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What’s the impact of Forecast Accuracy KPI on the behaviour of sales team?
If a company has Forecast Accuracy as a KPI, it does indeed impact the behaviour of its sales personnel. They would endeavour to do everything they can to get a good score on this KPI.
Since most companies have a decent power to push their sales in the near term, it comes in quite handy to match actual sales with the forecast. This power may be exercised either through the good relationship with their customers or by resorting to short term channel promotions. Let’s see how.
If actual sales of a product are tracking lower than the forecast, sales team may engage in pushing it at the month end to meet their target. It’s only a short term respite, which gets negated early next month. Moreover, it comes at an additional cost. It also leads to poor freshness and possible obsolescence. Since customers have limited funds to invest, they are also likely to compromise on the assortment they carry.
On the other hand, if a product is selling better than the forecast, sales team may throttle it to get good forecast accuracy. Such an action could lead to stockouts early next month.
Either way, keeping Forecast Accuracy as a KPI does quite a bit of harm to the smooth flow of goods.