Determining the best compensation strategies for your firm

In this excerpt from the AIA Kinetic app, get an overview of how compensation can impact firm culture

The AIA Small Firm Exchange is excited to announce an updated version of AIA Kinetic, the iOS and Android-based app for practicing architects. Both young and mid-career professionals will find a wealth of important knowledge in Kinetic's series of short articles aimed at conveying the essentials of architecture practice. The below is a Kinetic excerpt from Kirsten Murray, FAIA, principal and owner of Seattle-based Olson Kundig, on compensation strategies and how they can affect both morale and staff retention.

Compensation is more than money. It can often be a key element to the sense of fairness, motivation, morale, and long-term loyalty between employer and staff. A mutual understanding of the business relationship between employer and employee, as evidenced by compensation, will do much to set a tempo for the office's culture.

It's important to have alignment throughout the firm regarding the place that financial reward holds in your firm’s culture, and the degree to which it will motivate the choices that firm leaders make. It is particularly critical to achieve a widely understood and agreed-upon method of deciding on distributions of revenue to both staff and partners.

In considering methods and levels of compensation, it is good to consider whether the employee is responsible for the revenue of the firm or accountable for marketing, business development, fee negotiation, and subsequent management of revenues. Employees who work with a high level of accountability for these aspects will likely deserve and demand a greater stake in the financial rewards of the firm through higher salaries, profit sharing, and profit-related bonuses. Those with a lower level of accountability, who focus on production or execution tasks under a protective umbrella of the ownership, may feel equitably compensated if they are able to depend on a reliable and consistent paycheck.

There are various methods of compensation, such as salary, salary plus, hourly, and independent contractors—who may be paid on a lump-sum contract basis. Regarding requirements for payment method, it is important to know the federal regulations and laws of the jurisdiction in which you practice. These are often influenced by factors such as professional versus non-professional status of employees with varying job descriptions and levels of education and experience, as well as full- or part-time definitions and related issues.

Be sure to understand who is eligible for salary versus hourly employment, and how overtime policies are applied in either case. Balance high expectations for productivity with the pitfalls of subjecting junior staff to a regular routine of overtime. This may lead to creating an oppressive or exploitative environment for those who have little control over the workflow, and may create poor morale—if not employment malpractice—if overtime is not paid properly. Remember that all employees must be paid for their work, including interns and students. It is important to be aware of legal and ethical discussions around minimum wage and living wages.

When establishing pay guidelines, consider what constitutes compensation and look at the whole package of benefits that may be offered. Commissions and bonuses may be very helpful methods of further incentivizing the employees who are creating wealth and value for your company. Consider being transparent about the financial ups and downs of your practice to help create a sense of common good, as long as there is a general road map to success. Don’t expect to retain undercompensated employees for long.

Various tools and resources for comparative analysis of wage and benefits are available. The AIA publishes yearly compensation surveys, and other organizations and government agencies provide compensation averages sorted by job description, size of firm, and region.

This article originally appeared on the AIA Kinetic app. Download it now for iOS or Android, and contribute content through our submission form.