SPIFF vs. Comp Plan

So, what is a SPIFF? A SPIFF, also known as a SPIF, is a sales performance incentive fund.  It is cash paid on top of a sales compensation plan for a specific objective and predetermined time period.  Typically, in the form of a sales contest.

SPIFFs are a great tool when used appropriately as part of an overall sales compensation program.  The purpose of a SPIFF is to drive a specific temporary company objective – a sales spiff can be related to a new product, large sales, more volume etc.  A SPIFF differs from a sales compensation plan (i.e., a comp plan) because a comp plan is aligned with a sales role and the company’s objective for the entire plan period.  A SPIFF is a temporary focus, whereas a plan is based on the role’s core responsibilities.

A sales SPIFF should not be used in a few places.  It should not be used to supplement a failing compensation plan.  If a salesperson cannot earn their target variable, or target incentive, through their comp plan then the plan should be reevaluated.  Nor should a SPIFF be used for sales activities, such as entering CRM data. 

The key word in SPIFF is “fund”.  SPIFFs should be funded before paying out.  Some organizations tend to rollout sales SPIFFs without actually budgeting the expecting spend.  Without properly structuring SPIFFs and budgeting the cost, organizations may end up overspending in sales compensation expense.  Expected SPIFF spend should be factored into the total sales compensation expense when plans are being built, through plan costing or a cost model.  When that is established, you already have a bucket of dollars (or a fund) you can use to design SPIFFs for objectives throughout the year.  This is different from a comp plan.  A compensation plan’s payout is already allocated from their target pay, which allows for proper budgeting.  This is why SPIFFs can cause overspending, because they are in addition to plan payouts.

When structuring SPIFFs, you want to be careful in the amount you set for the payout.  The SPIFF program should be attractive enough to drive behavior, but not take eyes off of the sales compensation plan.  They also should be planned in a way that makes financial sense to the company and the return on investment.  It is important to balance SPIFFs, along with other awards (e.g., non-cash awards) in your overall sales compensation program.  Keeping in mind, the main focus for any role should always be the sales compensation plan.

There are other items needed when creating SPIFFs.  At Sales Comp Academy, we have full criteria on how to structure a SPIFF along with other sales incentive tools and resources.  Sales incentive plan management tools, such as our downloadable "SPIFF Guidelines", are in our sales compensation community, which you can join here.