People, Performance + Pay
Making Better Year-End Decisions in Your Firm
Year-end has a way of concentrating every people question into the same few months.
Performance reviews. Raises. Bonuses. Benefits renewals. High performers you really do not want to lose. Employees who are struggling. Long-tenured team members who may be nearing the top of their compensation range. And, underneath all of it, the inconvenient reality that the firm’s budget may not allow you to simply spend your way out of every problem.
That was the focus of a recent AVEC Partners’ Roundtable with HR consultant Danielle White: how firms can approach performance, compensation, retention and benefits with more clarity when the answers are not especially obvious.
The conversation reinforced something we see often in AEC firms: the hard part is rarely the form, the spreadsheet or the percentage. The hard part is making sound decisions about people, then communicating those decisions clearly enough that no one has to fill in the blanks themselves.
Don’t wait for the resignation letter
If the first time you discover that a valued employee is unhappy is when they resign, you are already, obviously too late.
Danielle recommended regular “stay” conversations, particularly with high performers and long-tenured employees. Instead of waiting for an exit interview to learn what mattered, ask sooner.
What keeps you here? Where do you want to grow? What would make your role better? What might make another opportunity appealing?
Those conversations become even more important when someone is nearing the upper end of what the firm can reasonably pay for their role. Retention may depend less on another salary increase and more on growth, flexibility, responsibility, professional development or a clearer sense of what comes next.
And if someone is a flight risk, finding that out before another firm has made an offer gives everyone a lot more room to work.
Decide what you are actually rewarding
Years of experience? Tenure? Performance? Leadership? Reliability? Contribution to firm goals? There is no universal formula.
Start with what matters most to your firm. One practice may care deeply about mentoring because it is trying to build the next generation of leaders. Another may need stronger project performance, client management or business development. Even reliability can matter more in one firm than another.
The important part is not that every firm use the same criteria. It is that leadership agrees on the criteria before compensation decisions are made.
If performance matters, define performance. If leadership matters, describe what leadership looks like. If helping the firm reach strategic goals matters, connect those goals to individual expectations.
Otherwise, employees are left reverse-engineering the rules after the decision has already been made. Not ideal.
A performance review does not automatically have to mean a raise
Many firms unintentionally train employees to see the annual review as the annual raise meeting. That gets tricky when the firm has a weaker year, when someone has not performed at the expected level, or when leadership wants compensation to reflect more than simply making it through another twelve months.
Raises and bonuses can reflect individual performance, firm performance, responsibilities, market position and future growth. They do not have to function as an annual entitlement. That said, surprises are still a bad idea.
If someone is not receiving the increase they hoped for, they should understand why. What expectations are they not yet meeting? What would improvement look like? When will the conversation be revisited?
Clarity matters especially for someone who is underperforming. If you say performance matters, compensation decisions should reinforce that.
When the money isn’t there, don’t make people invent the story
Sometimes the firm simply cannot offer the raise it would like to offer. The temptation is to say very little: “This is what we can do right now,” or “We’ll revisit it later.” The problem is that people hate a blank space. They will fill it.
Maybe the firm does not value them. Maybe leadership is doing just fine while everyone else tightens their belts. Maybe “later” means never.
Transparency does not mean opening every financial statement. It does mean providing enough context for employees to understand the decision.
If the firm missed its goals, say so. If compensation will be revisited when there is better visibility into the year, give people an actual timeline.
“We’ll talk again in May” is considerably more credible than “let’s see how things go.” People may still be disappointed. But disappointment and confusion are not the same thing.
Salary is only one line of the story
Most employees understandably focus first on salary. They may be much less aware of what the firm contributes toward health insurance, retirement, PTO, professional development, disability coverage, flexibility and other benefits.
A total compensation statement can make that fuller picture visible, particularly in a year when a large salary increase may not be possible.
The key is tone.
The message should be: here is the value of your full compensation package.
Not: look how expensive you are.
That distinction matters. Firm-funded expenses such as immigration sponsorship, specialized software or other individual investments can be acknowledged as part of the bigger picture, but they should not be trotted out as leverage against someone asking about compensation.
Show the value. Skip the guilt trip.
Your best employee may not want what you think they want
When firms worry about losing a high performer, the first instinct is often money. Sometimes that’s exactly right. Sometimes it is flexibility, time, career growth, recognition or a clearer future. The only reliable way to know is to ask.
The same principle applies when leadership starts thinking, “Maybe we should make them an owner.”
A great employee is not automatically a future owner. Some people want the responsibility and opportunity that come with ownership. Others very much do not. Profit sharing or a larger discretionary bonus may be a better fit than handing someone a piece of the firm they never asked for.
Retention works better when it is built around the person you are actually trying to retain.
Before you decide someone is the problem, understand the problem
When an employee is struggling, the first question should not be, “What should the PIP say?”
It should be: why is this happening?
Is the role a poor fit? Are expectations unclear? Is there a skill gap? Is the employee disengaged? Is something temporary affecting performance? Are they genuinely trying but not getting the support they need? Those are different problems and require different responses.
Where formal performance plans often fall short is in vague expectations and weak follow-through. “Improve communication” is not especially helpful if no one can explain what better communication looks like. Neither is creating a beautifully documented plan and then forgetting to check in.
A useful performance process should answer four things:
What needs to change?
How will we know it changed?
What support does the employee need?
When will we review progress?
If the firm has provided clarity, support and a fair opportunity and the problem continues, then leadership has better information for the harder decision.
Benefits are only valuable if people value them
This one sounds obvious right up until you look at how benefits decisions actually get made.
More PTO sounds good. Everyone must love the holiday shutdown. Surely people care about this insurance option. Right?
Maybe.
One of the most useful themes in the roundtable was simple: ask employees what they value before assuming you know.
Some may care deeply about preserving health coverage. Others may prefer additional PTO, flexible holidays or a different tradeoff altogether.
You can’t always give everyone everything they want. But if the firm is spending real money on benefits, it is worth finding out whether those benefits are landing. Especially before you cut one.
Better decisions start with better conversations
Performance reviews, compensation and benefits are easy to turn into annual administrative exercises.
They are more useful when firms treat them as business and leadership decisions.
Who are we trying hardest to retain?
What behaviors are we rewarding?
Where does someone need to grow?
What can the firm actually afford?
Which benefits matter most to our people?
And will employees understand why we made the decisions we made?
There will not always be a perfect answer. There should, however, be a thoughtful one.
And when it comes to people, clarity usually travels farther than another form.
Companion resource
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