Meihaus: The Courage to Say “Enough” at the Top | Gear Up For Growth

When public accounting firms talk about “leadership challenges,” the conversation often turns into a soft focus on communication styles or vague culture issues.

Michael Meihaus goes straight for the hard truths.

On Gear Up for Growth, hosted by Capstone Marketing president Jean Caragher, Meihaus—owner of Meihaus CPA in Escondido, California—lays out the structural leadership failings he sees across the profession: outdated ownership models, harmful work expectations, broken incentives, and leaders who resist change because the current system works for them, even as it burns everyone else out.

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“It’s simply that we don’t change unless we have to,” he tells Caragher. In a profession that’s been “stable, profitable, successful” for decades, too many people at the top have little incentive to transform how firms actually operate.

One of Meihaus’s most provocative arguments is that many “partners” aren’t really owners in any meaningful sense.

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He’s not talking about equity on paper. He’s talking about decision rights.

“Ownership isn’t that you have equity exposure to the company,” he explains. “It’s that you can make critical decisions without having to really have other people’s input or an override.”

As a small-firm owner, he can decide tomorrow to change compensation, client mix, or working hours. Many junior partners at large firms, he argues, have nothing like that level of control. They may have impressive titles and compensation, but from a practical standpoint, they function more like highly compensated executives with stock options—similar to a corporate employee with RSUs who would never describe themselves as a true owner.

That distinction matters. If people at the top can’t or won’t make structural changes, the rest of the firm is stuck living with outdated models they didn’t design and can’t influence.

Caragher asks why self-awareness is so hard for leaders in the profession. Meihaus doesn’t sugarcoat it: admitting you’re wrong is painful—and your brain is wired to avoid it.

Drawing inspiration from the book Mistakes Were Made (But Not by Me), he notes that our brains work overtime to protect our self-image. That makes it easy to externalize blame—on staff, on “kids these days,” on clients, on the market—rather than ask, “How are my own actions contributing to this problem?”

This shows up at every level:

• Staff who complain about comp or hours but avoid tough conversations, setting boundaries, or leaving.
• Managers who pass stress and unreasonable deadlines straight down the chain because “that’s how it was done to me.”
• Partners who cling to the status quo because it’s profitable for them—even as it drives turnover, disengagement, and talent shortages.

“If you want anyone in your organization to do something, but you’re not actively practicing it, then you shouldn’t expect to see that,” Meihaus says. Leadership starts with modeling, not memos.

One of the most intriguing concepts Meihaus brings to the conversation is the idea of a “leadership founder.”

Borrowed from a socioeconomic context, the term describes the “zero to one” person in a family who changes its trajectory—maybe the first to attend college or move out of poverty. In firms, Meihaus argues, the same idea applies: if you don’t like the leadership culture you see, you can be the first one to build something different.

“At any level, you really have the ability to start doing that,” he says.

For a senior in charge of staff and interns, that might mean:

• Not mirroring stress or bad behavior you receive from above.
• Acting as a buffer between your team and last-minute demands.
• Setting realistic expectations and advocating for your people.

It won’t solve everything—especially in large, slow-moving firms that operate like cruise ships rather than speedboats—but it can create pockets of healthier culture, and often, better-performing teams.

Meihaus doesn’t mince words on long hours and busy-season heroics: “There’s no world in which working 80 hours a week routinely is good for your health, well-being, your literal physical health.”

He points out that research doesn’t support the idea that people are more productive when they push into 80–100-hour workweeks. At best, firms get more time—not necessarily more value. At worst, they get burnout, turnover, and declining quality.

So why does the model persist?

Partly inertia. Partly the illusion of profitability created by traditional billable-hour math: “made-up hours times made-up rates” that make projects look profitable even if they’re not truly generating better outcomes.

He praises firms that have already moved in a different direction—those targeting lower annual hours, using flexible schedules, or adopting value and fixed-fee models. When you incentivize production and results instead of time spent, he says, “how many hours you spent on it is almost irrelevant.”

If Meihaus could redesign a firm from scratch, he’d start with structure and compensation. His own experiment involves a pod model built around employee benefit plan audits. While these engagements are often treated as second-tier work at traditional firms, he saw an opportunity to systematize them and create a specialized team. Each pod is a tight, consistent unit—technical lead, operations, admin, and signer—responsible for a defined book of work. Over a certain revenue threshold, he envisions a simple, transparent approach: a portion of every additional dollar flows directly to the team as bonuses.

