Benefits and Compensation

How SPIFFs Will Turbo-Charge Your Sales Performance

In yesterday’s Advisor, experts Jerome A. (“Jerry”) Colletti and Mary S. Fiss clarified Fast Start Bonuses and Overachievement Incentives for “turbo-charging sales performance. Today, their take on SPIFFS, plus an introduction to a special guide for smaller comp/HR departments.

Colletti is Managing partner of consulting firm Colletti-Fiss, LLC; Fiss is a partner. They shared their tips at the WorldatWork’s Total Rewards Conference and Exhibition, held recently in San Diego.

What’s a SPIFF?

Several phrases have been proposed as possible origins of the acronym SPIFF (e.g., “Sales Performance Incentive Fund,” and “Special Pay Incentives For Fast Sales”), but experts believe that they are all “backronyms,” as these phrases would have had no meaning in 1859, when the usage of “SPIFF” was first documented.

In any event, SPIFF generally refers to a special bonus to encourage sale of a particular product.

Applicable Business Situations for SPIFFs

Colletti and Fiss offer three business situations that are ripe for SPIFFs:

  • Introduce new products
  • Acquire new accounts in new market

  • Sell aging/discontinued products or products under competitive attack

The approach will work for B2B companies (with the notable exception of long cycle sales), and B2C companies, particularly when consumer goods are sold through multi-channels, they say.

Design Principles Associated with SPIFFs

Colletti and Fiss offer the following design principles for developing SPIFFs for your organization:

    • Eligibility. Typically, all sales reps and first line sales managers – employees in jobs that directly impact sales results.
    • Frequency. Typically quarterly (more frequent use dilutes impact).
    • Average length. 90 days (should reflect length of sales cycle).
    • Performance criteria. Defined goal; metric(s) should neither compete with sales incentive comp plan nor reward a result that it pays for (i.e., double comp’ing).
    • Average % winners. 20% to 30% of eligible participants.
    • Type of award. Cash.
    • Average value of SPIFF awards. Within range of 5% to 10% of variable pay (commission, sales bonus) budget; and, within 3% to 6% of base salary.

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    Illustrative Design:  New Product/New Order SPIFF

    Here is Colletti and Fiss’s example of a SPIFF:

    • Eligible personnel. All sales personnel, both Field and Inside staff; excludes managers.
    • Eligible products. Only products specifically listed in SPIFF program sheet qualify for reward provisions.
    • Definition of a sale. For purpose of the SPIFF program, a sale is defined as a “booked order.”
    • “New” order. If an eligible product has not been purchased by a current customer either “stand-alone” or part of a “bundled” order during the 12 month period prior to the start of this Program, then order shall be considered a “new order.”
    • Program period. This SPIFF program will be in effect from February through July; new orders must be submitted and accepted into the CRM system during that period to qualify for SPIFF bonus.

    Illustrative Design Alternatives for New Product/New Order SPIFF

    Here Colletti and Fiss show how payouts could be structured in two ways:

    Alternative 1:

    Defined Bonus $s

    Alternative 2:

    Defined Commission Rate

    Product Sales

    Bonus Payout

    Product Sales

    Commission Rate

    $x to y

    $1,000

    $x to y

    3%

    >y to z

    $2 000

    >y to z

    3.5%

    >z

    $3,000

    > z

    4%

    Etc.

    Etc.

    Etc.

    Etc.

    Effectiveness Assessment: SPIFFs

    Colletti and Fiss suggest the following assessment activities for SPIFFs:

    Before

    • Clarify objective – why SPIFF is used; what results are expected; how measured; where funds will come from
    • Confirm SPIFF is appropriate for proposed use

    During

    • Percent employee participation – consistent with expectation; representative by job or job level
    • Performance distribution – favorably impacted

    After

    • Final percent employee participation
    • Range of awards; size of average award
    • ROI assessment – results vs. cost; met/exceeded expectation
    • Managers’ and sales reps view about SPIFF

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