What is a Sales SPIF (Sales Performance Incentive Fund)?

9 min read

SPIF Definition

A SPIF (special performance incentive fund) is a short-term incentive typically used to drive sales of a designated item.

This particular item has been selected based on organizational goals. Thus, a new product launch or the need to complete sales within a specified time period could lead an organization to offering a SPIF, or special "bonus" to those tasked with selling the particular product or service.

cash money in glass jar

It’s probably no coincidence that the verb to spiff means to dress or spruce up something and give it a little extra pizzazz. In the same way that you can spiff up your appearance, you can spiff up your incentive plan.

How are SPIFs Used?

Since all companies have short-term goals, SPIFs should be a regular part of your incentive compensation strategy. As a matter of fact, recent research from the a showed that more than 50% of best-in-class companies drove their increased profits through SPIFs. Here are some examples of when and how a SPIF can be used to drive performance:

    • To pull the pipeline forward: Summer is sometimes a slow-down for sales, as many people are on vacation. So it can be a good idea to incentivize reps that are pulling deals in August.
    • When adding a new service: Test the marketplace when you’re putting out a new service. Don’t just expect sales reps to sell it, you have to add money behind it if you want your reps to do something different than they’ve always done.
    • To offset competitive financial schedules: You know competition is going to be fighting twice as hard as your guys, because it’s their quarter end. That's where implementing a SPIF comes in. This will help ensure that your reps are just as motivated as the competition. A “false close” and short-frame challenge within a small window will keep reps hungry.
    • To get sales to embrace a new tool: Reps sometimes get upset about adopting new technology, but if you incentivize them to make sure their  pipeline is accurate, take the hour training for the new product, and enter their pertinent data it’s a win win. Executives will get the visibility they need, the company will have increased data accuracy, and reps will understand the value of the new solution.

SPIFs also come in many shapes and sizes, with options including the spot bonus fixed amount, the double club credit, or double quota retirement, and can even take the form of non-cash incentives.

When spiffing up your incentive plan with sales SPIFs, keep these things in mind:

Six SPIF Tips

    1. Know your goal: Is your short-term goal to boost revenue, units sold, sales leads, or order size? Having a solid handle on your goal will help you develop SPIFs that drive the behaviors necessary to meet these goals. According to Numantra, a Texas-based advertising agency, you can even “tie your contest to sales behaviors. For example, reward them for using voicemail or sales techniques that you’ve coached them to use.”
    2. Be unpredictable: SPIFs that come at the same time every month or year can be taken advantage of by sales reps. Keep your plan “gameable” by introducing SPIFs at unforeseeable times, and be sure you don’t have so many SPIFs throughout the year that gaming them becomes the main focus. SalesGlobe’s Mark Donnolo says that over-reliance on SPIFs can create behaviors that you don’t want. He likens it to Macy’s ‘One Day Sales’: everyone knows they’re coming sooner or later, so they plan around them in order to get the biggest payoff. As a good rule of thumb, you should have no more than eight or twelve SPIFs in one year.
    3. Target your audience: One of the greatest benefits of short-term incentive compensation are quickly deployed is that they can be easily tailored to individuals and groups. Use your data to determine what kind of SPIFs have worked in the past and which are likely to work in the future, and then use predictive modeling to determine potential outcomes.
    4. Figure out your time frame: Determine if your short-term needs are a week, a month, a quarter, or a year.
    5. Keep it simple: SPIFs should provide guaranteed results. For specific actions, both results and actions should be crystal clear. Sales reps should understand that if they sell X, they will be rewarded with Y.
    6. Analyze the outcome: Compare the results to your predicted outcome, and decide if you like what you see. If your SPIF didn’t drive the desired behavior, use your data to figure out why. Then, tweak your plan.

Understanding the Power You Wield

SPIFs work. Flat out. But, when not thought through, they can also serve as a field experiment in unintended consequences, à la the Nike SPIF. Let us consider the case of Sergey Bubka and the world pole vault record.

As the Guardian reported, Sergey broke the world pole vault record for the first time in 1984. After that he spent a decade slowly increasing his performance in small, yet measurable increments.

Perhaps it was the bonus from his sponsor, Nike, that was driving this performance: Nike supposedly offered a bonus to Sergey for each record he broke (rumored to be as much as $100,000 for each increment). This might have been the factor that helped drive a man to constantly strive to beat his own record repeatedly, going so far as to break the numbers 14 separate times from 1991 to 1993.

The impact of an incentive is sometimes hard to separate from the innate drive that many have to simply win. However, we have to wonder if Sergey would have been as driven to break the world record for pole vault a total of 35 times without the additional payment from Nike to keep him going.

The follow-on question might be that he would have gone for larger incremental improvements if he had been incented to only chase the smallest measurable win, absent a competitor keeping him on his toes and over the bar.

And Finally, the Golden Rule

If people have no control over the outcome, the SPIF is bad. If people can take quick action and make a change, than the SPIF is good! If you throw one out that sales people can’t control it can be simply demoralizing.

One of the many advantages of using SPIFs is that they can be used to reach any specific goal—no matter how large or small. If you feel productivity is getting stagnant in your sales department, a SPIF might be just what you need to fire up reps, and use their competitive nature to your advantage. They get an exiting trip or prize; you get to easily reach your goals or quota.