That solves two big problems:

• Resentment when new work comes in: Instead of “Great, the partner just made another $100,000 and I might get a small bonus,” staff see a direct connection between firm growth and their pay.

• The entrepreneurial exodus: If people can earn near-owner-level upside inside the firm, the incentive to leave and hang their own shingle drops dramatically.

“Even just giving people the most marginal control over their income is so empowering,” he says.

Not every leadership fix is philosophical. Some are incredibly practical.

Meihaus urges leaders to identify and remove the “everyday annoyances” that make staff lives harder—things like unstable software, slow machines, or tedious repeat errors baked into templates and workflows. He gives a small but telling example: a Microsoft Office registry glitch that constantly resizes embedded Excel objects in Word-based financials. Fixing a single registry value can save thousands of clicks across hundreds or thousands of financial statements—and eliminate a persistent frustration.

Likewise, upgrading a slow, refurbished laptop to a fast, reliable machine cost him about $1,000–$1,500 per person, but provided an “immediate return” in both productivity and morale.

These small changes send a big message: We value your time and sanity.

Perhaps the boldest scenario Meihaus lays out is a thought experiment: what if a group of highly compensated partners, each making around $750,000, voluntarily gave up a slice of their compensation—say $150,000 apiece—and poured that $2–3 million into dramatically better pay for staff?

“You would have no staffing problems,” he argues. “You could hire the best people and retain them.”

The barrier isn’t complexity; it’s courage—and the ability to say, “I have enough.”

He’s honest that it’s hard. Every bonus to staff is money he could have kept for his own family. But he believes leaders must intentionally decide what they value, rather than letting the endless desire for “more” dictate everything.

In the end, Meihaus shares his own ongoing work: unlearning the reflex to do things simply because that’s how he’s always done them. Even as a firm owner, he catches himself defaulting to a 9-to-5 schedule and legacy processes that may not actually serve his health, his family, or his team.

Having an operations manager from outside the CPA world helps. Her constant question—“Why are we doing it this way?”—forces him to examine inherited habits instead of blindly repeating them.

That, in many ways, is the core challenge he poses to the profession: stop confusing stability with inevitability. Question the ownership model. Question the hours. Question the way compensation flows. Question the friction you tolerate in your systems and culture.

These issues are not easy, but as Meihaus and Caragher make clear, they are fixable—if leaders are willing to look in the mirror and make different choices.

More highlights:

• Many firm leaders avoid innovation because the existing model is financially rewarding for them. 
• Younger professionals are not willing to wait 15 years for ownership or rewards. 
• Modern firms must offer earlier incentives, transparency, and clear growth paths. 
• Leaders often blame others instead of reflecting on their own behavior. 
• You can’t expect behaviors from staff that you don’t personally demonstrate. 
• Staff at any level can start leading by creating better team dynamics and resisting toxic patterns. 
• Time-based billing creates distorted profitability perceptions and doesn’t reflect true value or effort. 
• PE is forcing new firm structures. The profession must decide whether to lead or be led in this shift.  
• Many firm issues could be solved with willpower and courage, not complexity. 

More About Michael Meihaus
Michael Meihaus is the owner of Meihaus CPA located in Escondido, CA. His firm specializes in remote employee benefit plan audits. Prior to starting Meihaus CPA, Michael led the California benefit plan audit practice for a Top 100 CPA firm, performing over 55 benefit plan audits annually. His experience includes 401(k), 403(b), ESOP, and defined benefit plan audits.  

Transcript
(Produced by automation. Not edited for spelling or grammar.)

Jean: Hello, thank you for joining “Gear Up for Growth,” powered by CPA Trendlines. I’m Jean Caragher, President of Capstone Marketing and your host. Today’s guest is Michael Meihaus, Owner of Meihaus CPA located in Escondido, California. Michael joins me today to share common leadership failings in accounting firms. Michael, welcome to “Gear Up for Growth.” 

Michael: Thank you so much for having me here. 

