A Process to Improve Sales Forecasting and Strategic Sales Coaching
What do we need to do to make sales forecasting more accurate? This is one of the most common and urgent questions asked by senior sales leaders. In theory, the answer is rather simple; but in practice, getting better forecasts has proven extremely challenging.
Aligning the Processes
So what’s the underlying problem? The dots aren’t connected. The most common reason sales managers can’t get sales reps to forecast more accurately is because the company sales process isn’t represented in the pipeline stages. The company’s sales pipeline process does not align with the company’s sales process. Too often companies implement a sales pipeline process without any regard for the fundamental and strategic activities that take place throughout the sales process. Throughout this whitepaper, I will provide some simple ideas to help you better align your sales process to your pipeline process and better leverage your pipeline process as a sales coaching tool.
The science of human performance technology teaches us that performance problems in the workplace generally boil down to three overarching factors: attitude, skills, and knowledge. Attitude has to do with whether the workers are motivated to do the task; it’s the why. Skills, of course, are about ability; they are the how. And knowledge is about understanding; we might call that the what. When workers are not satisfactorily performing the tasks that are required, it boils down to gaps in the why, how, and what, and the interplay between them. However, when it comes to complex tasks demanded of an entire enterprise (for example, pipeline management for a large-scale salesforce), a fourth element becomes essential for good forecasting: a well-thought-out, validated, and repeatable process. And it’s been my experience that many sellers—and many organizations—simply lack a reliable and consistent way to predict which deals will close and when. Producing an accurate forecast becomes a sort of meteorological art, but without the reliability. It’s no wonder sellers resist doing them. And it’s no wonder managers are frustrated. Nobody’s getting what they really want or need from the effort. To borrow a phrase used in reengineering and total quality management (TQM), blame the process, not the people.
Many of you are probably thinking that the only purpose of the pipeline process is so senior sales leaders can keep track of who’s working and who’s not. More than one salesperson has expressed sentiments like this medical device sales rep: “Forecasting has no value to me. My manager just wants it so he has something to hold over my head until the end of the month.” This may be more true than managers care to admit because bad information from bad pipeline management processes yield forecasts that have little value for anyone, except as an enforcement tool. However, there is tremendous value in managing your customer opportunities in an active and strategic pipeline management process. Emerging customer relationship management (CRM) software, such as SalesForce, SAP, Siebel, and others, have made great strides in simplifying the reporting process. This ought to have led to better forecasts and improved pipeline management. Yet the problems persist and sales reps and managers still have challenges getting the results everyone wants.
Finding the Problem:
Good technology layered over processes that don’t work yields unsatisfactory results.
Too often companies implement a sales pipeline process into their organization to match their shiny new CRMs, without any regard to the core strategic sales activities that sales reps should be completing throughout the entire process.
Most pipeline or funnel management systems use terms such as Stage 1, Stage 2, Stage 3, and Stage 4, or the even more vague Early Cycle, Mid-Cycle, and Late Cycle. We have seen five-stage models. We have seen seven-stage models. We have even seen a 12-stage model. It doesn’t matter how many stages the process has (five seems to be a pretty common “magic number”), but our evidence tends to be anecdotal and experiential, rather than statistically significant. The problems arise not from the number of stages there are, but rather murkiness around each stage’s definition. If, for one constituency Stage 1 means “targeting and qualifying,” but for another it means “uncovering needs,” the pipeline’s results will be ambiguous at best. A process whose boundaries and stage definitions can shift from constituency to constituency, or case by case, is a process that does not work. But when a clearly defined pipeline process aligns perfectly with sales activities, the results can be stunning.
When the Pipeline Hums
I saw this success story play out while working with a global commercial bank solution provider. Heather was the North American VP of sales, and she was striving valiantly to improve her team’s forecasting. After building a more rigorous pipeline process, not only did she get a more accurate sales forecast, but also the added benefit of a more strategically minded sales team.
