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Pay Transparency & Ownership Transition

Pay Transparency & Ownership Transition

By Mel Price, AIA

Pay transparency historically is a taboo subject in the architecture and design profession. The AIA’s own antitrust  compliance advises us not to talk about pricing for our professional services with our “competitors” (colleagues). The annual AIA Compensation Report and AIA Small Firm Compensation Report, begin to pave the way for more transparency, but there is still a culture of secrecy surrounding pay. At Work Program Architects, we believe pay transparency is a critical tool to attract and retain young talent and grow more Just, Equitable, Diverse, and Inclusive (JEDI) firms. Discussions about pay transparency have been simmering in our profession for several years, but with the Young Architects Forum (YAF) generation coming of age, we think it is getting ready to boil over. Firms need to be prepared to explore, weigh the benefits and risks, and take a firm stance on the issue.

The YAF generation is talking openly about salary, whether firm leadership want them to or not. Statistically, they are not committed to staying at one firm for decades; they are comfortable moving around. They look out for their own finances because they sense that the world is not going to look out for them. Mounting student loan debt, cost-of-living increases that are outpacing salary growth, and increased health insurance costs send a clear signal that the years ahead will be a steep climb for these young designers. This generation is forming investment clubs and educating one another. The popularity of apps like Acorn and Robinhood, and the openness to thrifting and buying and selling used items openly on social media, should send a signal to established firms that change is coming!

And why not? As many of you know, WPA has been an open-books, financially transparent firm since our founding in 2010. We believe that pay transparency is key to the concept of developing whole architects who understand the connection between excellent design, time, and money. We all want to work on cool projects and win design awards, but we can’t begin to have that opportunity unless we are running a profitable business. How do you teach the connections between design, time, and money without giving everyone a peek behind the curtain?

Pros & Cons

Yes, it’s risky to let everyone in on the ups and downs of running a business. What if someone disagrees with a decision the firm has made, or even worse, tells colleagues at other firms? What if a bad business decision comes to light? What if someone gets upset that their coworker is making more money than they are? What if leadership doesn’t want employees to find out how much they are making because they feel that the employees can’t truly understand why firm owners should make more money? What if…?

But what if our young designers, who learned nothing about finances in design school, don’t learn these important lessons? Will they make good decisions about how they spend their time in the studio? Will their projects help the firm be profitable? Will they eventually just figure it all out on their own? Will gossip start around the proverbial water cooler about who might be making more? This behavior eats away at office culture. It pits colleague against colleague. It opens the door to discussions about potential pay disparity between men and women, and between white designers and BIPOC designers. It enables people to make decisions behind closed doors that they wouldn’t make in a more open environment. And why not? It’s human nature to protect one’s own interest, and it’s so much easier to do that when no one sees the numbers.

I’ve spent the last decade talking about WPA’s business model at AIA National and state conferences and have been met with an equal mix of horror, anger, curiosity, encouragement, and excitement. Now, it’s time to share with you.

Transparency

This is a snapshot of our model:

  • Candidates seeking an opportunity at WPA go through several rounds of interviews. Once we’ve vetted skills and fit for a particular role, and the candidate has had a chance to understand what everyone does and where they are in their careers, we open our books. We show them the full company finances, with a spreadsheet of every employee’s salary and benefits. We ask them to think about what they want and where they think they fall on the pay scale. We ask them to make us an offer.
  • Our Raises and Bonuses Committee is made up of five rotating members who represent the three branches of our office: 1) Administrative/Marketing/Graphic Design/Business Development, 2) Architecture and Interior Design, and 3) Urban Design. We meet quarterly to talk openly about who is progressing in their professional development, who should receive a raise or a bonus, and what amount they should receive based on the firm’s overall financial health.
  • We email a summary of our invoicing every month, so that our whole team can see if we’ve met, exceeded, or fallen short of our goal. Everyone at WPA understands that there’s an amount that must be met each month to run a business successfully, and we celebrate when we exceed those goals. That means our team members can be rewarded. There is a clear understanding of the connection between salary increases and firm profitability.
  • We work closely with our CPA, business attorney, and HR firm to ensure we have a team of experts on hand to answer questions when needed. They join us in our end-of-year (and sometimes quarterly meetings), and they provide continuing education during our bi-annual retreats. They are truly an extension of our team, and WPA team members can reach out to them directly at any time with questions about the business.

Let’s be honest. Architects and designers lead with their hearts. We are notoriously bad business-people. We tend to put making our clients happy and producing beautiful designs above our own needs. We make jokes about how hard we work and the inverse proportion to our salaries. We wonder why our friends, who graduated with degrees in business or law, don’t have to struggle or work half as much, and we wear it like a badge of honor. But if we really believe that our design, visual communication, and problem-solving skills bring value to our clients and communities, don’t we want to change that? If we don’t make a connection between design, time, and money, how do we expect the business acumen and the personal financial health of architects and designers to improve?

In some ways, the WPA model was an experiment in doing things differently. We decided to take the risk in 100% financial transparency, make mistakes openly, and learn the business of design together. We benefit from those more experienced than us to weigh in and help us course-correct.

