The reality of sales forecasting

Dan Morgese: Only 22% of leaders have some level of confidence in the number that their reps are. So why even ask them to begin with it if it's really that low?

Corrina Owens: Welcome to Reveal.

Danny Wasserman: Corrina, so good to see you.

Corrina Owens: Good to see you, Danny.

Danny Wasserman: So what a killer conversation that we had with Dan Morgese. No, it is not Beyonce's bae. No, but it is Dan Morgese, the senior manager of thought leadership at Gong. Tell me what your thoughts were on this heavy hitter. What'd you think?

Corrina Owens: I got to say he is somebody that is able to really dissect and analyze just mass amounts of data and communicate it back to whoever his audience is in such a crystallized way while being very humble. So even with our customers, we recently had him on for executive round table, they just love chatting with him, and he's just so quick on his feet. He's got all these numbers to back it up with.

Danny Wasserman: My dad always told me, " Make sure you're never the smartest person in the room." And I can assure you, I always feel that way when I'm around you. But man, when I'm in a room with Dan Morgese, I'm a far cry from the smartest person in the room. Yes, friends, he comes from a analyst background. It's abundantly clear in the episode his mastery of utilizing numbers to stay informed, but then also to by extension, offer an incredibly authoritative perspective on forecasting. Spoiler alert, Dan's got some hot takes on how maybe we've been doing a classic conventional sales process like forecasting wrong up until this point. So very excited for you guys to tune in, hear a little bit more about what Dan uncovered in a data driven analytical capacity on how you can optimize supercharge, revolutionize your forecasting. Corrina, anything else before we pull the curtain back?

Corrina Owens: Nah, I think you nailed it. This is going to be such a good one for our listeners. Let's get into it. This is Reveal: The Revenue Intelligence Podcast, here to help go to market leaders do one thing, stop guessing.

Danny Wasserman: If you're ready to unlock reality and reach your full potential, then this show is for you. I'm Danny Wasserman.

Corrina Owens: And I'm Corrina Owens, coming to you from the Gong Studios. So Dan, we are thrilled to have you here today. You're going to dive into a new report that you did with sales professionals around the world, all around the reality of sales forecasting. But before we get into the report, we'd love for you to share with the listeners your background because you are no stranger to research. So would you mind telling the listeners a little bit about you and your previous experience?

Dan Morgese: Yeah. Absolutely. So prior to joining Gong, I spent the first eight years of my career in the research and advisory space. So working at an organization called SiriusDecisions, who was later acquired by Forrester. In those roles, as a benchmarking analyst, I spent the first portion of my career helping sales professionals make informed decisions by writing them the data that they needed. I feel really fortunate to be in this role where I continue to do research and provide sales leaders the data that they need to make informed decisions.

Corrina Owens: We are certainly thrilled to have you here and really excited to dive into something that I think could not be more pressing right now for sales professionals and that is accurate forecasting. So could you share with us, give us some context, who participated in the study? What are the types of people's roles, industry?

Dan Morgese: Yeah. Absolutely. We set out to find the current state of forecasting at sales organizations across the industry. So what we did is we went out and talked to sales leaders, and then actually conducted an online study of 928 sales professionals and across the organization. So looking at individual contributors, frontline managers, as well as the director plus sales leadership. And got a really nice mix of all of those three point of views to really understand what types of data are they leveraging to inform their forecast, what types of tools are they leveraging to analyze it and report up their forecast. And then understanding what were the current challenges plaguing a lot of organizations today. So super interesting findings. This is a hot topic, there's no shortage of thought leadership or research on it, but I think we took a really unique perspective. And again, trying to get down to the nitty- gritty of really what are the shortcomings that are challenging a lot of organizations today.

Corrina Owens: That's great. And this really did encompass a variety of different types of organizations, but I think there were a lot of familiar themes. What would you say is the current status quo for forecasting?

Dan Morgese: Yeah. Unfortunately, I think the headline here, and probably not shocked to it, to a lot of folks listening to our conversation today, but really forecasting at most organizations is broken. It's not accurate. It's leading to lackluster results. It's super time consuming, inefficient, and overwhelmingly there's a lack of trust in the number that folks are calling to leadership.