Heather’s North American sales team consisted of nearly 250 sales reps and their 30 sales managers. Like many organizations, forecasting was about as accurate as guessing when double zero would come up on the roulette table. Sales reps didn’t have an effective or consistent way to predict when their opportunities would close. Each region had its own way of doing things. This caused many problems for Heather, to say nothing of her company. Her biggest concern was providing a more accurate sales forecast to her senior management team each quarter. If projections were off by more than 5 percent in either direction, Heather had to explain and justify it, a verbal shuffle that brought about a rapid heartbeat and nervous sweats. She asked us to help her develop a pipeline process that would consistently provide accurate forecasts to the senior management team.
We began with data collection. We interviewed Heather’s top-performing sales directors, regional managers, and sales reps across the sales organization to learn three things. First, how they were communicating with each other about where the customer was in their decision process. Second, how they defined the stages or steps in the process. What sort of ground rules were they using to move customers out of one stage and into another? Third, we wanted to know what managers were doing to be a value-adding resource throughout the process.
At the time, the company did not have a central pipeline process across the organization. Some regions did it one way, some did it another. But among the top performers, there emerged a consistent theme. These top performers utilized a consistent and rigorous process for their region, whether it involved five pipeline stages or ten, and they communicated frequently about progress—or lack thereof—through the pipeline’s stages.
The unfortunate reality, though, was that the top performers were not any more successful at forecasting than average or below-average performers were. For Heather, this was not acceptable. So working in collaboration with a cross-functional team, we designed and implemented a rigorous, workable five-stage sales pipeline.
The five stages were:
The five stages were not a miraculous revelation. They weren’t even particularly innovative. They were just five stages, with no magic attached to the number five.
There was power, of course, in the model’s simplicity, especially considering scalability, applicability, and repeatability. If your pipeline model is so complex you need to hire engineers to make sense of it, it will become useless. Our five stages had the advantage of being so simple that anyone can understand and use them. Another advantage of our model was clarifying boundaries between the stages themselves. What impressed Heather—and what made this approach different from some of the company’s approaches in the past—was the clear and unambiguous way in which the five stages were delineated, and the key milestones and metrics built into each stage.
Agreeing upon the number of stages in your sales pipeline—and naming them in a way that is both memorable and denotative—is indeed a critical first step, but it is only the first step. More important than fixing on the right number of stages is clearly defining each of them.
What constitutes the first stage? And how is it distinct from the second? What criteria have to be met to move an opportunity from Stage 3 to Stage 4? What key milestones have to be passed, what activities have to take place? These criteria—the activities and milestones— ought to reflect the day-to-day selling activities of your sales rep. For example, is making contact at the C-level a necessary activity? If so, it ought to be a milestone in one of the stages (for example, “Met with C-level buyers and identified company’s goals”). Is mapping all the key players important to your team? If so, it too ought to be a milestone (“Identified my adversaries and developed a plan to win their support”).
So, coupled closely with naming and defining each stage is ensuring that the pipeline process integrates with the day-to-day activities in the sales process. That is, selling activities should fit with the pipeline. Connecting the dots for Heather’s company gave them a process that was workable for the entire sales team, leading to positive changes in Heather’s forecasting accuracy.
Establishing the crucial milestones for each stage makes it easier for salespeople and managers to communicate with clarity where they are in the pipeline process. When Harry tells his manager Sally that ACME, Inc., is a Stage 3 opportunity, Harry is telling Sally that each of the milestones in Stages 1 and 2 have been met. With a bit of discussion, Sally will know how close ACME, Inc.,to graduating to Stage 4. This is where the pipeline process becomes a great coaching tool. Sally, being a smart sales manager, will ask Harry a series of smart, strategic coaching questions that can truly assess whether or not ACME, Inc., actually belongs in Stage 3. If one of the milestones in Stage 2 was to “Identify the customer’s decision criteria and establish a strategy to better position our company value,” Sally may ask Harry, “What was your customer decision criteria and which of our unique capabilities align best with the customer?” If Harry isn’t able to provide his manager with a smart and accurate response there is a good chance Harry skipped that milestone. Another milestone might be “Develop strategy to neutralize your adversaries.” Here Sally may ask her rep, “Who have you identified as your adversaries that have a high level of influence and what was your strategy to neutralize their perception of our company?”
