When it comes to bonuses, senior principles in the A/E industry decided in 2018 to cut their own and instead share the wealth with middle managers and project managers, in hopes of improving retention rates.
“Firms are scared to death about losing those key people,” says Dave Burstein, P.E., AECPM, a principal and senior consultant with PSMJ. “The more senior the position, the less bonus they got compared to the year before, even though the profits were higher.”
That insight came from PSMJ’s compensation and benefit benchmarking data—information that can help firms stay effective and innovative.
BENCHMARK TRENDS
With performance bonuses in particular, a similar trend occurred across the board. Principals were less eligible for performance bonuses than associates, project managers, technical managers, and others, including those in administrative positions.
On top of that, part-time employees were eligible to participate in bonus pools—a rarity in other industries.
“It just goes to show that the basic ethos in our industry is to treat people relatively equal, even though they may have disparate education and experience,” says Burstein.
Not all bonuses are created equal, however. You have to give money as a sincere form of recognition—not simply a chunk of change—in order for it to be worth something.
Here are five other conclusions about bonus and benefit trends based on PSMJ’s survey:
1. Highly stratified bonus plans. These are the most successful. Employees were much more satisfied when bonuses were between three percent to 28 percent of their salary, compared to between two percent and 18 percent.
Notes Burstein: “If everybody's making about the same amount with only a minor difference, then performance doesn't really matter all that much.”
2. Reward vs. Incentive programs. Burstein defines a “reward program” as a group of senior principals (or just one owner) deciding on who gets what bonus based on their general impressions without specific criteria.
An “incentive program” is one in which employees are informed ahead of time what criteria will be used in determining their bonus.
“A good incentive program is better than a reward program, but a poorly structured incentive program is actually worse than a reward program,” he says.
Avoid creating formulas because they promote gamesmanship and unintended, negative consequences. Instead, use criteria such as budget performance, client satisfaction, and team mentoring.
3. Competitive vs. superior benefits. If you want high profit, then offer competitive benefits. If you want high growth, choose superior benefits.
4. Perks. These depend on firm size. Employees at large companies often are allowed to work from home, provide more structure training opportunities, and have more tuition reimbursement programs.
Smaller environments tend to be more family- and petfriendly, while allowing more flexible working hours.
5. Cash bonuses. These are ubiquitous regardless of firm size. But if you want to go a different route, the most popular non-cash bonus plans involve events, discounts, and travel.
PSMJ's A/E Strategic Planning Study is available for purchase or as a free download to PSMJ members.
