Corporate Pipelines - Why They Inevitably Lead to Poor Sales Forecasts
Corporate pipelines tend to be political tools and are rarely a true reflection of what"s happening within the sales function. Most often, they are used to show management what management wants to see.
Word comes down from management that "there is not enough in the pipeline", so the sales reps begin to populate the pipeline with data - any data - to show they"re working on something. This keeps management off their backs for a little while longer but if a large deal is put into the pipeline this then gets focus and attention because the big guns want to know that it's being managed properly. This leads to more pressure.
This management pressure is the reason many big deals don"t appear in the pipeline until the very last moment - when the sales rep is sure that it has a good chance of closing. The technical term for this is "sandbagging", which also happens when a rep has already made his number for the sales period but wants a good start to the next. This is often an indication that the company"s commission plan has not been well developed because accelerators should be sufficient to ensure that the extra commission made on exceeded targets is motivation enough to disclose all closed deals.
Other deals seem to come out of nowhere. The customer has not kept the rep informed or the decision has been made at HQ and the division has been told to buy. They place the order without the sales rep having to do any selling. The technical term for this is a "bluebird".
It"s no wonder that the sales manger has to spend time looking at the forecast and interpreting it based on his experience and knowledge of his sales team and their territory. He needs to know how his team is going to make their number but also wants to keep his job. Bad news, therefore, is only ever delivered upwards when necessary-at the end of a sales period or when a large deal is lost. Of course, if the lost deal was a sandbag then even that doesn"t need to be reported!
If both the sales rep and the sales manager knew at the beginning of the period that the target was not going to be met they could do something to make up the shortfall. It's unlikely that every sales rep within a team will make or exceed their target every period. The important thing is that the group number is made. If the group number is made, the pressure is less: it"s only when that number is not made that pressure mounts.
This works all the way up the chain. If the organization makes its number then everyone is happy. If the number isn"t made then the pressure starts to bear on the area that had the shortfall.
Sales professionals need tools to help them to do their job. Unfortunately, the tools supplied by an organization are often for the benefit of the organization itself and not to the individual"s advantage. Even then, the tools are rarely fit for purpose.
For instance, the pipeline is used as a management tool to make sure there are enough deals in the right places to meet targets. In other words, it becomes a reporting tool. These reporting tools are often misguided in their approach to the problem.
A pipeline"s primary purpose is to show you are in control. It gives you the ability to predict the outcome, even if that outcome actually falls short of your sales target. Prediction is only successful when it"s accurate. If you say you"re going to come out at 100% and you come out at 110% that"s not good. It may be good in revenue terms but it"s not an accurate prediction.
If you say you"re going to come out at 100% and you come out at 90% that"s good in neither prediction nor revenue terms. If you can predict accurately, it gives your organization the chance to make up shortfalls from somewhere else or cover shortfalls elsewhere in the team.
At the beginning of any period you need to be able to show how you"re going to make your number. You need to be able to identify deals, define their current status, and state when they"ll close. If you run your pipeline correctly you"ll also be able to put your effort into the most important deals.
The most important deals are not necessarily the ones with the largest value. The most important deals are the ones that will be closing. You also want to make sure that your pipeline only contains deals you know you can win. Working on deals that you know you are going to lose is a waste of energy. The majority of corporate pipelines give no indication to their sales reps or their managers where the effort should go, which is why large deals are always considered the most important.
My company First Border has created a personal pipeline tool - Focus. Use Focus and dramatically improve the accuracy of your sales forecasts, work only on the deals you can win, and maximize your sales commission - sales period after sales period.
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