Managing the sales pipeline effectively requires sales managers to know how to challenge their reps. To merely ask them if they completed all of the milestones in a previous stage is actually insulting. The job of the manager is to help the sales rep identify why that milestone is important and how to leverage that information to secure the opportunity.
On the following page is a list of a few strategic coaching questions we have picked up from our clients over the years; these questions are designed to challenge the sales rep, to get them to think about the opportunity at a deeper level.
Keeping the process simple is important. It seems that in the corporate world, simplicity is a bad sign. If it’s simple, it must not be complete. But it’s important to remember that simplicity is crucial with processes that need to be scaled across large enterprises.
An effective pipeline process needs to combine simplicity with effectiveness; it must not only be easy to learn and apply across a population of users, it must be robust enough to stand up to day-to-day sales rigors. As we’ve discussed, the challenge is in thoroughly defining each stage, delineating them from one another, and clearly distinguishing their boundaries. The key task in this endeavor is identifying the proper milestones within each stage. The milestones comprise the tasks that must be completed before moving on. What comes before what? For example, it has been well established that it’s important to understand early in the sales process who the key players are in the account, and what their roles are in the decision. A subsequent step might involve defining the customer’s selection criteria.
A Fully-Functional Pipeline
Let’s go back to Heather’s situation. We ended up developing a five-stage pipeline process that included critical milestones and tasks for each phase of the process. Below is Heather’s pipeline process as we designed it.
|Identified advocates and adversaries
All players involved in decision process identified
Decision factors identified
Nature and severity of buyer concern identified
|Needs and downside risks identified
Strategy to neutralize adversaries implemented
Confirmed where buyer is in decision process
Decision criteria identified
Compelling reason to act identified
Availability of estimated budget confirmed
|Financial buyer contacted
Decision criteria validated
Buyers understand the link between final solution and their needs
Competitive analysis completed; strategy for influencing decision criteria defined
“Go-no-Go” decision discussed with customer
|Implementation risks identified and addressed
Reconfirmed with advocates that all iceberg issues are handled
Confirmed that stakeholders have taken ownership for solution
Final presentation made to decision team
|Hard copy PO received
Paperwork sent to order entry
Confirmed the purchase and delivery process
Implementation and client training plan confirmed
Implementing this pipeline process had five distinct advantages for Heather and her company:
- Sales reps are clear about their call objective before the sales call begins. Too often average performers walk in and out of their customers’ offices without doing anything strategic or intentional to drive the customer closer to a decision. With clear milestones in each stage of the pipeline process, Heather’s team was able to check which milestones had not been passed for that stage, and then develop a smart call plan to achieve those objectives. For example, if a sales rep has an opportunity in Stage 3 and one of the milestones is to validate the customer’s decision criteria, then the call objective is clear.
- It shortens the sales cycle. Top sales reps are proactively driving their customers’ buying processes, versus playing a passive or reactive role. The pipeline process implements smart and clear milestones at each stage. This fosters momentum-building activities because sales reps are motivated to get the customers to take action.
- The sales reps and their manager have absolute clarity about where the opportunity is in the pipeline. An opportunity cannot move into Stage 3 until it has met all the criteria for Stage 2. A rep cannot promote an opportunity to an advanced stage before its time, so nobody gets false optimism about a deal’s likeliness to close.
- Sales managers can quickly identify where a sales rep may need help. Too often sales managers spend hours conducting “account reviews” with their teams without having any clear objectives for the conversation. Establishing criteria for each stage of the pipeline process allows the manager to quickly identify which accounts seem to be stuck in the pipeline. They can collaborate with their reps on developing action plans to move the opportunity forward. Without milestones in each stage of the pipeline, managers may conduct account reviews with good intentions, but they can’t establish which direction the seller should move to secure the business opportunity.
