About That SPIFF

"About That SPIFF"

My Job Here is Done™ Transcript (for general use only – machine-generated and it may not be accurate.) 

Kelli (00:00) The first time I heard the term SPIFF, I asked what it meant, and nobody could tell me.

Dave (00:05) Have you ever had a SPIFF in your career?

Kelli (00:07) I had incentive bonuses, for sure. Yes, I've had a SPIFF.

Dave (00:11) How did that work out for you?

Kelli (00:12) I think I won a toaster or something, but I still don't know what SPIFF stands for.

Dave (00:16) Well, I know!

Kelli (00:17) Then stop holding out. Do the big reveal.

Dave (00:19) Wait, let's set this up. Most people have heard the term SPIFF used as an incentive provided to change a team's behavior to achieve a certain short-term type goal.

Kelli (00:30) Yeah. Like to the wait staff, sell the special fish dish tonight at the restaurant, and the chef will give you a free meal because the fish is now five days old.

Dave (00:40) Yeah. So in that case, SPIFF stands for Sell People Inferior Fish Food.

Kelli (00:46) Right. Well, we're definitely going to a Steakhouse tonight for dinner then.

Dave (00:51) SPIFFs and other instant incentive programs seem like they work on the surface, but in the end, they're actually one of the worst things for your career success or your own business growth.

Kelli (01:02) I think you'll see that the 'S' in SPIFF stands for Superficial!

Dave (01:07) Hi, I'm Dave, and I've been starting and running businesses all my life. And I'm Kelli, working for the man like a dog for decades. And you are YOU! The driven career professional, clawing your way up the ladder of success. Maybe running your own business ... The next 20 minutes or so is just for you.

Chuck Fresh (01:26) Welcome to My job here is done.

Kelli (01:31) Welcome. We're thrilled to have you listening today. I'm Kelli. And if you stay with us throughout the entire 20 minutes or so, we'll give you a SPIFF.

Dave (01:41) A SPIFF? Like a coupon for a fish special at Kelli's Seafood Shack?

Kelli (01:44) Yeah.

Dave (01:45) I'm Dave. And before we dash your dreams of making that bonus or SPIFF, please consider subscribing or following us on your favorite podcast app so you don't miss any new episodes or bonus material we publish on career success and business growth.

Kelli (01:58) You can interact with Dave and I personally at our website. My job here is done.com and on social media at myjobpodcast.

Dave (02:07) We had a listener, Jared, leave a comment on the My Story link at the Myjobhereisdone.com website...

Kelli (02:14) Thank you, Jared, by the way.

Dave (02:15) Yeah, thanks! He asked: "Do you guys have any thoughts on why my company seems to panic when sales are slow by suddenly offering us SPIFFs with more Commission to sell certain items?" He went on to say "they never offer SPIFFs when sales are good. So, I wonder what they think will change by offering us more money for just a few weeks?"

Kelli (02:34) It seems like there should be an obvious answer to that question, like duh it's to make you sell more stuff, Jared, but this is far more complicated than that. We need to unpack what Jared is really asking about.

Dave (02:46) Well, first again, thank you, Jared, for planting the seed for this podcast. Kelli and I have a long list of topics to talk about, but your comment to us on SPIFFs hit on a topic we wanted to do anyway. So again, Jared, thanks. This one's for you.

Kelli (03:01) Yes, we will define the acronym SPIFF in a few minutes, but first I want to get you in the right mode so you look at SPIFFs or any spot incentives as a potential problem rather than a solution. Let's take Jared's question apart and see what he is really asking. He starts off with, “Why does my company seem to panic when sales are slow by suddenly offering us with more commission to sell certain items?”

Dave (03:26) And this doesn't just apply to sales. You have seen spot incentives made to speed up a project. Get this done before the deadline and you'll get a SPIFF or come in under budget and we'll give you a percentage of the savings.

Kelli (03:40) Sell the old fish before it rots, and we'll feed you for free.

Dave (03:43) I am never eating a fish special again, thank you very much. Why does my company seem to panic when sales are slow by suddenly offering us SPIFFs with more Commission to sell certain items? Wow. If you are a business owner or a leader who cares about the long-term behavior of your team, are you willing to cause the emotion of panic when things are slow or slowing down a bit? All this in an effort to keep things looking stable in all businesses as everything in life in the world, it's sinusoidal. We go up and then we go down and then we curve around and go back up again. It's okay to have that fluctuation because it's natural and it's baked into life and existence.

