Idea meritocracy for CPAs

Most CPAs know they must become more agile and more innovative to stay relevant. But how can you and your team take time out of your overloaded schedules to come up with new ideas, new services and better processes that clients value—and actually pay for? One of my favorite techniques for doing so is using “idea meritocracy,” a concept made famous by Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, and author of the best-selling new book, Principles.

For an idea meritocracy to work at your organization, you must create a culture of “radical transparency” and “radical truthfulness.” That means people at all levels of the firm are encouraged to voice their opinions, question the status quo and have public disagreements without fear of losing their jobs. Again, it’s not a free-for-all. It’s not anarchy. It’s a disciplined decision-making process that’s free of emotion, politics and bias.

The value of each person’s input is based on how knowledgeable their peers think they are about a given area. It’s not based on one’s self-assessment of their capabilities. Job titles and tenure don’t matter in an idea meritocracy—just your knowledge.

For example, Mary (who’s in charge of IT) might tell Tom at a meeting: “You’re great at bringing in the business, but you’re just not very good at picking our most effective software.” That doesn’t mean Mary thinks Tom’s a bad person or isn’t smart enough to evaluate software. She’s just saying that assessing software is what she does all day long. It’s not in Tom’s wheelhouse and he should not have the same vote as she does when it comes to software assessment.

While this kind of candor can be tough to swallow at many CPA firms, once people get used to the culture of transparency, they never want to go back to office politics, brown-nosing, backstabbing and what Dalio describes as “people making decisions with high-fives behind closed doors.”

Again, an idea meritocracy is not a democracy in which everyone has an equal vote about which idea is best. It’s a disciplined and objective system for “score-carding” new ideas and decisions. It reduces “analysis paralysis” so common to CPA firms. It drastically shortens all-hands meetings in which much gets discussed, but little action is taken after all 30 people in the room have finally said their piece and lunch is consumed. It prevents situations in which promising ideas die on the vine because there might be a risk involved, and everyone’s too busy to really assess the risk. Sound familiar?

Bringing idea meritocracy into your firm

To ease the transition, have everyone on the team read Patrick Lencioni’s The Five Dysfunctions of a Team. You need to develop trust. You need to have healthy arguments with each other. You need to accept direct responsibility for your actions.

How it works

This is just an example based on a four-partner firm (Let’s call it Beancount & Grindstone, LLP). Adjust for you own firm’s size and needs. There is no limit to the number of columns you can use.

• Everyone receives 25 voting points, regardless of job title or tenure at the firm.

• All 25 voting points must be used by everyone.

• Each team member must receive a rating of 1 to 10 for each category of decision (with 10 being excellent).

• You cannot rate someone a 7. That is non-committal.

• The higher the weight, the more knowledgeable the firm thinks you are about a particular area.

· Internal ratings for team members at Beancount & Grindstone, LLP

Source: L&H CPAs & Advisors, 2018

Example: As a group, the firm thinks Jen is much more knowledgeable about business development and HR than she is about operations and finance (see table above). By contrast, the firm thinks April is much more knowledgeable about operations and finance than she is about business development and HR. April’s opinion about operational and financial matters will be weighed more heavily than Jen’s. But, when it comes to business development and HR, Jen’s opinion will carry much more weight than April’s. You get the idea. You can create as many vertical columns as you like and play around with the point system. Some firms give everyone 50 or 100 points to divvy out instead of 25. Just make sure each person assigns every single one of their voting points.

How our firm uses idea meritocracy

My specialty is advanced planning and wealth management. I help our clients solve really big problems and focus on guiding the vision and direction of our firm. If we’re talking about how to implement a CRM system or marketing funnels, or how to create a 100-day “wow” experience for our clients, I can weigh in very heavily on those areas. My team will respect my input in those areas.

But, if we’re talking about accounting workflows, we’re getting into areas “below the line” and behind the scenes. These areas are vital to our firm’s success, but they’re never going to be in my wheelhouse. My team will be happy to tell you so, and my scorecard in this area will reflect my lack of knowledge.

To make idea meritocracy work, we’ve got to put our pride on the table and keep reminding ourselves these are “autopsies without blame,” to borrow a phrase from author Jim Collins. They’re not personal attacks on you and your co-workers. Over time, members of high-performing firms learn to remove their personal feelings from a dissection or attack on an area for which they’re responsible.

An idea meritocracy can be an abrupt change for those long-accustomed to the collegial CPA environment. But you can’t get better or reach the next level unless you are brutally honest about your own strengths and weaknesses—and about those around you. Trust others to tell you what you need to hear—not what you want to hear. In the long run you’ll be glad you did.