SPIFs, short for Sales Performance Incentive Funds, can be highly effective tools that boost sales team motivation and help you meet sales goals. These potential benefits are what motivate enterprises to implement them. It comes as no surprise that 81% of European enterprise companies (and we’re including the UK here) are using them.
SPIFs can be tough to design and get the right results from, especially when the level of plan governance isn’t where you’d like it to be. In such cases, you can find various bespoke plans that exist in the “grey zone” of a sales director’s laptop, unknown to the sales compensation and rewards team, that can act as personalised SPIFs.
We’re here to give you an easy-to-follow checklist of how to create an impactful, well-governed SPIF that will give you and your sales director the results you’re looking for.
Sales Performance Incentive Funds (SPIFs, for short) are incentives offered to salespeople to motivate specific behaviours, such as selling a certain product or reaching a certain target, within a specified period.
The incentives are offered as a standalone plan or blended into a standard variable compensation plan. The format is often dependent on the size and maturity of the organisation.
SPIFs offer numerous benefits for sales leaders, especially when you need to incentivise your sales team on a particular metric or product. Cash incentives are a proven way to change behaviour. When that cash incentive is provided for completing a particular activity, your sales team is going to pay attention.
SPIFs tap into one of the most classic and proven sales motivators: money. However, SPIFs operationalise that motivation and place its focus on a specific objective. So, not only is your sales team motivated, they’re motivated to reach a goal that’s a high priority for the sales organisation.
Suppose your organisation needs to increase the sales numbers of product X to meet the business’ annual targets before the end of Q4. This is the type of situation where SPIFs are most impactful. SPIF are an excellent source of temporary motivation to push your team to hit short-term objectives.
Okay, so SPIFs can be a highly useful tool for your sales team if you use them (looking at you, Europe), but the question lingers of how to create a SPIF that’s going to motivate the right behaviour to achieve your objectives.
We’ve put together this checklist to help you do just that. By following these seven steps, you won’t only be able to build a SPIF that gives you the results you’re looking for, but you’ll be able to consistently improve them going forward.
One of the biggest missteps sales leaders make with SPIFs is not being specific enough when defining its goals and metrics. To be properly motivated, sales teams need to have clear expectations about what they need to accomplish. It’s critical to set a tangible goal for your SPIF, including objectives and what sales will need to achieve to hit them.
Next, you need to define the eligibility rules. who precisely is eligible for the incentive. This can involve splitting your sales team into different groups based on their roles, channels they use, geographies, or products they sell.
In most cases, this is easier said than done. There are plenty of factors to take into account. What levels of the hierarchy can take part? Which roles are client-facing enough to be eligible? Would this salesperson expect to be included in the SPIF? All these questions need to be answered. However, they’re fraught with employee relation nuances that need to be carefully considered.
To get your people motivated, you need to reward them properly. It needs to be proportionate to the difficulty and significance of the goal you’ve set.
It’s a delicate balance. The incentive(s) should be attractive enough to get your sales team excited, but should also be moderately hard to achieve. This helps you motivate your sales team while keeping it cost-effective for the organisation.
So, how do you decide on the incentives? First, you can looked at what your organisation has done in the past. If you’re blazing a new trial and organising the first SPIF, you can get feedback from the sales team on their past SPIF experiences and rewards. You can also connect with compensation peers to get their thoughts. If you’re an Amalia.io customer, you can ask your customer success manager for their advice as well!
Another key aspect of any effective SPIF program is a specific performance period. Setting clear rules around what period will be counted and what sales team members need to do (and what they can’t) to earn the incentive within said period.
Creating a SPIF involves finding the balance between the goal you’re trying to achieve and the resources you need to achieve it. Understanding how many salespeople are going to participate is the easy part. The challenge is deciding how much you’re going to payout at the end of the performance period without knowing exactly how much that will be. It’s impossible to precisely predict each salesperson’s performance by the time it’s finished.
Once you set up the initial SPIF, metrics will almost certainly need to be adjusted to fit the budget-setting realities of the future performance period. These adjustments may need to be made based on geographic market differences, product maturity, sales role diversity, and more.
With everything set and ready to go, now is the time to communicate it to your team. Well, “communicate” is a bit of an understatement. You need to sell it to them. This underappreciated step is commonly overlooked by many involved in the SPIF process.
First and foremost, you need to have the SPIF planned out (which the previous steps will help you do) so you know what you’re bringing to the table and why. Share all the details including who can participate, the goal, what’s being measured, what activities count towards the SPIF and what don’t.
