3 metrics to hold sellers accountable for forecast accuracy

In sales operations, there’s a saying: “There are two types of sales forecasts – lucky and wrong”. That adage perfectly illustrates how elusive accuracy can be. 

Sellers and managers both strive to deliver an accurate forecast. But the steps they take to achieve this goal are very different.

Managers, for instance, must engage with sellers, coach on deals and understand the near-term performance of their combined territories. Forecast accuracy is a great indicator of how well managers are engaging with sellers and contributing to their success. For this reason, sales leaders often use forecast accuracy as a KPI for frontline sales managers.

Does the Concept of Forecast Accuracy Apply to Sellers?

The same approach doesn’t work for sellers. Savvy sales leaders don’t want their sellers distracted with a cumbersome forecast submission process. Instead, they want their sellers focused on deals. A well-designed opportunity management process enables sellers to provide everything their managers need for forecasting within their sales force automation (SFA) platform. It’s the frontline sales manager — not the seller — who is responsible for applying judgment to the committed pipeline.

Of course, managers can’t forecast accurately if sellers don’t maintain accurate pipeline data. Even when managers have access to machine learning-based opportunity scoring and forecast guidance, they’re still subject to the law of garbage in/garbage out. So how can sales leaders hold sellers accountable for forecast accuracy while shielding them from the burden of submitting a forecast?

Measure the Seller Behaviours That Enable Good Forecasting

Sales leaders should implement three metrics to hold sellers accountable for contributing to an accurate forecast:

1. Initial pipeline value — Sellers must identify the deals eligible to close in the current period, early enough to inform the initial forecast. Managers can see which sellers are consistently providing pipeline visibility by trending their initial pipeline values over recent months or quarters.
2. Pipeline conversion rate — Creating pipeline is critical, but that pipeline must produce timely revenue. Therefore, a seller’s pipeline conversion rate (i.e. final bookings or revenue divided by initial pipeline) should be stable over time and compare favourably versus peer sellers.
3. Pipeline slippage rate — Sellers who habitually include deals in their initial pipeline only to let them slip to later periods undermine their managers’ ability to forecast. A seller’s pipeline slippage rate (i.e. value of all slipped deals divided by initial pipeline) should be minimised with better deal qualification and active deal coaching.

Combine the Three Metrics to Unlock Insights

The following example uses these metrics to reveal a positive story. The seller’s initial pipeline shows a drop-off in period 3, which is usually bad. But there’s a corresponding increase in pipeline conversion rate — possibly due to a focused pipeline clean-up effort. Slippage rate is trending down, which is also common as more effort is invested in pipeline hygiene.

Sales leaders can implement metrics to hold sellers accountable for forecast accuracy by taking these steps:

1. Build awareness by communicating the rationale and calculation of these metrics to sellers and managers.
2. Promote adoption by making current data easily available to managers and sellers.
3. Reinforce these metrics’ importance by incorporating them into seller KPIs and performance coaching.

Sales forecasting may still require a little luck, but increasing seller accountability will tip the odds of accuracy in your favour.

This article was published with permission from the Gartner Blog Network.