Kelli (04:31) When you respond to these ups and downs in reactionary ways, you send messages to the people who are listening to you, and often those messages can seem like panicking or overreacting. Jared chose to use the word panic in his question because that was the emotion his leadership was sending by introducing a SPIFF when things were slow. Why? To reward him for doing his job better for a few days or weeks. And then is it okay for Jared to go back to normal?

Dave (04:58) I've seen this numerous times in my career in business. Leadership effectively changes your compensation temporarily higher by offering an incentive to literally just entice you to do your job, and then your comp drops back down to where it originally was.

Kelli (05:15) There's something inherently wrong with using a SPIFF this way, and we think that's why Jared chose to use the word panic when he asked, "Why does my company seem to panic when sales are slow by suddenly offering us SPIFFs?"

Dave (05:28) So what is a SPIFF and is it a bad thing all the time? Well, no, it's not a bad thing all of the time. But using SPIFFs or other short-term incentives are likely not helping you and we bet are actually hurting you by sending the wrong message and guidance on long term behavior and results.

Kelli (05:48) SPIFF is an instant or short-lived sales or performance incentive given to an employer or a team. A classic example is where sales reps are awarded a small spot bonus for closing a sale or booking a demo.

Dave (06:02) In other words, just doing your job. SPIFF is an acronym commonly stands for Sales Performance Incentive Fund. But like we said earlier, SPIFFs don't just apply to sales or selling. Businesses use SPIFFs when normal practices are either not working well or when something, like a project, an event, or a product launch, for example, wasn’t planned correctly from the start and is now failing. And by offering your teams or employees a SPIFF, you expect that this will correct the original problem. After all, who gives out SPIFFs when everything's going well, right?

Kelli (06:38) Think about this. Are you using SPIFFs in an attempt to correct employee dissatisfaction where your team isn't motivated like you expected? I've heard sales leaders say out loud in executive meetings, 'I don't know why they aren't selling these things, so we're putting a SPIFF on them for a few weeks to see if that helps'. Stop right there and unpack that, really your sales team isn't selling as much of something as they should, so let's SPIFF them to get them to sell more. You should be asking yourself, what is causing that item or project or event to be failing your expectations?

Dave (07:14) My business experience is rooted mainly in sales and selling. And with all due respect, and this being said in the kindest way I know; Salespeople are coin-operated machines. They naturally hunt for coins. They carefully assess the size, scope, and difficulty of the coins in their view, and once they are locked in, they laser focus like a hungry Cheetah on attacking and capturing that coin. In the end, the coin has got to be worth the effort.

Kelli (07:44) So if the item you're SPIFFing wasn't worth the effort in the beginning, adding a SPIFF is like faking its worth for a short while, and that doesn't make any long-term sense. Fix the root of the problem and then you won't need SPIFFs.

Dave (07:57) Yeah, and the list is long on the negatives of using short-term incentives. We've made a list of some of the more important negatives we hope you'll consider before using short-term incentives first. As Jared points out in his message to us, SPIFFs usually seem reactionary to everybody else. Or, as he wrote, panicky. This sends the wrong message to everyone in the organization and makes people question if something big is brewing ...Is something wrong??

Kelli (08:26) If you use SPIFFs often enough, you invite SPIFF- Waiting, a type of sandbagging where the team waits to see what item is going to be SPIFFed before they prospect.

Dave (08:37) And you may be undermining your compensation plan adding extra pay for the same exact work effort. This variable pay creates a new rollercoaster ride for commissioned salespeople who actually want predictability in their comp.

Kelli (08:51) Yeah, and if you're using SPIFFs to, say, hedge a better budget by offering budget owners a piece of what they save ... my strong opinion is that your budget was flawed in the first place. If you ask a budget owner to reduce his or her spending and that you will pay them to do that, I guarantee they'll do that!!  And in doing it, piss off other employees by not funding the department correctly, reducing or delaying headcount to save money, not updating needed equipment, or a whole host of bad long-term things. I've seen it.

Dave (09:23) It's really hard to calculate ROI and thus the true value of a SPIFF program. To do that correctly, you actually need like two control groups, one with SPIFFs and one without. And both have to be blinded by the study. It can get really complicated and it's rarely done, so you really never can measure it. Rather, we just assume SPIFFs will work, so we use them and we really don't care about the actual data behind it.

Kelli (09:50) Other negatives include having other employees not part of the SPIFF program feeling left out. After all, if a salesgal sells more of X product and gets a SPIFF, why shouldn't the guy who packs up the extra product for shipment get one too?

Dave (10:04) Good point.

