Forecasting Ability Paramount in Presidents and CEOs?

forecasting ability

Forecasting ability: This is the skill we should primarily judge presidential candidates on according to Adam Grant, professor of management and psychology at the University of Pennsylvania’s Wharton School. His explanation, written in an article for The Washington Post, is similar to what we say about great CEOs:

“Great presidents can glimpse what’s in the future and shape a vision around it. So rather than judge candidates solely on their past, we should examine whether they have the key traits that make for effective forecasters.”

His point is that those who can anticipate what may happen in the future are better able to prepare for it. This is a critical part of a CEO’s job as well. The late, great Lewis Grizzard said, “If you ain’t the lead dog, the view never changes.” Everyone else in an organization can get their direction from someone above them. The CEO must constantly try to anticipate likely futures and prepare for them based on their likelihood.

Forecasting ability requires many traits, which are also synonymous with great leadership. Grant cites open-mindedness in the article. The ability to put together a good team is another (not just of “yes” people but experts in their fields who will challenge you). I would add humility, a sharp mind, and a willingness to constantly learn on the job.

Often the CEO is the only person in a company with a holistic view of the entire organization. In order to make informed guesses about what may happen, he or she must combine this knowledge with a keen understanding of the market, competitors, customers, regulations, politics, and myriad other issues.

CEOs must also set up systems where their employees can provide the input needed to help make forecasts. Setting up relevant goals and metrics is a must. CEOs should require metrics that are predictive of future business performance. Most metrics reflect past performance. This is particularly true of financials.

For instance, revenue tells you how many deals your sales team closed or how well your frontline staff pitched a new service – last quarter. It doesn’t tell you anything about what might happen in the coming quarter. The best metrics don’t tell you just how well you’ve done (your financials tell you that), they tell you how well you’re going to do – in the next month, quarter, or year.

For example, when I was CEO of NetQoS the sales group’s top performance metric was how accurately they forecasted revenue at the beginning of each quarter. While predicting the future is difficult, over time they developed a process that enabled them to predict new license revenue within a tolerance of less than five percent, more than 90 percent of the time. This is world class in the software business, and their success was driven by their strict focus on accurate forecasting. As CEO, I had a one-quarter crystal ball from a revenue perspective, which allowed me to properly adjust resources to maximize growth without running out of cash.

CEOs should expand this forecasting to the rest of their organizations. One system that can help is a platform such as Khorus that collects weekly insights and predictions from employees on how well they are tracking towards their quarterly goals. By holding people and teams accountable for accurate forecasting and consistent performance, CEOs can spot risks before they cause damage and take action before performance suffers. They can help CEOs provide the resources employees need to move the company forward and prepare for contingencies.

In his article, Grant emphasizes skill over experience when choosing a president, but I think experience improves someone’s forecasting ability. While start-up founders are often the best people to lead their organizations, more mature companies will benefit from a CEO who has been there, done that. They can look out on the horizon, gauge what is happening in the market and world based on their experience, and anticipate what may be coming. They have marshaled teams and implemented systems that enable them to instill a culture of high performance and have a crystal ball of sorts.

This type of experience benefits a presidential candidate as well. Obviously the presidency is a different animal, especially when our candidates have such different types of career experience. However, the president of the U.S. and the CEO of a major corporation have more in common than not. They both deal with similar issues, because they both lead large organizations and must balance many competing interests.

In my estimation then, Grant’s suggestion for how to vet presidential candidates for forecasting ability is better in theory than in practice. He recommends holding forecasting tournaments over the four years before the next presidential election. We would then judge the candidates on their ability to predict major world events. This has some validity, especially if those candidates put together teams to help them make predictions.

Yet there is no substitute for experience combined with the traits that make someone a good forecaster, which also makes someone a good leader overall.

Photo Credit: Max Goldberg via Compfight cc

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