iStock_000019922536SmallIn a previous blog in this series, Chad wrote about sales compensation plan periods and noted that the majority of companies follow an annual performance period. I look at annual performance periods as akin to a long race, whether it’s a 5K run or the Indy 500.

Unlike shorter races – such as 100m or 200m dashes or an automotive drag race where you go full speed for a brief duration – longer races require strategy: when to pass, when to conserve energy, when to work with someone for mutual benefit or when to take a break (like a pit stop).

If companies look at sales compensation as a longer race, sales performance incentive funds (SPIFs) and contests can be an effective mechanism to create that short term focus or burst.

Time to pass someone? Need a kick to infuse some energy? Then maybe a SPIF or contest is for you!

Here are 4 ways to maximize your use of SPIFs and contests:

  1. Use SPIFs and contests sparingly. They are not intended to correct flaws in your base sales compensation program
    • If you face a challenge in the base compensation program (e.g., unrealistic goals after a market event), SPIFs can provide upside opportunities and maintain motivation for short periods of time until the compensation plans are adjusted.
    • Be careful not to use SPIFs as a mechanism to correct fundamental flaws in the base incentive program – e.g., a focus on the wrong product or metric. A SPIF intended to correct these flaws can send contradictory messages to the sales force.
  2. Limit the number, length, and total spend on SPIFs to ensure they don’t compete with the main variable compensation components
    • If SPIFs are used non-stop throughout the year, what is the base incentive plan design driving? Limit the number of SPIFs to 2 or 3 per year for most industries, and keep the duration to less than 3 months. More than that, and they may begin to feel like they are components of the base sales compensation program
    • Limit the spend on SPIFs to no more than 5% of your compensation spend
  3. Ensure your contests don’t become an “arms race” between competing functions (e.g., different marketing groups pushing their products)
    • SPIFs should be used strategically. Be cautious of running a SPIF on Product B because it is losing focus to Product A when Product A is also running a SPIF. If both products have SPIFs, will your sales people do anything different?
  4. Be creative! SPIFs enable companies to exert more creativity and freedom than the base sales compensation program
    • Short term SPIFs and contests allow you to use themes to generate excitement that may not be possible with an annual program. For example, you could use a “SummerBreak” SPIF to drive sales during traditionally slower months, a World Series contest in October to coincide with baseball playoffs, etc.

Keep these four points in mind, and you’ll greatly increase the usefulness of your SPIFs and contests. In a future blog, I’ll focus on a particular type of contest that deserves its own considerations, specifically the annual recognition program.

Topics: sales compensation plan, sales compensation, Incentive plan design, Incentive compensation, Steve Marley, SPIFs, sales contents, sales performance incentive funds