Danny Wasserman: So you sit in this unique purge, Dan, as an authoritative benchmark analyst who's worked for leading brands like Sirius and subsequently Forrester. When you guys come out within a pity, you draw a line in the sand, stipulate your point of view, it has implications. You're either on the right side or the wrong side of the point of view that some seemingly authoritative neutral party like Sirius is claiming. And now fast forward to your role at Gong, you say, " Hey, forecasting is broken." You're talking about all of these, we'll say, roadblocks, hurdles, obstacles, any number of things that are causing to be broken. The downstream effects of that are, I think, if you are in charge of forecasting in an organization, maybe you're the head of revenue operations, maybe you're the head of sales, you've devised what you think is the bee's knees of forecasting, and then all of a sudden, Dan, he comes down and says, " Your shit's broken." I'm wondering, has that ever backfired? Has that ever reared its ugly head? Can you think of a time maybe when either advising a client or even an industry benchmark report where someone came back and said, " Dan, you're full of shit"?

Dan Morgese: Yeah. Absolutely. Luckily, I've always been fortunate to be backed by data. So we don't like to necessarily draw a line in the sand and give guidance if we don't have valid and trusted data to support those claims. As I said before, again, 928 is a very small sliver in terms of sample size of looking across the industry, but the findings are substantial and significant here. And then no two businesses are alike. So while we paint with broad strokes, specifically as a former analyst, looking at the implications and what this data would suggest or what this means for the specifics of each organization and sales organization respectively within those companies, I think is super important. So do a full assessment. Folks are using different tools, folks are tapping into different data sources. So while we are painting with broad strokes here, and I think that's a good disclaimer, a lot of these findings can apply in some manner, especially the qualitative stuff. So we'll talk about trust and forecasts. I think overwhelmingly, I feel pretty confident that this would resonate with folks across the board.

Corrina Owens: Yeah. No, I really appreciate that. And talking about how this is broken, we definitely want to know what is a proposed solution. So in looking at that data, what were you guys able to surmise that the best sales teams were doing from a forecasting method perspective, maybe against their competitors or the folks that are struggling to achieve this?

Dan Morgese: Yeah. So maybe before even talking about the solution, I'd love to dive into just what we saw as the largest challenges facing teams. And I think that would probably be a nice segue into the correlation of, " Hey, folks who aren't facing these challenges are doing X, Y, and Z." And overwhelmingly, I think the organizations who are reporting one inefficient forecast accuracy. So over 50% of the respondents that we surveyed said that their forecast falls within 10% or more of their call number. So outside of 10%. So forecast actually of 90% or less, more than half of organizations today. The second is its super time consuming, so inefficient, more than 60% said they're still forecasting using spreadsheets. So while they might have an actual solution that they've paid a lot of money for and have an enterprise license for, 60% of them still leverage disparate, disconnected static spreadsheets for this super critical. And the thing is recognizing, " Hey, this is super critical for our business." This is super critical for intelligent growth. Rowing and scaling the business intelligently. Yet there's this huge gap that still exists. So folks who are able to these challenges have identified a streamlined solution where, " Yes, we're tapping into..." There's no limit to the amount of data that we have access to, but the folks doing a really good job have identified an elegant solution to actually connect all of these data sources into one place where their reps, their managers and leadership all live. So we're not using different tools based on your role to understand what's the reality of the deals that we're forecasting.

Corrina Owens: I come from the procurement, sourcing, and finance world. I work for a lot of those startups in those industries, and you're hitting on a sore spot for me with spreadsheets. They live in spreadsheets, and I feel like that's just prone to so much human error when you rely on that. Do you see that there's a correlation there? And if so, what would you advise for industries that maybe are really dependent on some of these tools that are not as secure or you can't have as much edit or access rights, not everybody's seeing the same things. What would you say to that?

Dan Morgese: Yeah. I would say I think it's a comfort and probably a tool adoption thing. So I just mentioned that also seeing that based on where in the org you are, so whether you're a sales leader versus a manager for a rep, you might be using a different tool to roll up your forecast or, Corrina, it's to your grade, maybe a different version of the spreadsheet. I have my individual contributor view, I have my team view if I'm a frontline manager, and then I have the org view if I'm in that sales leadership role. Not only is the risk in terms of what you're talking about in security, but just from a productivity standpoint, we actually found that folks who leverage spreadsheets to roll up their forecast versus those who don't are spending a lot more time. It's only 11%, but if we think about that 11% more time are spread across your entire team for a fiscal year, that's a lot more time they could be spending engaging with customers, closing deals, generating revenue. And again, we realize this is a mission critical process. So it's not like we're trying to cut corners or totally devalue the task, but as a sales leader, I think everyone can relate to having to hound their team to submit their forecast and then through their forecast. So yeah, I think it's a great point. You bring up the security risks, the old school dinosaur way of doing things in spreadsheets, but there's also a cost associated to it as well from a dollars and cents perspective.

