Weekly Editorial

The Influence of SPIFs on Sales Motivation and Performance

Written By Rob Kirkbride, Editor-in-chief, OI Publications • August 21, 2023

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Everyone can benefit from a little motivation at work. And yet these sales incentives — or SPIFs (sales performance incentive funds) — are treated as a dirty little secret in our industry. People quietly talk about SPIFs at NeoCon and other industry gatherings, careful of who is around or listening. I’m not sure why there is a stigma attached to sales incentives since virtually every industry uses them to motivate salespeople.

If you don’t work in sales, you might have never heard of a SPIF. A SPIF is a sales reward/compensation (cash or non-cash) that’s given to a salesperson for performing up to a level, mainly for selling a particular amount of goods or services. It is generally different from a bonus in that SPIFs are often paid immediately, not at a set point during the year.

According to a Harvard Business Review article, the practice of SPIFs began in the 1940s. And they have helped companies grow sales ever since. In the 1980s, Apple was able to beat IBM in retail computer sales by sweetening the deal for the salesmen with SPIFs. At that time, SPIF referred to Sales Person Incentive Forms, where salespeople would fill out a form for every Apple they sold in return for a bonus. Dell EMC used the term SPIF (Sales Performance Incentive Fund) in 2019 for the programs designed to target businesses that might otherwise go to competitors.

SPIFs aren’t for everyone. Some manufacturers feel like SPIFs are an unnecessary bribe to salespeople who should be selling the product regardless of extra compensation. For the manufacturer, managing sales incentives can be a pain, to say the least. They have to be fair in doling them out, consistent in who gets them and clear about what needs to be sold to achieve a certain goal.

Many argue that SPIFs prompt salespeople to sell their customers products they don’t need or furniture that might not be the best fit for their needs, promoting products to earn extra money or free trips with no regard to what their customer truly needs.

Regardless of where you stand on sales incentives, the fact remains: Sales force compensation represents the single largest marketing investment for most B2B companies. In aggregate, U.S. companies alone spend more than $800 billion on it each year—three times more than they spend on advertising.

So do sales incentives actually work? The answer is nuanced and depends greatly on the salesperson. According to Harvard Business Review, some salespeople have greater ability and internal drive than others, and a growing body of research suggests that stars, laggards, and core performers are motivated by different facets of compensation plans. “Stars seem to knock down any target that stands in their way—but may stop working if a ceiling is imposed. Laggards need more guidance and prodding to make their numbers (carrots as well as sticks, in many cases). Core performers fall somewhere in the middle; they get the least attention, even though they’re the group most likely to move the needle—if they’re given the proper incentives.”

Everyone is driven by different goals, but compensation ranks near the top when it comes to workplace motivation. Do your salespeople, dealers and reps need sales incentives to get the job done? That’s entirely up to you. But a SPIF trip to the Caribbean that you take with a group of salespeople who hit high goals might not be the worst way to keep them motivated.

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