Jean: I’m excited about this conversation and I’ll mention for the audience’s sake, this episode is based on a presentation that you delivered at ENGAGE. When I saw it and I saw the title, I knew this would be a great episode for “Gear Up for Growth.” So I appreciate you coming on, Michael. 

Michael: I’m so happy to be here. It was a fun topic to present on and to think about. So really, really looking forward to discussing it. 

Jean: Right. So let’s start off with what leadership failure you see most often in accounting firms and why do you think it’s so common? 

Michael: There’s a few, but the one that comes to mind, and this isn’t revolutionary from my perspective, it’s been talked about a lot, but it’s simply that we don’t change unless we have to. And I think this is applied maybe to new areas, at least in my presentation. But so often we’re a stable, profitable, successful profession. And so on one hand, once you’ve reached the top, if you’re a firm owner or a partner at a large firm, the incentive to change or be extremely innovative or shake up a system is low. You know, why would you try to transform something that’s working really well for you? I think at the same time, we forget what it’s like to be maybe at the bottom of the totem pole of those types of organizations. And so that’s the one I’ve seen is that there’s just not this push to innovate or transform the profession in a way that works for everyone. There’s more of a model of, hey, work really hard, you’ll get to the top, and then you’ll reap the benefits. Whereas maybe we should ask, how do we benefit everyone proportionally throughout the process? 

Jean: Okay, so we are reading and hearing a lot about that these days, especially as it relates to private equity and ESOPs, you know, different compensation systems, because these younger ones don’t want to put in 15 years, let’s say, with the hope of becoming a partner and getting the reward. You know, they’re working hard and they want rewards now. 

Michael: Yeah. And it’s it’s intuitive if you think about it anywhere else. Could you imagine a startup where you didn’t get ownership equity right away? They might say, hey, 15 years from now, maybe you’ll get equity when we exit. And I know there’s a degree of a lack of certainty with a startup, but you still have that ownership. You immediately know this is my exposure to upside, whereas it’s the hey, you might get ownership at some indeterminate point in the future. But before that, you have to build the practice that you’re going to become an owner in, which is a very odd idea. You know, typically you align incentives. Here’s equity, now build the thing, startup mentality, or hey, here’s an existing company, buy in and work on it. Whereas accounting is kind of like hopefully you earn into it over 15 years, with hopefully being the operative word. 

Jean: Right. I also think, and I’ve had many CPAs tell me this, that they’re making more money than they thought they would being an accountant. And as you say, if the process is working and they don’t necessarily want to work any harder than they’re already working and they’ve got a nice house and a nice car and their kids are going to good schools and they take nice vacations, why rock the boat? Right. Why make that change? 

Michael: Exactly. And often I wonder if many partners have the ability to rock the boat. And that is something I’d say if I was to state things in terms of how controversial they are in the presentation. That’s one of my opinions, which is often who we call owners in accounting firms, aka partners are not actually ownership. And the way I would define ownership as it’s not that you have equity exposure to the company. It’s that you can make critical decisions without having to really have other people’s input or an overwrite. The simple example is I own my firm. That doesn’t make me better than a partner in a big four. They probably make more money than me and have greater prestige. But I can actually say, no, if this is the way I want to compensate my employees, I’m going to do that tomorrow. If this is the client set we want, that’s what we’re going to do. These are the hours I want to work, that’s what I’m going to do. 

Whereas often I’d say most partners firms are more like a highly-comped executive with equity exposure. A simple example would be my father in law works for a publicly-traded company. They get some stock options and they get RSUs, things like that. He would never say, oh, I’m an owner of said company. He’s a highly compensated employee with stock options. And so I think that’s more of what the reality is in the accounting firm, especially once you get to the 30, 50, 100-partner firms. If you’re a junior partner, you don’t really have ownership say for many years often. 

Jean: Right. And just I’ve never heard it put that way before. That’s a great analogy. In your presentation, you mentioned that we blame everyone but ourselves. Why is self-awareness or taking some blame so hard for leaders in the accounting profession? 