Kelli (10:05) And the IRS in the US considers SPIFFs compensation, so they must be tracked as such and reported. This is true if the SPIFF is a cash or payroll incentive or a gift of value. Let me tell you a quick story. I was offered a reward along with everybody else in the company. It was a nice way of saying thank you. I got to select from a number of different gifts in the company store, and I chose a nice fuzzy throw blanket. The value was like $50 or so. And I was talking to a colleague who said, did you see they took taxes out of this week's pay to cover the gift they quote-unquote "gave us?" Well, I wasn't surprised because that's actually the law and I expected to see that. But the vast majority of others did not know that and would not have even selected an item if they knew the SPIFF we got was going to be taxed as income. What do you think that did for morale?

Dave (10:58) Yeah.

Dave (10:58) See, SPIFFs are not always a good thing, no matter how hard you try. But we do have an example coming up where SPIFFs do work for some parts of the supply chain. Hang on for that. But first, let's get back to Jared's question. As a reminder, he wrote, "do you guys have any thoughts on why my company seems to panic when sales are slow by suddenly offering us SPIFFs with more commissions to sell certain items?"

Kelli (11:23) So we just addressed the panic part of this.

Dave (11:26) Yeah, but he went on to say they never offer SPIFFs when sales are good. So, I wonder what they think will change by offering us more money for a few weeks.

Kelli (11:36) Inside Jared's comment about 'what they think will change by offering us more money for a few weeks' is a deep concern that we should highlight. Of course, we know that the reason for the SPIFF and Jared's case is that there's hope by his company leadership that offering a SPIFF will increase sales quickly. That's the reason. But Jared's last comment is the troubling concern that we want to highlight, and that's where he says "for a few weeks."

Dave (12:03) Short term incentives like this actually drive less efficient long-term behavior. Think about this, Jared's right! What happens after a few weeks? Is everything suddenly okay then? Are we out of the woods? Do we make enough extra sales to take care of the problem? Whatever the problem is, I think the failing here is that the SPIFF is being used to cover up a bigger problem, a problem that leadership may not yet have identified or even considered.

Kelli (12:34) Dave and I have both worked in healthcare over the years, and that field of business has some interesting lessons that can be adapted and used in other businesses. If you look at the SPIFF as a cover for another bigger problem, then Dave's story about the distracting injury will resonate with you.

Dave (12:51) I was super fortunate to have been a volunteer paramedic, in a part-time way for many years. It was a great experience, and I loved to teach in the paramedic program, and one of the stories I would tell the new paramedics was about the distracting injury. Picture yourself as a first responder being called to an automobile accident. You're in the ambulance heading to a one car crash, and the radio says that the victim is reported to be alert and awake, but still trapped in the vehicle.

Kelli (13:25) So what are you thinking about on the way to the accident scene?

Dave (13:28) Well, first, why did the car crash in the first place? What could have caused it? And how will my partner and I help this victim?

Kelli (13:36) Your adrenaline must be sky high.

Dave (13:37) And naturally it is. And when you are in a stressful situation, you don't want to let yourself get tunnel vision where you don't look at the entire problem. But it happens just like it happens in any business when you're under stress.

Kelli (13:51) So what did you find when you got to the accident?

Dave (13:53) Well, there was a single person in the car. Thankfully, he was alive, but his leg was badly hurt and clearly broken. The paramedic and EMT on scene saw the broken leg, and their training immediately kicked in. They knew exactly what to do. They started to split the broken leg. They did a complete assessment on the injury. They gave a little pain medicine. They wrapped him up and they kept the patient comfortable and drove him to the hospital and took him to the emergency room and transferred care to the doctor.

Kelli (14:21) Sounds like a job well done. How did he make out?

Dave (14:25) He died a few hours later in the hospital.

Kelli (14:27) What?? From a broken leg?

Dave (14:29) No, from the heart attack.

Kelli (14:32) What heart attack?

Dave (14:34) Exactly! The paramedic and EMT got so fixated on the broken leg that they missed doing their assessment on what caused the accident in the first place. The poor guy had sudden chest pain from the start of a heart attack that caused him to veer off the road and he hit a tree. Yes, he broke his leg as a result, but the broken leg was not the big problem. He was having an active heart attack!

Kelli (15:01) Oh boy.

Dave (15:02) The paramedic and EMT were so distracted by the visual injury that they saw that they missed the real problem and never assessed the patient completely. Had they done that, they would have treated the chest pain and heart attack as the priority and probably saved the guy's life. This is why I call it the story of the distracting injury and why this story can relate to the use of a SPIFF in business to cover up a distracting, bigger problem that might be slowly killing your business.

Kelli (15:32) Short term Incentives SPIFFs are clearly not appropriate to use to attempt to cure a long term, underlying and possibly systemic problem in the business. And the advice we have here is to take a lesson from the way doctors assess a patient before they treat the complaint -- they first work to find the source of the problem.

