WhatTheyThink.com - The ABC?s of Forecasting:
"Forecasting should not become an arduous and bureaucratic process. Nor should it become politicized. The quickest way for that to happen is to tie forecast accuracy to sales compensation. Honesty must permeate a forecasting system. Tying forecasting to compensation is only asking for trouble, creating potential of ?low-ball? forecasts on the part of sales people, and intimidation on the part of managers anxious to impress higher-ups with aggressive targets and to motivate sales reps. Goal-setting is not the same as forecasting, and should be apart from it.
Of great concern at the roundtable was dealing with customer loss and replacement. Customer losses are not always related to supplier performance. A sales representative and production personnel can execute all of their tasks perfectly, yet a large client can disappear for reasons out of their control. It was clear that the owners who were sitting at the table don't lose many customers due to performance issues. Their bigger problems were customers who change communications plans, merge with another company that uses other suppliers or is outside of the geographic or market niche they sell to, or go bankrupt and close. These can result in quite substantial revenue losses. Whatever the reason, those sales still have to be replaced.
In the end, forecasting is a constant process of learning about the business as it exists at a particular point in time. The exercise uncovers many issues that would otherwise surface as crises later on. Every forecast needs a scheduled reappraisal as the year goes on. Unexpected situations, problems, and opportunities always arise. Dealing with them in a in the forecasting context is more likely to yield a sensible, thoughtful plan of attack than if they were allowed to fester into a crisis."
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