My goal with this diatribe is to provide a stark contrast to nearly every corpo-bullshit response you'll get from most "managers" and give you the perspective of someone who has been on both sides of this equation.

And the quality of his work surpasses what I could do on the side of my desk, which is ultimately how I evaluate whether someone is addresing technical debt or adding to it.

Considering how much care you put into typing addressing correctly, I doubt you have the wherewithal to properly evaluate the true complexity of the work. Since you so simply wave away all of the investigatory and planning that sometimes is invisible. It's so easy to critique the PR after all the hard work is done. You even get a simple overview of what files are relevant to the problem! Programming on EZ street.

The other senior dev has historically been someone I could depend on to get things done.

Let me guess, until you denied them compensation bump for doing well for so long? Wow, I wonder why they stopped caring how you felt when it was clear it didn't matter in the first place.

However, that was back in the early days when really, we just needed to get anything at all together.

So you don't reward loyalty for sticking around? You want output-output-output. Use an AI. I'm sure it'll give you exactly what you want when you ask really well.

The past year or so his performance has been below senior. More like mid-level. He needs to [...] a lot without actually bringing any solutions.

You didn't reward the behavior that you liked so of course he's not going to continue it. He got a negative response for what he thought was a good job. You thought he was doing well until then. So it's clear he's waiting for direction from you in order to know how to perform his role, since you fucked up the messaging.

He does so so at his assigned work, doesn't show initative and requires me to micro manage his work.

His prior stellar performance didn't get the recognition so he's going backwards until you tell him what you actually want. You directly told him that his prior performance was not good enough nor relevant. Could have thrown him a bonus just to keep him hooked, but no. That's too much money. Meanwhile you'll probably blow more on travel or an offsite for "team building."

Nice typo on initiative too.

He sometimes makes mistakes other staff do not make.

Incredible, almost like you hired a human. You made typos I'd never expect a competent technical manager to make. Especially for words like "initiative" and "addressing," two of the most overused words in management and software.

I asked him to make a change, he made the change, but then forgot to merge the PR after approval and missed the release window a few days out.

Sounds like you could have merged it and let him know to keep up on merging to not miss deadlines. Instead you waited on him to fail and then the failure became your problem? Are you trying to be high performance manager or be an annoying prick?

I find myself doing work I should ostensibly be assigning to him just to get it done properly and on time.

He doesn't know what work you want him to do since you directly told him that the great performance he was doing wasn't what you really wanted since you didn't give any award. What you're doing right now is an informal "PIP," you are directly giving exactly what to do since that's the expectation you set. If you want him to perform at the level you want you have to specify that exactly at this point. You give feedback on how well he's approaching it. If they fail over 2-3 months you can fire them. If you try to rush the PIP, don't expect anything. If you announce you're going to PIP them, they'll look elsewhere.

The scenario you're looking at is you're about to lose an engineer, so all the work you're complaining about is about to become YOUR responsibility if you can't retain that engineer. I guess you could offload to the other senior and then critique their lack of performance when you end up having to do some of their work. I'm sure that will go over really well.

He is capable of heavier lifts than I have time for in addition to my managerial duties.

I would say you fucked up your duty by not properly giving the right encouragement. Now you've made your own job harder, congrats. Welcome to the real world of management and dealing with peoples emotions.

he helps onboard clients and makes sure it gets done. and its not like he does nothing. but he is the most expensive member of my team already and easily the lowest performing as of this year.

So you'd rather stop paying them and have none of that talent? What is your end goal here, to be right or to run a valuable team that delivers results? It sounds like you want to be right more than valuable.

Last year he asked for a 20% raise. He said he could go anywhere and get a 50% raise.

Call his bluff? Either way it sounds like he likes the WLB or maybe they don't realize how bad this industry is right now. Regardless you haven't given any TC or vague range of what the pay is. 20% could be reasonable if you're underpaying them. Say for example your "senior" makes 100k, 120k isn't a huge jump. 150k is perfectly attainable for a senior as valuable as you say they are capable of.

My ex-boss wanted to let him go, but I argued to keep him around. as my ex-boss had a "one out, no in" policy. losing my report would have been net negative at this time.

Well let's keep the advice of the ex-boss around, that'll make the company run well! From how you've described it, you lost this engineer and they're doing the minimum until they're fired or they leave. Do what you will with that info.

I said "lets just do inflation and see if he leaves", and he didn't. part of me thinks this senior dev may have started sandbagging after this.

You do realize it's more insulting to deny a raise then give an invalid inflation-adjusted salary. Do you realize how much inflation occurred in the last 5 years alone?

Anyways, my ex-boss has moved on and this "one in no out" policy isn't an issue anymore. So I've been reflecting what to do about this senior dev.

I hope you understand that denying a raise without a reasonable reason more often backfires and increases the expectation? If you're already doing all of their work for them what difference does it make if they're employed? Fire and replace, spend the time to find someone in this shitty AI-driven fake-resume market, attempt to train them and then maybe they actually perform for your subpar salary. Then repeat the process when they ask for a raise.

Build a successful team that functions instead of being focused on how "right" you are.

I've had conversations level setting with him about expectations, and he says he'll do better, but I never see lasting change beyond a week or two.

Did you bother to acknowledge the improvement actively during the week? Makes barely any fucking difference if you wait a month to let them know they were good for 2 weeks then failed. You sound more and more like a low performance manager who thinks because they can program they're gifted at managing software teams.

End of year raises and bonuses are coming up. He's asking for a 20% increase again. I don't want to pay him any more, nor do I want to give him any bonus as he is already too expensive for what I am getting out of him compared to his peers. How have others dealt with this situation?

I think it's abundantly clear if you deny this raise they're going to leave and it'll be all your work soon enough. How about this; You can approach the raise on a contingency. Call it a "promotion," to warrant the increase in salary you now have a Senior II or Staff Engineer. You can now change the expectations and either demand more performance for the salary or let them go. As an added bonus you can rid yourself of the "problematic" engineer through title inflation and they use that to find employment elsewhere. Give a good review and have it be someone else's problem if you don't want to fire them.

I think it's comical you're constantly comparing to their peers. Do you want to retain that specific engineer or not? Perhaps the problem is that engineer recognizes they're underpaid and the rest don't. Ask yourself this question, what would happen if everyone knew each others' salaries. Would they ask for more or would they be content? Everyone has a different skillset and values and that is represented in the salary. Titles are not 1:1 to a salary, but a salary band. Exceptional talent can command an exceptional salary. Either you'll be paying or it someone else will.

When it comes to deadlines and performance you don't have to do their work. You're underestimating their output and trying to create commitments for the team that they don't want to meet.

With all of that said, if you're dealing with a psychotic SWE who has an ego way bigger than their potential then go through with the promotion -> firing pipeline. It works 100% of the time and no one ever expects to be fired right after being promoted. In fact, if you want to be really nasty about it. Say you're promoting them from "mid" to "senior" since their performance has matched mid and the 20% pay bump is to get them back into the "senior" role. They'll take this one of two ways, "Great, I'll get right on that." or "I thought I was already senior, but thanks for the raise!"

Then. Do the evaluation the way you want it to be. Give them clear and distinct goals and if they miss; give them a notice on the first of the month. No need to be an asshole and fire them at the end of the month to give them zero chance to have health insurance during their job hunt. Unless you really want to make it painful, but I must advise you that being vindictive can also result in unintended not-so-good things. Remember, You're dealing with real people who can do very real things.