Do SPIFs work? Why and when to use SPIFs.

money icon

Recently, we ran an interactive webinar polling attendees to find out how RevOps and Sales leaders kept reps’ motivations high during a challenging Q1.

Topping the list, according to the poll and our panelists, was SPIFs.

SPIF Meaning

What is a SPIF? A SPIF is short for “sales performance incentive funds.” Leaders implement these to motivate employees to improve their performance or to encourage revenue-generating specific behaviors.

“I’m a big fan of SPIFs,” said Mallorie Maranda, VP of Sales, WorkRamp, who had just implemented a team-wide SPIF. 

The SPIF came after she and her leadership team learned that her reps felt most motivated by team collaboration and competition. After the SPIF began, Mallroie reported a noticeable increase in team bonding and mentorship. Plus, the team ended up earning the SPIF once it ended.

At QuotaPath, we also love a SPIF. 

We previously ran a “fast start” SPIF. In this scenario, reps who hit a certain percentage of their quarterly number by the end of the month earned a cash bonus. This incentivized reps to get a jumpstart on the quarter rather than waiting until the end. 

Additionally, we had a “baby SPIF” that paid reps a fixed amount in addition to their standard commissions if they closed a deal the week leading up to our Director of Sales’ departure for maternity leave. 

And, did you know that SPIFs aren’t just for your account executives? We have a SPIF in place for our account managers too when they upsell users. 

Still, we get this question a lot. 

… Do SPIFs actually work?

We think so, however, it’s worth noting that there is a right and wrong way to SPIF.

Below, we explore when a SPIF is appropriate (and when it’s not), best practices, and examples for you to consider. 

SPIF in QuotaPath

Do SPIFs work?

First and foremost, yes, SPIFs are effective. 

SPIFs typically lead to an immediate boost in performance tied to the SPIF-related initiative.

For instance, if you’re going to offer a $250 SPIF for outbound demos completed for prospects from a specific industry, you’re likely to see more demos from that segment. 

However, because they classify as short-term incentives, it’s pretty unlikely that long-lasting effects will result from a monthly SPIF. But, if you want consistent results, you could consider giving a previous SPIF a full-time role in your next compensation plan if it goes well and makes sense.  

A potential SPIF to test before adding permanently to your commission structure could entail paying a higher commission rate over the course of a quarter for multi-year deals. If successful, meaning you see a vast improvement in the number of multi-year contracts, consider a sales compensation plan that includes multi-year accelerators

When to use SPIFs

Now, when is a SPIF appropriate?

Most leaders will drop one according to changes in the market or business, or when the team needs a little motivational boost. 

Mallorie from WorkRamp, for example, added her team SPIF after learning how much her team cared about team competition from an HR survey. By creating a SPIF that only paid out if the entire team hit goal, she immediately saw an increase in team productivity. 

Meanwhile, we’ve previously launched a one-call-close SPIF to help close a pipeline gap toward the end of a quarter. 

Want to pilot a potential commission agreement adjustment that pays an accelerator when deals come in the first month of the quarter? Run a SPIF first to see how it impacts your sellers. 

Other times to consider adding SPIF and SPIF examples: 

  • New product/service launch: First five deals that include a new product earn an extra SPIF.
  • Drive a specific business metric:
    • Cash flow: SPIF for deals that include Net 30-60-90 day payment terms
    • Gross profit: SPIF on deals that are more profitable to the business
    • Retention/renewals: Offer a SPIF anytime your account managers secure an early renewal
  • Test potential changes to next year’s compensation structure: Like the example above with multi-year accelerators.
  • Market factors/seasonality: If your business has seasonal ebbs and flows, think about adding a SPIF during the down seasons based on deal size or the number of deals.
  • Enter new territory/industry segment: Similar to new products or services, you could implement a SPIF on the first five deals won in a new territory or industry.
  • Support ideal customer profile (ICP) strategy: If you recently unveiled an ideal customer profile strategy, you could SPIF on closed/won deals to the sales development rep who generated the ICP lead and to the rep who closed the deal. Or you could tie this to outbound efforts from reps who source ICP deals. 
  • Increase outbound efforts: Many teams right now are ramping up their outbound efforts since inbound leads have taken a dip due to the economy. To incentivize rep-sourced deals, add a SPIF. 

When NOT to use SPIFs

Of course, if there is a “right time” to use a SPIF, that also means there are “wrong times.”

See below.

If your sales compensation plan is ineffective. SPIFs do not fix your compensation plans. We repeat: SPIFs do not address broken compensation plans. If your comp plan isn’t effective, a SPIF will only act as a bandaid. Instead, get your key stakeholders involved, re-align your plans to your key business metrics, and begin modeling out new structures. You can use Compensation Hub for free templates and help.  

