In this 3rd installment of David Cichelli's "Ask the Expert" series on this blog, I asked David about his thoughts on spiffs. I asked him if it was possible to use spiffs while avoiding encouraging employees to push a certain product upon a customer at his or her expenses. I also asked David if there was such a thing as too many spiffs. Previous posts of this series are here and here.
Before going into David's answer, I want to give a bit of background regarding what is a spiff.
SPIF (or SPIFF) may stand for "Sales Performance Incentive Fund", "Special Performance Incentive Fund" or " Special Performance Incentives for Field Force". The exact origin of the term is open for debate. Wikipedia defines a spiff as a small, immediate bonus for a sale. They can be paid by a munufacturer or the employer, to the salesperson who sold a specific product.
I have seen spiffs used in several scenarios such as when a manufacturer wants to gain market adoption with a new product, when a retailer wants to liquidate some of its inventory, to incent sales people to sale certain combinations of widgets, etc. The goal is always to have an immediate impact on sales force behavior. Of course, spiffs are not without their own pros and cons, but they can fit nicely within a compensation strategy.
Here is what David had to say about spiffs:
Julien, you might want to check the spelling of “spiff.” I spell it with one “f.” It means Special Performance Incentive Fund. Check Wikipedia for a nice discussion on the spelling. [Sorry David - I'm sticking to spiff for now, so far I've seen it spelled this way more often than "spif"].
First of all, I consider spifs, contests and campaigns an integral part of the sales management’s tool kit. Here are the rules for appropriate use of these programs:
- Budget of all programs should not exceed the total earnings of the sales force by 3% .
- Spifs should be used for “doing something new for the first time.”
- They should not be used to spike performance during a period.
- They are narcotic in nature: the more you use them the more you need to use them. Moderation of use with healthy hoopla is the best prescription for success.
- Avoid the use of “chance” to determine winners and payouts--it 's unethical to do so: this is an employment relationship, not Las Vegas.
