Every experienced sales manager has a couple of ‘secret sauce’ sales SPIFs in their back pocket for when numbers take a dip.
The logic is sound. More cash = more motivated reps = more sales. Unfortunately, real life isn’t that simple. When closely analyzed, short-term sales incentive programs often show poor returns and significant missed revenue opportunities.
Here, we’ll summarize the most common sales SPIF problems that we’ve helped our enterprise partners overcome.
What is a sales SPIF exactly?
If you’re not sure what a sales Spiff or SPIF is, Sales Performance Incentive Funds — also known as SPIFs, sales SPIFFs, and SPIVs — help sales organizations motivate their teams for short periods, often to increase sales for a particular product or promotional package or to close the gap to reach sales goals.
SPIFs bonuses could be cash bonuses, gift cards, or luxury items like a vacation, new car, or the latest gadget. They could also include team bonuses and activities, or “money can’t buy” prizes.When closely analyzed, most short-term sales incentive programs show poor returns and significant missed revenue opportunities. #sales #revops #spiffs Click To Tweet
Although SPIFs can be very effective if executed well, they can have a negative long-term effect on performance and often deliver diminishing returns over time. Poorly planned and executed SPIFs can damage morale and cause employees to disengage from work.
The Problems with Sales SPIFs
Not all sales SPIFs are created equal, but almost all are made on the fly and based on gut feelings. These are the problems that reduce the impact of most sales SPIFs.
1. SPIFs are (almost) always planned reactively
Naturally, most SPIFs are introduced in reaction to some unforeseen dynamics in the marketplace or within the organization. But when SPIFs are reactive, they’re less likely to be well thought through and often have a negative long-term effect.
With little time to plan and organize, you risk implementing a SPIF that does more harm than good.
Most SPIFs are poorly executed ‘Hail Mary’s’ with limited impact on revenue.
Mistiming sales incentive programs or poorly planning their execution could drive the wrong outcomes, or worse, distract your team from the bigger picture. What’s meant to improve your team’s performance may end up driving behaviors that go against the goals of your primary incentive plan.
The best time for an organization to plan SPIFs is during the planning phase of their budgeting process. That allows you to use data from past years to create relevant incentives that motivate your sales representatives.
Look back on previous SPIFs to identify any that are seasonal or periodic and could be planned. Introduce those SPIFs into annual compensation planning and budget.
If you must be reactive, establish a repeatable process for introducing the SPIFs to mitigate the risks of moving fast.
2. Most SPIFs are poorly implemented
The reactive nature of most SPIFs means these tools often get calculated outside the core sales compensation processes, which adds an element of financial risk and “analysis blindness.”
Most organizations are so busy with day-to-day operations that they don’t have the time to plan SPIFs and integrate them into the broader compensation solution.
Moreover, most sales compensation platforms aren’t up to the task of SPIFs. They don’t give you the ability to quickly and easily create a customized plan for your sales team. That’s why many companies end up planning SPIFs in spreadsheets — even if they have an established sales compensation solution.When sales SPIFs are implemented with spreadsheets, the result is a vague bonus problem that's difficult difficult to administer and analyze. #sales #spiffs #incentives Click To Tweet
When SPIFs are implemented using spreadsheets, they are often not integrated into the sales compensation plan. The result is a vague bonus program that’s difficult to administer and analyze.
The best companies will have a sales performance and incentive compensation platform that has the power to quickly create customized SPIF plans with built-in compliance and control features.
3. Limited visibility limits the impact of SPIFs
Managing your SPIFs in spreadsheets can make or break how effectively it can motivate your sales team.
When reps can’t easily see how they’re progressing towards the SPIF, they won’t be continuously motivated to pursue it. Since SPIFs are typically paid out at the end of a set period, most reps won’t find out how much progress they’ve made towards the goal until the end of the promotion.If your sales reps can't see, track, or keep tabs on a SPIF, was it ever worth creating in the first place? #sales #spif Click To Tweet
Of course, a SPIF program without visibility results in sales reps spending time creating their own spreadsheets to track progress (shadow accounting) instead of pursuing leads and closing deals.
4. It’s hard to prevent them from being abused
There are other dangers to executing SPIFs in spreadsheets, primarily lack of governance oversight that could potentially invite fraud.
One Florida case involved the use of pre-paid debit cards for a so-called “Sales Person’s Incentive For Fun” program (these acronyms are getting out of control). The employee in question was able to change the billing address and PINs of employees’ cards.
When the time came to pay out the SPIFs, she tricked the company into sending her hundreds of online transfer payments, which she used to cover personal expenses.
5. ROI can’t be attributed
To accurately measure the ROI of SPIFs, you would need at least two control groups: one with SPIFs and another without SPIFs that are very similar in terms of geography, demographics, and product mix.
If, for example, your company has been struggling with sales and you introduce a short term incentive to motivate the team in one region of the country but not another in similar economic conditions, it could be difficult to determine what caused the change.
If there is only one control group, then it’s possible to calculate ROI. However, ROI could be attributed to several factors that affect sales volume across time or geographic regions.
- competition from other brands
- localized economic cycles
- laws and regulations
- changing consumer preferences
- a competitor’s new product
That makes it almost impossible to measure the ROI of SPIFs accurately, meaning companies struggle to understand what works and what doesn’t. That’s where the experience and ‘gut-feeling of sales managers come into play.
Now, technology has evolved, and we can perform incredibly complex tests on cross-sections of a large employee base, to truly determine what drives sales. To find out more about how we do that, speak to one of our sales compensation experts.
Planning Sales SPIFs Increases ROI
SPIFs can be a powerful tool to motivate sales teams, but they can backfire if not planned, implemented, or executed correctly. If you want your SPIFs to boost sales, create SPIFs based on historical sales performance.
“SPIFs have a significantly greater impact when sales reps can track their performance in real-time and see clearly what they must do next to earn more.”Kyle Webster, VP Customer Ops – Forma.ai
For the SPIFs you can’t plan for, take a hard look at your existing processes. Can your sales performance and compensation tools handle an unpredicted SPIF, or are you forced to manage in a spreadsheet?
If your current SPIFs are causing pain for both you and your organization, it may be time to search for an alternative.
To learn how one company implemented an automated incentive fund and quickly pivoted in response to COVID-19, read How to Plan a SPIF Program That Actually Works.