If your sales team is already motivated. If your entire sales team is already meeting or exceeding their goals, there’s no need to implement a SPIF. In fact, a SPIF could actually backfire and demotivate your team by making them feel like they’re not being trusted to do their jobs.

No budget. SPIFs can be expensive, so it’s important to make sure you have the budget to implement one before you do so. If you’re not sure how much a SPIF will cost, it’s always best to overestimate rather than underestimate.

Lack of clear goal. Before you implement a SPIF, it’s important to have a clear goal in mind. What do you want to achieve with the SPIF? Are you trying to increase sales of a new product or service, reach a specific sales goal, or cross-sell or upsell? Once you know what you want to achieve, you can design a SPIF that will help you reach your goal.

If you don’t know what motivates your team. The incentives you offer in your SPIF should be something that your sales team will find valuable. If you offer incentives that your team doesn’t care about, they’re not going to be motivated to participate in the SPIF. Make sure you have a clear understanding of what will motivate them by discussing it at team meetings, running surveys, or conducting 1:1s. 

No plan in place for tracking and measuring the results. It’s important to track and measure the results of your SPIF so that you can see if it’s actually working. If you don’t track the results, you won’t know if the SPIF is worth the investment. You can use QuotaPath’s sales and commission tracking software for this. 

SPIF best practices

Now that you have an understanding of when to consider SPIFs and when not to, let’s discuss some best practices. 

  • Understand & define goals: Have clear reasons for them. Is it to inspire a quick burst of sales toward the end of the month? Rally your team during a slow season? Shift selling behaviors toward a new product? Set your goals ahead of time so that it’s easier for you to communicate them to your team and measure success after. 
  • Get Finance signoff: Never start one without the approval of your Finance team. This may seem like an obvious one, but you’d be surprised how many Sales leaders rush a SPIF and forget this step. 
  • Communicate the purpose of SPIFs clearly with the team: Give your reps direction and definitions of the SPIF. Make sure they understand how they qualify for the incentive and what doesn’t qualify.
  • Confirm details (timeline, payout, how and when SPIF is acknowledged): Similar to the point above, review with your team exactly when the SPIFs start and end, and when reps will actually see the SPIF they earned.
  • Measure success: Have a clear path for measuring the effectiveness of your program by identifying the metrics most appropriate to your sales goals. This will help you determine whether you should add the measure permanently to your comp plan or run the SPIF again later on. For instance, if you SPIF on outbound-sourced ICP deals, look at the number of deals sold as well as the revenue generated.
  • Avoid SPIFs that contradict your sales compensation plans: This is key. Never put an incentive on behavior that goes against your existing compensation structure. For example, if your comp plan encourages and pays on deals above a certain size threshold, you would want to avoid SPIFs that incentivize the number of deals within a specific timeframe. (Deals that close faster are more likely to be smaller deals.)
  • Don’t use SPIFs too often. Your reps shouldn’t start to “expect” SPIFs. If they do, the SPIF itself will become less effective or you’ll start to notice an uptick in sandbagging. 

By following these best practices and avoiding some of the most common mistakes, you can ensure that your SPIFs are effective and that they help you achieve your sales goals.

Final thoughts

In conclusion, SPIFs act as a valuable tool for motivating sales representatives to achieve specific goals. You can run them to encourage sellers to push specific products or services or to a particular industry or market, to increase sales volume or another business metric, or to close deals more quickly. 

However, remember to avoid contradicting your sales compensation plan or other business targets. The most effective SPIFs align with your sales goals, have clear measurables, and have a purpose widely understood by your reps.

You can use QuotaPath to quickly add or remove SPIFs and immediately give your revenue team insights into how the SPIF is performing. For more information, chat with our team today.

Ready to automate sales compensation?

See how QuotaPath can automate commission calculations for your organization.

Try for Free

Ready to automate sales compensation?

See how QuotaPath can automate commission calculations for your organization.

More from Compensation Strategy

How to incentivize new business vs. renewals

Sales compensation is the lever to pull when you’re looking to drive selling behaviors more toward new biz or more toward renewals. Read on for key tactics to inspire

9 mins

Guide to creating Sales Leadership incentive structures

Developing an incentive plan for sales reps is one thing, but what about leadership? Inside, we provide steps to create sales leadership incentive packages.

10 mins

How to solve for CAC, LTV, and gross margin using sales comp

Your sales compensation strategy can play a huge role in driving important business metrics such as customer acquisition cost, lifetime value and gross margin. Here’s how.

10 mins

Keep up with our content

Subscribe to our newsletter and get fresh insights monthly