Danny Wasserman: So Dan, my follow- up question to this that deals with the two stats you gave us. You gave us 60% and 11%. For the listeners, can you delineate what does 60 represent and what does 11 represent real fast?

Dan Morgese: Yeah. So 60% of the respondents that participated in the study said that they leveraged a spreadsheet in some capacity to report their forecast. So over half of organizations are still using spreadsheets today. The cost of that in terms of time is 11% more time that they're spending to get a forecast that's actually less accurate. So more time, less accuracy, which is unfortunate.

Danny Wasserman: Where those two data points lead me to my follow up question is we have an antiquated way of doing something. It is laborious, it is manual, it is inconsistent, it is prone to error, it is prone to secures. We all willingly acknowledge the deficiencies of using spreadsheets and yet over half of us still use them. And I was thinking in my own personal life, what is something that I willingly continue to indulge in, yet I know it is unhealthy or it is unproductive. And I'm thinking, I love Cocoa Krispies. Oh my god, I love Cocoa Krispies as a cereal. I love the chocolate milk at the end. I think it's a bonus. And yet as an adult, as all adults would look at that cereal and say, " Shame on you, that is wildly unhealthy. It is sugary. It is going to rot your teeth. Boom. You should be eating some green smoothie, drink, whatever." Looking at the psychology, the retractor beam that Cocoa Krispies has on me as I'm walking down the grocery aisle, what in your research, if anything, did you guys unpack psychologically about why, even though we all accept that spreadsheets suck, and we accept that there are a multitude of alternatives? What does that gravitational pull or stickiness that keeps us shackled to spreadsheets? Did you guys unpack that at all?

Dan Morgese: Yeah. So this wasn't spreadsheets are the devil study unfortunately, honestly. So that's a hot take for me. I built my career on spreadsheets at least early on the first three or four years. I was the go- to guy at a small organization and, thank God, I was familiar with Excel. So I love spreadsheets, planning bachelor parties for friends. I'm the guy with the Google Doc and then I'm sending it over to everyone. Excel to some extent is my Cocoa Krispies. That being said, I think it's a comfort issue. And I also think it's like a UI/ UX issue. Are we streamlining, are we putting the technology where the reps are already living? So is there a way that we can create a unified system or unified platform for, " Hey, our reps already live and breathe and love this technology, they love the interface, they're comfortable with it. Is there a way that we can somehow put the forecast and what we're asking them to report in terms of forecasting where they're already living?" So we can drive adoption, drive comfortability with this new tech and it's a win- win across the board. I don't have to have six different applications open looking at deal warnings in one, looking at deal size in another, and looking at a CRM score in a third system and then entering that into a spreadsheet right after trying to tabulate all those different data points. So I think it's a matter of finding a solution that reps love to use and that one that you're sure they'll adopt.

Corrina Owens: I love that point. I think it's also that maybe we don't know how to communicate the value of the opposition. So we're very comfortable with what we know is tried and true, which I think sales spreadsheets is definitely one of those things that most sales leaders I've come across in my career are most comfortable with using. But I don't know if their team or counterparts know how to communicate what some of this new tech can do for them. So they can't communicate the value of why this is so different. And that's why I think your efficiency metric that you shared in this report is so incredibly impactful because I don't know any leader today that isn't looking to be more efficient with their most valuable resource, which I think is time. I'm curious, what are some of the other shocking data points that really were like aha moments for me from this report?

Dan Morgese: Yeah. So we talked about trust or lack thereof and the idea that yes, forecasting is broken, it isn't a headline, but we didn't quantify it. And actually, in this report we did, which was one of the data points I was giggling about, not in a good way. And that's the fact that we asked all participants, so whether you were an individual contributor, a manager, or a leader, and let's just talk about the highest level, the leader. So we asked what level of confidence from strongly no confidence at all all the way to extremely confident, what level they have in the number that they're calling at the end of the day? And so only 58% of respondents had some degree, and most of that 58% indicated that somewhat confident in the number that they're calling. We then turned that around and said, for your reps, what level of confidence do you have in the number that they're reporting up to you? Any guesses on what that might be?

Corrina Owens: Yeah. I was going to say 30%.

Danny Wasserman: I was going to say, for all those sales friends out there, sorry for being a cynic, but I was going to say about 20%.