Dave (15:52) If you are using SPIFFs to, say, boost sales and you use SPIFFs more than once a year, you're likely having an underlying problem. If you use SPIFFs to speed up a project in the hopes that people will do a better job this time? If you pay them more? You likely have an underlying problem. And if you're using SPIFFs to change the way an employee behaves or how a team operates in a work environment, you likely have an underlying problem.

Kelli (16:20) I hear a theme here, so ask yourself, why do I need to incentivize on this issue? If I didn't know that SPIFFs even existed, what else could I do to cure the deficit? Could it be that your comp and commission plan for your sales team is not designed correctly to allow for budgeted sales goals? Could it be that the team needs more training or maybe better tools? You want to find a long-term solution to problems that will stick around and work next time and the time after that, right?

Dave (16:50) I recently read an article by Nathan Bonela Warford. We have a link in the show notes for you. Here's the quote: "when I was an optician, I received SPIFFs when they were given to me. I get an extra dollar or two for selling upgrades like antireflective coating and high-index lenses, and more for selling multiple pairs of glasses. While I surely accepted the extra money, I never felt that these SPIFFs themselves resulted in increased sales. I simply sold each patient what was best for them." ----  And if you think about that, there's a great lesson in those words.

Kelli (17:26) We promised we'd highlight an example of where SPIFFs are good for your business and your culture. One is SPIFFs from your manufacturers and dealers to your business. My suggestion is that you use these gifts to excite your customers by passing the SPIFF savings onto them. If your comp plan is designed correctly, your sales team will love the opportunity to use their skills to pass on limited-time value opportunities to their pipeline. They'll sell more, shorten sales cycles, and make you and them more money naturally.

Dave (17:59) (Knocking sound on a door) Oh, who's at the door?

Kelli (18:01) I don't know. Who cares? Are you going to answer the door during the podcast?

Dave (18:06) Yes it may be important (chatter at the door) 

Dave (18:11) Okay, I'll tell them... Calm down! You're sweating up your fancy pin-striped suit.

Kelli (18:17) Who was that?

Dave (18:19) That was Walt Cheatham from Dewey Cheetah and Howe, our attorneys.

Kelli (18:25) (laughter) You know, you just alienated every lawyer listening!

Dave (18:28) I did not! They all know that's a joke. And I think it's funny too -  stop being so PC.

Kelli (18:32) Okay, whatever. So, what's the message here?

Dave (18:35) Well, the message from Dewey, Cheatham, and Howe is SPIFFs may not be legal to use, as they can be considered inducement, kickbacks or special gifts, especially in some highly regulated industries and in a lot of governments. So, you should check with your legal counsel to be sure you're in the legal lane. And as we mentioned, SPIFFs are almost always considered compensation, subject to taxes and reporting. Make sure HR is aware of any plans ahead of time before you simply start a bonus or a SPIFF program.

Kelli (19:09) Here's a question ... What can you do to change the long-term behavior and get the benefit you want without using SPIFFs? We might have a good answer for you, and that is to try a version of our Keys to Success Growth program.

Dave (19:22) Well, Kelli's keeping her promise. Remember in the beginning of the show when she said if you stick around through the entire podcast, we'd give you a SPIFF at the end? Well, voila, your SPIFF has arrived.

Kelli (19:36) Yes, we have a free subscriber only edition podcast episode that goes into this exciting reward and incentive program in full detail, and we're happy to send you a link to it.

Dave (19:48) Yes, just head over to myjobhereisdone.com and sign up for our weekly show email and we'll send you a link to the Keys to Success Program episode. It's free and we promise we won't use your email address for any other purpose.

Kelli (20:02) How's that for a SPIFF?

Dave (20:04) Sounds good to me.

Kelli (20:06) Thanks for listening today. We hope you enjoyed the story, the topic and the SPIFF you can get. We have dozens of these short, easy to listen to episodes available anywhere you listen to podcasts. Just search for My Job Here Is Done podcast and you'll find us waiting for you.

Dave (20:21) And as always, if you find our stories and ideas interesting, we have a number of ways you can work with us to help grow your career or improve your own business. Just head over to the website and say hello to us at myjobhereisdone.com.

Chuck Fresh (20:37) I'm the announcer guy and I sound as good as the story you just listened to. My Job Here Is Done is a podcast production of 2PointOh LLC. Thank you and your awesome ears for listening. Want to get involved? Have your own special story to share? Tell us all about it and you might get some airtime just like me. Browse over to myjobhereisdone.com ya, squish that all together into one word and look for the My Story link ... Until next time my job here is done.