Ownership

Ultimately, this path led to ownership. We believed that if we treated everyone like owners, and openly shared information, we would end up with employees who behave like owners. It’s working. Just before our 10th anniversary in 2020, we transitioned the company from two owners to nine. Our seven new owners have demonstrated that they understand and embrace an owner’s mentality. We trust them to make good decisions and continue to learn how to make large financial decisions. We are still young (in an architect’s career-span). It was not easy for Thom White and me to distribute shares of a company that we’d just built. But it was the right thing to do.

We believe that, like pay transparency, ownership is a tool to retain talent and increase profits. If we acknowledge and reward the people who have been instrumental in our company’s success, there is a better chance they will stay. If their performance is directly linked to their individual profits, there is a greater chance they will work to make the company more profitable.

There are a million ways to design an ownership transition, and that comes with hard decisions. Were we going to require employees to pay into the plan so that we could recoup our initial investment, or would we give the shares away? After reflecting on the past two years and the lessons we have learned about Justice, Equity, Diversity, and Inclusion (JEDI), we knew what our decision would be. Not all employees have the financial ability to purchase shares of stock, because everyone has different life circumstances (student loans, family care, spouse’s income, medical expenses, etc.). How could we create equity in ownership based on a person’s contribution to WPA that is not tied to an individual’s personal finances? We decided to gift the shares because our team members had already earned them! We believe strongly that this method is a tool for increasing a firm’s JEDI.

WPA is on a path to becoming a fully employee-owned firm. This decision-making process has taught us that we are looking for people to join and help us grow WPA who eventually want to be owners. We are placing a bet that the long-term benefits of hiring people who want to be firm owners, and whose hard work is rewarded accordingly, will pay off with talent attraction and growth. The most valuable asset we have is our employees; turnover is expensive.

Moving forward, we will chart our personal and professional growth as owners. We believe that if we work together, we will be more profitable and experience more long-term stability. The only constant at WPA is growth and change. We look forward to sharing our learning experiences with you. 

 

https://www.aia.org/articles/181756-compensation-strategies-from-a-small-firm-p

https://www.architectmagazine.com/practice/implementing-pay-transparency_o

I’ve been in the position to watch Mel and Thom grow WPA since the beginning. When I came on board 7 years ago, it was an entirely new field of work for me. Having come from an elementary school classroom to newly formed architecture firm, I had a lot to learn. Mel and Thom were patient and helped draw out the my skills, they included me in decision-making, and trusted my suggestions for improvement of organizational processes.  The business model they established from the start was always been leading towards an employee-owned it would seem. For myself and the other newly installed owners, I see a shift in the way we are talking about the work, the practice, and our goals. Our team members are our most valuable asset. Just as I have watched Thom and Mel grow into their roles, it is exciting to see our young staff grow in their profession and roles within the firm.  

-Beth White

 

The biggest benefit I see to pay transparency is a shared sense of ownership and responsibility to all firm members. It’s clear to see what you may be in control of and how you can contribute to the financial health of the firm. With all team members aware of the finances, there’s less of an “us vs. them” mentality when it comes to payroll and productivity. The responsibility shifts to the individual to advance the firm’s finances when the books are open and accessible. I think the opportunity to see financial benefit from the company’s growth in value is the best part of ownership. Practically, the daily work is not much different but it is a nice milestone to look forward to after 3 years of employment. It also opens a chance for employees, typically not privy to the admin side of business, to develop skills in business administration.

-Zachary Robinson

 

Having been part of WPA for 10 years and working to grow the business from the ground up, I have felt like an owner from the very beginning and have endeavored to think and conduct myself accordingly. Being formally brought into the ownership structure with several other folks who have worked hard alongside us underscored the responsibility that I have to each of these people to make the best possible decisions and do the best possible work to maintain the health of our company. Working through this ownership transition, and looking ahead to the processes we are putting into place to carry it forward, has brought into focus the specific and diverse talents, skillsets, and personalities of each of the new owners in a way that likely would not have happened if we had not chosen this path. Knowing that each of these new owners has been steeped in the WPA ways of financial transparency and has been privy to crucial financial decisions since the day they were hired gives me far greater confidence in their understanding of and respect for the business of architecture. This confidence is what made the transition such an easy and natural one.

-Peter Johnston

 

I think my own perspective on this is nuanced, as I have been seeking out ownership for my entire career. I believe the concept of ownership is the best path toward growth and accountability for staff at every level, and it's something normally withheld or put behind financially onerous barriers. The idea that WPA treats every member like an owner and expects them to take part in (and responsibility for) the success of the firm, is a major reason I chose to join the team. I also think employee ownership recenters the dialogue about younger designers and "firm loyalty". Young architects feel more comfortable moving firms to find the best fit, so why not give them the opportunity to shape their firm into something they love, appreciate, and (ultimately) own? 

-Sam Bowling

 

Ownership provides additional incentive to succeed. As an employee, the success of a company is great, but I’m really working for a paycheck. As an owner, I am working to ensure the success of the company. Being an owner shows that Mel and Thom trust their employees to grow the company, and sort of become self-sustainable. Ownership helps to boost my confidence in providing exceptional service to clients, seeking new clients and opportunities, or pursuing alternative revenue streams within the A/E industry – all for the good of the collective company. I’ve always considered WPA to be “our” company, now it truly is.

-Jacob Combee

 

 

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