There are significant scientific and industrial efforts to develop and optimize Iron-based shape memory alloys (SMA) such as FeMnNiAl for cost-sensitive applications. This alloy system shows shape memory and superelastic properties across a large temperature range. However, many studies have pointed out the need for rather complex thermo-mechanical treatments for the optimization of the SMA properties. In addition, works considering the effects of alloying on the development of microstructures that are more conducive to pseudo-elasticity in this system remain limited. Hence, systematic studies aiming at the investigation of the microstructural evolution of the FeMnNiAl(Gd) system are of great interest. In this study, solution heat treatment is done to tune the microstructure for optimum mechanical properties. The effect of phase distribution on mechanical properties is investigated at different heat treatments. Whereas cyclic heat treatment induced abnormal grain growth (AGG) in all samples, so large grains were obtained. The phase variation and elemental composition are analyzed by X-ray diffraction and Energy Dispersive Spectroscopy, respectively. The microstructure and phase distribution are observed using Scanning Electron Microscope and then related to the microhardness results. The microstructure has a good correlation with mechanical properties where the fine distribution of phases results in a higher hardness number.