Michael: Yeah, I think it’s really hard for everyone. I reflected back on this myself. If you’re interested in diving into the science of it, mistakes were made was kind of the title inspiration for my presentation. That came from a book called “Mistakes Were Made.” And it’s about how your brain specifically tries to protect you from realizing you’re wrong. And it’s just a way that we’re neurologically wired. So if you ever ask yourself, oh, why is this person so self-deceived? Why am I so self-deceived? Why do these behaviors exist and I justify them? It’s helpful to know it doesn’t remove responsibility, but your brain is actually hardwired to protect you from realizing you’re wrong. It’s just the way we’re written. There’s probably some survival portion written into that, but great book if you ever want to read it. But I think that’s the first is our literally our brains are working against us. 

But other than that, there’s a lot of ego involved. It’s really painful to admit that you’re wrong. I’d say it’s much easier to externalize blame, even as a staff, say. So say you’re, “I’m really frustrated with my company. They aren’t paying me enough. They aren’t working me enough.” But are you willing to leave to correct that? Are you willing to communicate? Are you willing to set boundaries? So ultimately, like all we can control is our actions. But often we like to externalize blame without asking, well, how are my actions contributing to the situation? 

Jean: And how does that impact staff? Because I believe if they had a leader who was willing to admit, you know, when he or she made a mistake, it’s easier to build that trust than someone who isn’t able to do that. Yeah. 

Michael: Oh, absolutely agree. I think if you want anyone in your organization to do something, but you’re not actively practicing it, then you shouldn’t expect to see that. Honestly, being a parent has been probably the most helpful thing in terms of leadership, because I can’t tell in a harsh, mean voice that my son needs to be nice to his sister, right? It’s just counterintuitive. You say, “You shouldn’t yell at your sister,” in a really loud, overbearing voice. And it’s like, how does that make sense? Or, “You need to be patient with your sister,” as I’m, like, hurrying them out the door and, you know, yelling at them to put on their shoes. And so I think in so many ways, first demonstrate and train and mentor. And then you can come with expectations of here’s how we behave. But to start with, this is the way you need to act while you’re acting completely counter to that expectation. It is really a hard thing. So parenting is really great for that. It’s very humbling, but it also teaches you that people are only going to learn and do what you teach and model and expect of them, essentially. 

Jean: Right. Right. And you also refer to what you call leadership founders. What’s a leadership founder and how can you become one? 

Michael: Yeah, I heard this concept not in the leadership space, but in the socioeconomic space. It was a person who built a very successful real estate company. And he just wanted to call out that, hey, a lot of my success really did come from family members and the environment I grew up in, meaning he had a grandpa that lent him some money to buy his first rental property. He had a healthy upbringing. And he just realized that for so many people, if you’re trying to raise socioeconomic status of your family or try to improve things, that that first zero to one person in a family, maybe a family who’s never been to college, a family who grew up under poverty, to be that first zero to one person, you’re the founder. And that means that Sam Walton was the founder of Walmart. Obviously, his children bear…or grandchildren or whatever it is at this point bear the real result of that. But he was the first zero to one there. 

And for myself, I grew up relatively poor. I was very blessed. I always had food and housing and everything like that. But we grew up technically relatively poor. And so for me to raise the socioeconomic status, I view myself as, okay, I’m that zero to one step. And then hopefully my children will have opportunities that I didn’t have, or they’ll continue that legacy onward from there. 

Jean: So could that also be equated to a leader in a firm that encourages others to be leaders or…? 

Michael: Exactly. That was that’s where it went. Yeah, essentially, if you’re in a firm or you feel like there’s a deficit of leadership or you say, “I wish I would be treated like that,” then at any level, you really have the ability to start doing that. Again, a staff doesn’t have the responsibility or the capability that, say, a partner or senior manager or director has. But if you’re a senior and you oversee staff and interns, you can absolutely start creating a leadership culture. Do you mirror stress or bad leadership that’s directed downwards for you or do you start transforming that and changing it? And it can be simple tweaks. It’s like, hey, maybe I get a last minute stressful request from my in charge or my partner manager. I’m not going to do the same thing to the staff or I’m going to be a buffer between them and try to set expectations and realization. So that’s the way I like to pursue it. 

Again, how much you can do this really depends on the organization. But I think if you’re in a situation and you don’t want to leave, but you see these frustrations, you can be the first one to start creating those habits, environments, or structures. And I think often it can build from there, right? If people like working with you, your team will do better. Hopefully that’ll get recognized and then maybe it starts some dialogues about how that helps. 

