Improving Forecast Accuracy

Your ability to predict is as important as your ability to perform. Forecast accuracy is a critical component of your company’s success in today’s markets, particularly when competing on a global scale. Wall Street pays a premium for those companies that consistently meet their forecasts, while regarding forecast misses as an indication that the company’s senior leadership does not have a handle on their business.

There will always be reasons you might miss your forecasts — markets change, unexpected supply problems surface, competitors make surprise moves, a recession sets in, or mergers force divergent cultures to blend forecasting processes and approaches. The possible excuses are endless.

CLG can help you move past the excuses to create a new level of discussion — “critical dialogues” that will help all levels of your organization have honest, data-driven discussions around the forecast — and work together to mutually derive gap closure plans so you can meet or beat your estimates.

The Vicious Cycle

There is a vicious cycle that may become embedded in your company’s forecasting process. Business units submit forecasts that are lower than expectations, and when the numbers don’t add up, your senior leaders ask questions to figure out how to close the gaps. The answers they get are often surface-level and not well thought out. Without sound reasoning for the numbers gap, your leaders feel compelled to “push” the business units to outperform their estimates. This makes it less likely that your teams will do the thoughtful analytical work that is needed to create an accurate forecast the next time around. After all, why do the work when their numbers will be overridden anyway?

If this vicious cycle continues, your leaders and teams at all levels ultimately lose touch with the true business drivers and your organization’s capability to deliver. This pattern can work during stable times, but when business conditions become more dynamic, causing you to change your strategy or business models, it can result in tremendous problems and challenge your credibility with the analysts. Worse, it can cause you to focus on closing short-term gaps at the expense of managing out six to 18 months.

CLG’s Behavior-Based Forecasting Tools

CLG works with you to ensure that your technical forecasting tools are used as intended. We know the High-Impact Behaviors^SM that are required to break your organization out of the counter-productive cycle of inaccurate forecasting. The behavior changes that need to occur fall into three general categories, from simplest to change to most entrenched and difficult:

1. Holding Effective Forecasting Meetings: Basic blocking and tackling behaviors that enable good decision-making are required across dozens of forecasting meetings each cycle.
2. Using Forecasting Tools and Processes: Out of the hundreds of behaviors that are required by your forecasting processes, a select few are highly correlated with improving or achieving superior forecasting accuracy.
3. Making High Quality Decisions: No matter how accurate your data are, the usefulness of your forecast is determined by the extent to which people are having honest and forthright discussions about current and future business performance. We gauge decision quality by measuring specific behaviors related to having “critical dialogues” at all levels.

The Key to New Behaviors

CLG will implement our Performance Catalyst^® for Forecast Accuracy to quickly change those behaviors needed to get critical dialogues started among those who have their fingers on the pulse of your company. This ensures that people across your organization are having the types of discussions that will help them reach forecast accuracy.

CLG makes behavior change happen in your forecasting process across all levels of your organization. We do this by:

• Aligning leaders and employees on desired results
• Clarifying roles and responsibilities in the forecasting process
• Tailoring our proven behavioral checklists to your organization so you can reliably improve decision quality, meeting effectiveness, and use of forecasting tools and processes
• Implementing coaching and feedback processes so your people can monitor their own use of the new behaviors
• Reviewing behavior-to-results data with senior leaders so they can reinforce progress and make any necessary adjustments early in the forecasting cycle

When leaders recognize and reinforce the link between forecasting behaviors and forecast accuracy results, it causes everyone to want to use their other forecasting tools to their full potential. Everyone wins, from the finance personnel who need people to use their new tools, to field leaders who want to engage in deeper levels of discussion about the business.

Learn more about how CLG can help your company with this challenge in our fact sheet, The Goal is No Surprises, Improving Forecast Accuracy.