When SPIFFs Become Shadow Compensation Plans

Last year, I got a husky named Luna Moon. From the start, I knew she was strong-willed and would require significant training. Therefore, I worked with two different trainers, and both gave me the same advice: use treats to reward desired behavior when she successfully completes a command. They also emphasized something equally important and that over time, those treats need to be phased out. Eventually, there will be moments when you don’t have a treat available, yet you still need the behavior.

Honestly, I was convinced we were going to fail the class. We didn’t and today, Luna can perform several commands without needing a treat every time.

Sales incentives work much the same way.

In sales, organizations often use SPIFFs (Sales Performance Incentive Funds) to reward specific selling behaviors. SPIFFs are designed to be short-term incentives and are not intended to be part of on-target earnings. Their purpose is to reinforce a behavior temporarily and are not meant to replace or supplement the core compensation plan indefinitely.

Yet it’s not uncommon to hear organizations say, “That SPIFF has been running for over a year.” Just like training a husky who only listens when a treat is visible, long-running SPIFFs can unintentionally condition sellers to perform only when an extra reward is attached. Over time, this undermines the effectiveness and credibility of the core incentive plan.

The Real Intent Behind SPIFFs

SPIFFs are most effective when used for short-term behavior change, such as:

• Supporting a new product launch when it’s too early to assign a quota
• Filling a temporary gap in focus or execution (e.g. key product sales are lagging)
• Reinforcing a specific action during a defined window (e.g. To accelerate adoption of a new product launch in quarter 2)

When launching SPIFFs, there should be clear directions on:

• The exact behavior it is intended to drive
• A defined start and end date—typically 30 to 90 days

The Shadow Compensation Plan

However, when we talk to organizations about their SPIFF programs, we often learn they’ve been running well beyond the 30–60-day window. Once a SPIFF extends past a few months, it’s no longer a SPIFF – Instead it becomes a shadow compensation plan.

Long-running SPIFFs distort selling behavior and often transition to becoming “expected pay.” When organizations attempt to remove them, sellers experience it as a pay cut, leading to frustration and resistance. Even more problematic, extended SPIFFs can mask underlying structural issues in the core plan. If a SPIFF has passed the 90-day mark with no end in sight, it’s often a signal that something in the base incentive design may be missing or misaligned.

We also frequently hear that SPIFF programs were launched with good intentions but ended up with inconsistent application and limited impact. Many SPIFFs are paid on top of all other earnings, tracked manually, and layered onto existing commission or bonus plans. This can result in salespeople being paid twice for the same outcomes driving total payout increases without incremental business impact. When SPIFFs are overly rich, they can also pull focus away from core performance metrics.

Conclusion

In closing, SPIFFs can be a powerful tool when used appropriately. But like treats in training, they are not meant to be permanent. At some point, they need to be retired, redesigned, or absorbed into the core plan.

A SPIFF may be a candidate for review if:

• It has been renewed multiple times
• It is part of a pattern of back-to-back or continuous SPIFFs
• It is addressing what has become a permanent business problem
• Sales behavior now depends on it

If that’s the case, it may be time to step back and rethink the incentive design—not add another treat.

SalesGlobe is a leading sales effectiveness and data-driven creative problem-solving firm. We specialize in helping Global 1000 companies solve their toughest growth challenges and helping them think in new ways to develop more effective solutions in the areas of sales strategy, sales organization, sales process, sales compensation, and quotas. We wrote the books on sales innovation with The Innovative Sale, What Your CEO Needs to Know About Sales Compensation, and Quotas! Design Thinking to Solve Your Biggest Sales Challenge.