Jean: Right. So much of this is relying on the culture of a firm and how confident the team members feel about speaking up and making suggestions or recommending changes. 

Michael: Yeah, exactly. And that’s one of the kind of double-edged swords is a good culture is really great and it provides a huge foundation. But if you’re sitting in a firm where maybe you aren’t a fan of the culture, you want to be a leader, leadership founder, you want to change things, the question of how realistic is it to try and change it is tough, right? Like, larger entities are like cruise ships, I’ve often heard the analogy said. They’re really comfortable. They have a lot of amenities. There’s a lot of safety. You’re probably not going to get capsized in the ocean, but they’re very hard to turn or change with any degree of speed or efficiency. So you just have to ask yourself, do I want to be on a cruise ship or do I want to be fast, adaptable, more of a speedboat mentality, something along those lines? 

Jean: Right, right. That’s an advantage because, you know, lots of folks that listen and watch, you know, are from smaller firms. We do a big variety, but we’re really focusing in on those, you know, with 100 people or less. And this is another example of how I think smaller firms also have an advantage because they are more nimble. There’s not as many layers that change and opportunity could come quicker. And I see you nodding your head. 

Michael: Yeah. And again, there’s pros and cons. So I never want to disparage larger firms because there’s a whole different experience. There’s levels of work I’ll never be able to complete, you know, with my size that larger firms can, experienced staff would get at the…But it is if you won’t be changing quickly, responding to technology, pushing profitability and efficiency in new and innovative ways. It’s just so hard to do that in a traditional corporate structure. You have to have software approved through acquisitions and then the IT team has to be deployed, tested, you know, firm-wide. Whereas I work with my operations manager and we’ll churn through a couple of products a week. It’ll be just a question of, oh, we saw this new software. Is it good? What’s the data security look like? Will it fit our use case? Nope, goes in the bin, or yes, it might. Let’s test it for a week. So we get to iterate very quickly through technology, which has helped us find some really useful tools quickly. 

Jean: Right. Now, you say the current business model in the accounting profession is objectively harmful to well-being. 

Michael: Yeah, that might be on my controversial list too, along with a partnership. I think this is everywhere, but I think we maybe don’t talk about it strongly enough. But yeah, there’s no world in which working 80 hours a week routinely is good for your health, well-being, your literal physical health, the stress that people go through, like, chronically through a career. And so, you know, there might be some eye rolls I would expect in the audience right now. “Well, I did it for years. I’m healthy. I’m fine.” You know, kind of like, “Get over it.” I think that’s fine if that’s your approach. And if people want to work 80 hours a week, that’s fine. That’s their life. It’s autonomy. But to say, and there’s research backing this, that people are any more efficient or any more productive when you’re working 80, 100-plus hour weeks, it’s objectively wrong. And you can’t say that you’ll be healthier for doing that than you would if you if you worked fewer hours. 

Jean: Right. So why do you think firms continue to operate that way? 

Michael: We’ve always done it is probably the [inaudible 00:14:40]. But more than that, it feels a little bit like a shell game to me where we have made-up profitability and billable hours metrics that feed our made-up, like, profit. Like, it’s not even cash flow based. It’s just, hey, your billing rate is this made-up number. And then the amount of made up hours you put to the job times this made up billing rate because our profitability. But it could have zero impact. You know, if somebody spends 100 hours that would have been administrative time sitting at their desk, then that’s an extremely profitable project. If somebody’s bill rate is very low, it can look profitable even if it wasn’t. So I just never understood some of the metrics we use. 

I think we’ve always used them. And therefore, that’s how we do it. Some of the more progressive firms I think are more in terms of revenue per head or you have incentive-based comp based on production. I think those are really interesting models. But I just don’t think we’ve ever found a model better than that, you know, that we think. And other than that, I don’t know why we approach it that way. I ask myself all the time, is it actually necessary to work that many hours? And I don’t think it is. I just think we’ve always done it that way. 

Jean: As you said, that’s just how it is. So when you’re using public accounting, this could be your reality if you choose to follow through with that. 

