Helping the Chronically Overworked Find Life Balance

Why You Should Care About The Revenue Forecast

Chapter 9: Paint Your Environment: Part 4

As I argued in the last post, if you want the company to do the right thing, make sure you have a set of numbers to back it up. To fully understand why I think this is critical, lets step back for a moment and look at where a revenue forecast come from.  The Cambridge dictionary online defines a revenue forecast as “a calculation of the amount of money that a company will receive from sales during a particular period.”

In a very real sense, a revenue forecast is a prediction of the future, and a forecast can have a very real impact on the day-to-day activities of employees.  It is tempting to think that these numbers are scientifically derived and reliable, but often they come from sticking a finger in the air, and then justified after-the-fact in Excel.

I heard a cautionary tale from “George” the former VP of marketing at a mid-sized biotechnology company about how a bogus forecast helped propagate a disaster.  Research created an elaborate robotic system to streamline the user experience for one of the flagship product lines.  After a few experiments, they pronounced it ready to ship to customers, and did not need to go through a formal development process.

I cringed when I heard the story.  Product development is always needed to make a new technology robust enough to work consistently in customer hands.

But “ready for customers” is exactly what the CEO wanted to hear.  He was a Scorpion, a “visionary” who felt that the technology should sell itself.  The President and CFO were hungry for revenue growth, and via a process that sounds a lot like groupthink, the executive team convinced themselves that “we should be able to make $10M on this product this year.”  Marketing then back calculated the number of units, service contracts, and consumables that would need to be sold to make the forecast.  (As a point of reference, this represented 25% of the company’s projected revenue growth for the year.)  Then when the product ran into development issues, the same executives went on a headhunt to find out where the number came from.

The rest of the company scrambled to fill the $10M revenue hole.  Timelines for other products were accelerated, and employees throughout the organization put in long weeks to “make it happen.”

Bad management?  Sounds like it.  But there was not a rush of people heading for the door.  Inside the asylum, everyone looks sane.  (See this post on stress and loss of perspective for more.)

How far will your company go to make the numbers?  Where do the numbers come from?  If you can’t control the forecast, what can you control?

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Disruptive Technology Plus Rapid Growth Equals Excess Devotion, For the Newbie

Chapter 5: The Role of Circumstance Part 11

In the last post, we met Mary, who enthusiastically embraced the corporate life after graduate school and was shocked when the first layoffs hit.  It is perfectly understandable that early in her career, Mary did not understand the business realities, especially coming from a different set of realities.

As a science graduate student, she worked independently on her project, with a large peer group of fellow grad students to commiserate with.  There was no overall institutional loyalty – a graduate student is part of a scientist’s lab, who in many cases could care less about what you think of them or the institution.  In fact, many a graduate advisor hates the institution for all the bureaucracy.  Personal identity does not become intertwined with the institution.

A corporation is a completely different environment.  It’s about making money for the company, and working with other people towards a common goal.  At work Mary was surrounded by signals that re-enforced her attachment to the company, and she was caught up in the gung-ho attitude of trying to change the world.

The customers were almost all of the top twenty pharmaceutical companies, which reinforced her perception that the company was helping to revolutionize drug discovery.  (See this post on the illusion of control.) And, these companies were a very lucrative source of revenue.  At one point, the stock price was going up 20 to 30 points a day, and everyone was talking about it.  You could literally hear people screaming out numbers and cheering from their cubes.   One of the founders, whose major contribution at the time was surfing porn sites, was once seen dancing down the hall chanting the company name.

The core of Mary’s devotion, though, came from the company President, who was energetic and visionary.

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