Share knowledge and collaborate. Salespeople and others involved in forecasting will make better decisions if they have more knowledge available to them. The information may include the factors that went into the quantitative forecasts; information on relevant economic data such as leading indicators; industry trends; market research; and information on past forecasting accuracy including the rationale that led to errors. Marketers may have information to share on plans for pricing and promotions that would influence sales. Operations and logistics may have information available on problems that could limit availability and sales. Clearly, there is much to be gained in forecast accuracy when information is shared.
Document decisions. Requiring documentation for every qualitative adjustment to forecasts services two purposes. First, forecasters will give more thought to a forecast whenever they need to write out a rationale. Second, reviewing the rationales of past forecasts is a great way to learn how to improve forecasting. It is important not to request that a forecaster adjust so many forecasts that they would not have time to explain their decisions at least briefly. When a forecaster has too many forecasts to adjust, they will not be able to devote sufficient focus to each and will start to just enter numbers to get done with it.
Train the forecasters. The analysts who perform the quantitative analysis obviously need training in quantitative techniques if they do not already have those skills and ongoing training is always helpful to refine skills. It is also beneficial to train salespeople in forecasting so that they better understand the basis for the quantitative forecasts, how best to interpret information that is provided to them, and what to consider when adjusting forecasts.
Include forecasting in job descriptions and performance reviews. Most people involved in forecasting do not consider forecasting an important part of their job and it is generally not part of performance reviews or compensation. Most salespeople consider forecasting an unpleasant distraction from their real work. Obviously, forecasts are unlikely to improve if the work is not taken seriously. That which is measured is rewarded and that which is rewarded gets done.
Integrate systems. Much forecasting and business analysis is performed in spreadsheets. Although convenient, spreadsheets can make collaboration difficult and result in islands of analysis and data inconsistencies. An enterprise system for performance management such as Microsoft PerformancePoint Server can combine the convenience of spreadsheets with the power of centralized data storage and data warehousing. A CRM system would work well for collecting qualitative adjustments to quantitative forecasts and presenting forecasters with data drawn from an enterprise performance management system.
Measure, learn, and improve. To improvement forecasting, measure how well you are doing, learn from mistakes, and continuously refine the process. Learning to improve forecasts not only improves business efficiency but also encourages everybody in the organization to better understand the market environment and why products and services are selling or not. Forecasting is a key to operational excellence and greater insight into the business.
For additional resources on sales forecasting, I recommend the following two titles:
Sales Forecasting Management: A Demand Management Approach by John Tom Mentzer and Mark A. Moon
Excel Sales Forecasting for Dummies by Conrad Carlberg