us to another statistic from Ventana’s study: 33% of those surveyed take more than 3 weeks to generate forecasts, at which point the data is stale and useless. Only 25% average less than 1 week.

This finding falls right in line with fact that 50% are dissatisfied with sales forecasts because the “process is too slow.” Self-fulfilling prophecy?

Sales data ossifies in the data table by the minute. The longer it takes to make it into some sort of usable format, the less valuable it will be.

Why are forecasts too slow?

27% of the time — Reviewing the pipeline and forecast data for quality and consistency. (Note: If you’re using an overly complex CRM product, or a scattershot method such as spreadsheets, this is a very real thing.)

19% of the time — Preparing sales data for analysis—for example turning the spreadsheet into a chart or running a macro.

12% of the time — Simply waiting for information.

How They’re Doing It

If forecasting isn’t occurring the way it should, it stands to reason that there are barriers. Indeed there are, as the study shows:

Now let’s zero in on one particular point on this graph. If it were resolved, it’s quite likely that the others might very well fall into place: “No suitable software.” A whopping 77% of respondents agreed. That point also falls in line with the number 1 answer above, “Lack of resources” at 84%.

So what’s the software story? Well, 29% of those surveyed are using spreadsheets as their forecasting tool. Not surprisingly, only 25% of that 29% are satisfied with that process. A follow-on question asked if the spreadsheet process might change, and only 38% of spreadsheet users said, “Yes.”

The numbers don’t lie.

If you are using spreadsheets, you won’t be satisfied with the results, and you’ll waste tons of time with a broken sales process and decay in the data collected. Further, it’s like the old dog that won’t learn new tricks—the more entrenched an organization is in a particular process, the more unwilling to change, regardless of results.

Curiously, BI (Business Intelligence) tools didn’t fare much better in the study. Of the 40% that use some sort of BI, only 22% report significant improvement in sales outcomes.

Of all of these statistics, here is probably the oddest: 58% of those not planning to deploy sales forecasting software don’t know why they will not. It’s like the old saw: People don’t know what they don’t know.

This aligns with a study we ourselves amongst sales professionals in America. We asked, “If you’re not likely to use a CRM, why not?” The leading answer was, “I don’t need a product like this.

The Fix

So what would constitute “suitable software”? What kind of tool would reliably, accurately, and timely provide forecasts that would lead to better control of sales, increased sales velocity, and more reliable quota attainment? Utilizing the Ventana benchmark study data, it would be one that:

  • Aligns with the importance of accurate and timely sales forecasting, which the majority of companies agree is paramount
  • Illustrates and makes possible efficient processes with which companies and sales organizations can cooperatively move forward.
  • Illuminates and make plainly visible genuinely reliable data.
  • Instant data availability – always timely.
  • Allows the near-instant creation of a sales forecast.

Summing Up

All in all, the Ventana study is a fascinating report on sales forecasting. It appears that this is the 5 P’s “Proper Planning Prevents Poor Performance” type of truism in reverse. It seems that many are totally willing to continue playing the role of mushrooms being kept in the dark and fed, well, y’know–that “y’know” being sales forecasts that won’t get the job done.

Let’s move into the sunlight, folks. The methods have never been more plain, and the tools have never been more available.**

About Author

A wordsmith all her life, Alyson is typing as fast as she can.

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