Dan Morgese: So Danny price is right rule. You're winning. So 22% was the number there. So only 22% of leaders have some level of confidence in the number that they reps are. So why even ask them to begin with it? If it's really that low, why even ask them to begin with? So again, it's this gap that yes, we realize it's broken and maybe there's this almost disillusion into current forecasting process. Yes, we know it's broken, we know it's important, but accepting the status quo, at least that's what the data is telling us.

Corrina Owens: What do you think you would attribute that back to? Because I think there may even be a tie in here about competency generally of their talent. And I know you released the reality of sales talent report earlier this year too. So I'm wondering if there's any correlations between these two reports that we could also tie together.

Dan Morgese: So yeah, if folks haven't, check that out in the beginning of the year in Q1, we released the Reality of Sales Talent Report, which is essentially a similar thought leadership piece around how do you attract, retain, and motivate your top performing sellers. I think the one element, and we identified five key drivers of how to motivate your team, one of them being your frontline managers. So the kind of interface between your strategy of leadership and the tactical execution of that strategy from your reps. And I think getting buy- in from managers and managers, having visibility into deals, being able to proactively understand like, " Where's the book of business at for each of my reps? Am I coaching and strategizing with them on deals? Or am I wasting time asking questions that I should already know the answers to?" So I think the managers play a really critical role in helping increase that trust level between the reps and leadership, because currently that 22% shows us that there's a huge gap that exists.

Corrina Owens: Dan just dropped that insane stat on us from the reality of sales forecasting report. Only 22% of sales leaders have some level of confidence in the forecasting numbers the reps are reporting to them. So what factors are playing into lack of confidence? Well, according to Gong's research in this report, the number one factor is actually opinions. Most reps are relying on gut feelings to contra up those forecasted numbers, which leaves their leaders feeling shaky about the validity of the numbers in front of them. The solve here, you guessed it, data. Let's get back into it with Dan as he explains this opinion driven dilemma a bit further.

Danny Wasserman: I appreciate the optimism that you're not trying to sound doom and gloom, but from where I'm sitting, the writings on the wall, 60% of us use the wrong methodology, 11% inefficiency, 22% confidence interval that what we're actually getting holds water. So to me, it's abundantly clear, it's time to shape up or ship out. So you've got me on the ropes, I'm a believer, you've sold me that the status quo was broken. Now do we have, when we say we do you and your authorities that ran all this research on a statistically significant sample size, do you have the yellow brick road that's going to take us to the promise land?

Dan Morgese: So we do. We have a few things that we identify four key principles. And so that's to make your forecast reality based, shocker, right? It's okay. I'm a Gong marketer, I'll throw out my hands. So to make it reality based, how do we increase efficiency? We're understanding how critical this is. We don't want to cut corners, but there are ways that we can operationalize the forecast to make it more productive and more efficient. Are we aligned in terms of, again, using the same interface, using the same tools, having access to the same source of information, and then is it leading? Again, I think 99% of most organizations forecast there are historically based. We have a certain number of opportunities they convert at a certain percentage. There's seasonality to the business that's typically included as well. Again, all based on a historical business. If we think back to March 2020 when things hit the fan around this global pandemic, for every nature of unprecedented times is they have not happened before. So what are the leading indicators that we aren't tapping into or not including in our current forecasting process today that we can then extrapolate and start to have an understanding of, "Oh, okay, we don't have access to power in this deal. Oh, this deal isn't multi- threaded. Oh, we haven't even brought up pricing yet, and my rep committed this." Things like email velocity. How quickly are we exchanging emails with the prospect? These are all leading indicators that if folks aren't somehow tapping into that visibility of the actual reality of their deals, it's a huge miss in terms of doing that.

Danny Wasserman: Does that eradicate the relevance of looking at historicals when you formulate your confidence in a forecast? So obviously we prefer leading indicators like the ones you mentioned and obviously comparing March of 2019 versus March of 2020, apples and oranges. So we probably don't want to bet the farm on historical models, but is there still a place to use the past somewhat reliably to inform our future or do we scrap that all together? Maybe it's somewhere in the middle. It's not so black and white.

Dan Morgese: No. I think it's a hybrid, and I think very much if we were to allocate percentage of it, I think historical is, there's a reason it's produced at least 90% before almost half of businesses. 48% I think said the big fall somewhere within 10% of their number. But the folks using the reality of their interactions, those leading indicators were actually twice as likely. So two times as likely to fall within 5% of their call number. And I'm going to tee this one up for you. So what we're saying is you're twice as likely to fall within 5% of your forecasted number if you're using the actual customer interaction data within your forecast.

Corrina Owens: Well, I think the difference here is that it's the actual customer interaction versus being rep prescribed what the interaction was.

