In 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:
- 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.
- 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
- 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?
- 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.