- Establishing clear milestones in each stage of the pipeline process creates a set of forecast metrics that the sales rep can rely on. The manager knows if he can get his entire team to use the pipeline process that was established and coaches his team to achieve the milestones in each stage of the pipeline process, everyone will win.
The pipeline model we designed for Heather quickly improved the company’s forecasting accuracy, to say nothing of the sales team’s increased interest in using the process. Heather and her sales managers became more aware of the warning signs of an opportunity stalling or slowing. Conversely, they were able to respond more efficaciously when an opportunity’s forward momentum increased because they saw it coming. Over time, Heather and her management team established reliable metrics that gave them insight into their business. For instance, they learned that opportunities that entered Stage 3 had a 78 percent chance of closing. When the opportunity moved into Stage 4, the percentage jumped to 86 percent.
Heather was able to provide her senior management team the accurate forecast they were demanding. More importantly, her sales reps and sales managers had a consistent pipeline process.
Summing It Up
Sales forecasting is inevitably problematic. Some salespeople are too optimistic. Some are too pessimistic. And beyond optimism and pessimism is plain, old forecasting ineptitude. The end result is inaccurate forecasts. This chapter provided some tools and techniques for improving your pipeline management process by helping you see the importance of building critical milestones into each stage. These milestones help create a common understanding of the pipeline process.
Putting a smart pipeline process in place isn’t difficult, but it does take some careful consideration. We suggest you follow this easy three-step process to get started:
1. Categorize the stages of your pipeline. We’ve found through experience that these five tend to work across nearly every sales sector. They are:
You may incorporate more or less than five stages in your pipeline model. However, more important than determining how many stages there should be is defining what criteria you use to promote a prospect from one stage to the next. This leads us to step two.
2. Agree on the criteria that defines each stage. We advise that these criteria be clearly defined and aligned with the necessary activities that create value for your solutions. For example, if gaining access to the C-suite and conducting an economic value conversation are important, be sure to include these as part of your criteria.
Having the right criteria that both clearly define the specific stage of the pipeline and drive your sales process is important, but ensuring your sales team understands the value of the process is also important. Salespeople often believe that pipeline management tools are only important for sales leaders. Your sales team needs to understand the value to them. Without clear understanding, you will struggle with driving accountability among your sales team, which leads us to Step 3.
3. Once you have the stages categorized and clearly defined with smart criteria, ask your sales reps to select their top 10 accounts and place each of them into the stage that best aligns where they are in the sales process. Ask them to be honest with themselves and be careful not to put an opportunity late in the pipeline process if they haven’t met the criteria in the early stages. This exercise will help your reps better identify steps in the sales process they might have skipped. Only ask your team to add their top 10 accounts because they may get a little overwhelmed after they recognize they have missed many of the crucial criteria in each stage.
Accountability is key. Top sales managers hold their teams accountable for meeting the criteria in each stage before allowing them to advance the opportunity. If you have established the criteria that drives your sales process and you hold your team accountable for meeting those criteria, you will not only improve your forecasting, you will also improve your closing ratio!
About the Author
Steve Gielda is the principal partner at Ignite Selling, Inc., a global sales training and consulting company and author of Premeditated Selling: Tools for Developing the Right Strategy for Every Opportunity. Steve has spent more than 20 years helping Fortune 1000 companies in the healthcare, manufacturing, distribution, and IT industries to improve their sales performance. His emphasis on building and maintaining strong relationships and his focus on driving business results is what sets him apart with his clients. Steve began his career in sales with Lanier Worldwide, a document management solutions company, eventually becoming a regional manager. He was also vice president of sales and channel management at CTN, an office equipment manufacturing and distribution company.
After CTN, Steve worked as a senior sales consultant for Huthwaite, helping to create unique sales training solutions for his clients. Most recently, he was a franchise owner with the Advantage Performance Group consulting and learning firm, and an active partner in building the business of Sales Momentum, a customized sales training organization.