When presenting it, use simple language and provide supporting visuals. If you want to go a step further, interactive models or apps can help proactively address questions or concerns. It’s also crucial to position it as a challenge that the salespeople have control over rather than just a corporate tool designed to change their behaviour.
Depending on the size and global footprint of your organisation, take cultural considerations into account. Ensure the messaging is culturally specific to that particular region.
Last but not least, be prepared for questions and pushback. Know your SPIF inside and out so you can address any concerns immediately and confidently.
Tracking SPIF performance is something that every organisation wants to measure. However, most cannot or struggle to do it properly. If you don’t have a long sales cycle, it’s a huge challenge.
In fast-paced environments, you’re dealing with constantly changing and often overlapping metrics. This can lead to a lack of historical data that’s highly useful in deeming whether or not your SPIF was a success.
Now, this is where an incentive compensation management (ICM) solution can be helpful (like Amalia.io, for example). By setting up and tracking the SPIF within the ICM, you’ll be able to accurately follow the results and return on investment. This will give you the performance metrics and costs you need to determine the success of your SPIF.
While the seven-step process of setting up a SPIF can seem straightforward, it’s often fraught with challenges. The devil is often in the details. Let’s jump into covering some of the most common pitfalls that plague SPIFs so you can make sure to avoid them.
One of the killers of SPIFs is “mutation” over its lifespan. There can be several reasons as to why. Targets could be too easy, the period too long, or the eligibility criteria could be too wide. Whatever the trigger, it can be tempting to adjust the SPIF on the fly.
Though enticing, it’s a bad idea that’s bound to hurt the trust and morale of your sales team. Moving the goalposts undermines any future SPIFs that you try to implement and, depending on the geography, could lead to disputes with employees and their unions.
Another issue that can derail your SPIF is having too many SPIF criteria and conditions, making it nearly impossible for your sales team to score a payout on time. It’s important not to make deduction and clawback criteria too stringent. The sales team needs to connect their sales effort with the sales reward.
On the sales compensation side of things, we know that deductions and clawbacks exist for a reason. When designing your SPIF, you need to be cognizant of the organisation’s cash flow, any known plan limitations or imperfections, and/or the company’s sales costs to revenue tolerance. If there are deductions or clawbacks, you must be as transparent as possible about the criteria and conditions to avoid confusion and keep the team motivated.
Organising a SPIF takes time, but managing without the proper technological support can be even more time-consuming. For example, tracking a SPIF on Excel requires a ton of extra manual work (plus lacks transparency). To get the most out of your SPIF, you need a platform capable of automatically tracking performance and handling payout (like Amalia.io 😉).
This last challenge is very organisation-dependent. Some thrive on high internal competition while others do what they can to combat that kind of behaviour. For organisations that like the latter, it’s crucial to make sure your incentives foster an environment of teamwork rather than breed unhealthy competition. Objectives must be structured in a manner that isn’t susceptible to rewarding bad sales behaviours or cannibalism.
Not so much a pitfall as it is a highly unpleasant situation to be in, a shortfall in the SPIF can be difficult to handle. Practically, this means you may not be able to pay out all the promised rewards or need to end the SPIF preemptively. It’s an employee relations nightmare. Not only does it negatively impact morale and the sales team's trust, but it can also lead to sales performance setbacks and the failure of future programs.
So, SPIFs can be a highly effective tool for incentivising sales engagement to reach your goals. However, maintaining control over your SPIF is essential to ensuring that it effectively motivates and rewards your sales team. To do that, you need to start with governance.
Going through our checklist and establishing clear and well-defined SPIF guidelines and objectives are critical. But they only matter if the SPIF is governed by the appropriate teams. Close collaboration and transparency with sales leaders will ensure that you’re aware of the existing lay of the land.
Once you accomplish proper governance, you can set the goals, incentives, performance period, and eligibility criteria. Review the performance metrics bi-annually and adjust the SPIF program to maintain a balance between motivating the sales team and controlling your budget.
This might involve modifying incentive structures, introducing caps, or changing payout frequencies based on performance trends. By staying flexible and data-driven, you can keep the SPIF program in line with your sales objectives and financial constraints, ultimately ensuring that it remains an effective tool for driving sales performance.
Finally, keep the lines of communication with your sales team open. Get their feedback. It will help you fine-tune your SPIF program, further increasing your ability to control its impact on sales performance while keeping motivation high.
When combined, all these tactics will allow you to consistently implement and improve impactful SPIFs that drive the right behaviour to accomplish the right sales objectives.
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