Dan Morgese: Exactly. Right. So we're not relying on the opinions or the" I feel", " I think", " Oh this, we talk about happy ears all the time. Oh, this is a done deal. Or we signing checks and buying the new car or whatever." But yeah, having access to actually what's going on in those interactions, hearing that unfiltered voice of customer, not the relayed information in the CRM notes at the end of the day. And then we talk about efficiency. So automatically flagging those things as they come up because we are using AI to hopefully uncover those if our tech stack allows us to. Yeah. Lots from a tech enablement perspective, that can really be done to step up the game and fix this broken forecast that we've been partnering on.

Corrina Owens: Well, thank you, Dan. I feel like you've illuminated so many useful insights from this report and all of your research. If you could close us out with what would be one thing that you've uncovered from this report, or maybe your accumulation of all your research reporting, what would you want one sales leader to know about forecasting?

Dan Morgese: It's broken, but it can be fixed. Even just doing an audit of really, do I truly understand one, how many data sources today am I actually using to inform my forecast? How many tools across my organization are used by different teams? So honestly, just taking the step of conducting an audit, understanding what the reality of your current forecasting process is, and then identify any low hanging fruit. Okay. Maybe we are using static spreadsheets today. Have we already invested dollars and cents to a solution that maybe isn't being leveraged or utilized in a way that it can? So I think just taking a step back. Let's slow down to speed up. Let's just audit the current process. It's broken at 60% of organizations today. Are we one of those 60%? And if so, again, what's the low hanging fruit? What have we already invested in? What are we hearing from our people? So that would be my takeaway, hopefully use this industry data. And again, that is a nice callback. This isn't that we're painting with broad strokes here. Every data point is not going to apply to your organization but identify the ones that do and fix.

Danny Wasserman: With statistically the odds against us. 60% of us are going to be using spreadsheets in some form or fashion that we're going to be plagued with everything that comes with that. As you look ahead into your crystal ball, the Morgese, where is business going and how increasingly globalized competitive things have become. The stakes are higher than ever. The margin for errors been compressed. Any number of things that are challenging all industries. And you say, all right, 60% of us do the wrong thing. Are we on borrowed time? And for the 40% that aren't using spreadsheets, are they the ones that are going to prevail? Because I'm wondering, there is something captivating about that phrase change or die, and I don't get the impression that you think you we're just going to limp along until we suffer a slow, painful death. But I do wonder the disparity that is going to be more pronounced and exaggerated if you find yourself in that 40% versus the 60%.

Dan Morgese: Yeah. It's a great question. So at the end of the day, forecasting isn't a revenue generating activity. So will we stop closing deals? No. Are we going to be able to scale and grow the business in a really intelligent and formulated and responsible way to those 40% who aren't using spreadsheets? No. So that's a huge competitive gap that they've created for themselves by not being able to intelligently plan, intelligently grow their business because they can't trust their forecast necessarily. Are you going to go out of business because you're not following within 5% of your number consistently? No. But think about all the strategic advantage that you're leaving on the table if you aren't increasing the rigor and operational effectiveness of your forecasting process. So yeah, I think that's how I feel at least about the gap that might exist between the folks who are leading in terms of forecasting in the lagers.

Corrina Owens: I would agree with you there, Dan. Better to be ahead of the pack than waiting and be left behind. So start today. Okay. Dan, as you're a longtime listener of the podcast, we ask all our guests one final question. In one word, how would you define sales?

Dan Morgese: I'll say partnership. So as someone who's been an advisor to sellers and sales leaders, but has never actually carried a bag, I think, my perspective, the best sellers are business partners for their customers and the best internal partners with marketing. I'm a marketer today. The best partners to across the go- to- market organization. So partnering with marketing, partnering with product, partnering with a solution specialist, I'll say partnership.

Corrina Owens: As a fellow marketer, I really resonate with that tune. I feel like it's never too late to partner. I think oftentimes we wait too long to forge that relationship. But I think that was beautifully well said. Dan, thank you so much for joining Danny and I today. Your insight is invaluable, and I'm sure we are going to have several data points for our listeners to pull from. So thank you again. We appreciate you.

Danny Wasserman: Thanks, Dan.

Dan Morgese: Thanks so much for having me. Appreciate it. Thanks guys.

Corrina Owens: Thanks so much for listening to this episode of Reveal. If you want more resources on how Revenue Intelligence can help you create high performing sales teams, head on over to gong. io. If you like what you heard, please give us that five- star review on Apple Podcasts, Spotify, or wherever you listen.