Avoid ConAgra’s Forecasting Debacle, Switch To Range Forecasting
ConAgra’s CEO Gary Rodkin said the miss “was driven by two key factors; one, weaker than planned Consumer Foods volumes, and two, significantly lower profitability in our Private Brands operations.”
They had expected Consumer Foods sales of almost $1.9 billion (down 3% vs. prior year) but ended up with sales of $1.8 billion (down 7%).
Their forecast meant something totally different if:
$1.9 billion was the absolute maximum they could sell if everything went right,
$1.9 billion was the bare minimum they were going to sell even if everything went wrong,
$1.9 billion was the most likely forecast.
These might have translated to:
somewhere between $1.7 billion and $1.9 billion
somewhere between $1.9 billion and $2.1 billion
somewhere between $1.8 billion and $2.0 billion
The issue is not that people lie in their forecasts (though some do). It’s that different forecasts mean different things to different people and lead different people to expect different things.
Don’t believe precise forecasts. As Wharton Professor Leonard Lodish puts it, “It’s better to be vaguely right than precisely wrong.” So, push for a range and for an understanding of the scenarios that lead to the range.
Net, range forecasts with explanations give you more and better information than do single-point forecasts. Switch to range forecasts.
Tighten the Range
Once you’ve done that, work on ways to tighten the range.
Jeff Fotta is the president of Gryphon Networks, a company that makes sales intelligence and marketing compliance solutions for distributed workforces. Their cloud-based technology collects and analyzes call data from any device to transform sales activity into actionable sales intelligence. It removes that subjective bias of sales rep CRM input, to produce more accurate sales forecasts and teach underperforming salespeople best practices gleaned off of the top-performing ones. Sales Intelligence helps sales managers get clearer visibility as well in three ways…Read More at Forbes.com.
Learn more: Gryphon Sales Methodology