Michael: And some firms are really great. Like, I know of firms that are running, you know, 40-hour weeks year round or they do, you know, during the summer, they’re doing Fridays off. And, you know, I know firms where they’re, like, billable hours are much more like the 1500 to 1600. So the total hours worked the whole year is less than 2000. So there are definitely the exceptions. But I think just on the whole, we view it as more work, it’s more billable time. Therefore, the more work you do, the better is kind of the mindset as opposed to if you incentivize production, like getting jobs out the door, then how many hours you spent on it is almost irrelevant. It’s better to not spend time on it. It’s better to do it. 

Jean: Right. Right. Exactly. Yes, I have a very good friend and colleague, Michelle Reiver [SP], who created advanced pricing methods. And that’s exactly what she says all the time, the client is not paying you for the number of hours that you work to solve that problem. You know, but they’re willing to pay you what it’s worth because you are solving a problem and you’re helping them in some way. 

Michael: Yeah. Yeah. And I always have a good conversation with a friend of mine who still is on hourly billing. My firm is completely fixed fee. But I laugh because I said, “Okay, what if you halved your time because you invested in new technology and all that?” I said, “Would you write down the fee half?” And he goes, “Well, no, I’d kind of write it up a little bit. Maybe I’d pass along a little bonus.” I said, “Okay, then it’s not hourly billing.” Hourly billing means whatever hours you put to it, you charge, whether it be higher or lower. So I feel like, again, it’s that, well, this is how I feel like I should do it versus, well, just give the client a quote, figure it out. If it’s too low, next year, raise it and you can try some different pricing models. 

Jean: Right. Now, we just talked just a little bit about structure of accounting firms and how it really doesn’t make a lot of sense. If you were to redesign one of those firms from scratch, what would be the first thing that you would change? 

Michael: Yeah, actually, this is something I’m trying. So maybe we should touch base in two years and see if I eat my words or if I think it’s harder than it actually was. I think a pod style of firm makes a lot more sense to me. So for context, I do exclusively employee benefit plan audits. And in the accounting world, they’re a little bit of the undesirable work. They’re often attached to a larger prestige client. A simple example, our company audits Apple or some large regional bank. And also because we do all the good work, the tax, the consulting, the audit, we have to also do the employee benefit plan audit. And so they’re often kind of assigned to B teams. They’re done in the summer. Everyone’s trying to take a break. And so they’re typically not super profitable. They’re perceived as not very profitable. The work isn’t usually prestige work or gets you to a partnership. And so people will just kind of toss them aside. 

I saw an opportunity where I thought, wow, these are actually very easy if you develop the systems and train people well to complete quickly and accurately and well, if you have all these systems designed and well staffed. So I was trying to do that within my other firm and they just weren’t able to staff it in the way I hope. So that’s why I started my own firm. And the goal being you want really for people to have a good experience. You want a very consistent team year over year. And that’s what most firms aren’t able to provide. People are put on a two-year assignment. They don’t like the work, they roll off. Whereas I said, what happens if we create a pod of experienced people? So I’m the first pod right now. I’m the signer of all the returns. I have an operations manager, an admin and a technical person. So that’s about, you know…and I’m about two full-time employees in that. 

So the revenue I have provides good income for everyone and it works. So I think if I just were to copy and paste each pod, then you can actually have sustainable income for each person. There’s a bonus structure where you can really decide and control your own compensation. A simple example would be, hey, maybe you need to have half a million of revenue to pay everyone’s salaries and have the firm’s profit. Anything over that is profit shared immediately. So it’s a really easy pathway to say, how do we get more money? What’s your revenue? Or you can might say no, based on my family commitments or my lifestyle desires, we’re going to be a lower…we’re going to be a 75%, you know, full-time-equivalent team. We’re only going to work 75% of the time. Our compensation will be adjusted below, but you can make that choice. So I think it’ll work. I’m the test of it. So I’m the first pod. I’m reaching capacity with the first pod. So the next step and the big one will be to hire an experienced technical person next year to build pod number two, essentially. 

Jean: Right. Right. So interesting. So I’m going to make a note. I will have to follow up with you, Michael, to see to see how the pods, you know, are building and working. You also refer to structural friction points that cause staff a lot of frustration. Can you give us an example of a friction point and what leadership should be doing about solving that or fixing it? 

Michael: Yeah, I think there’s a lot of everyday annoyances that can be built into a firm and just correcting those can be such a benefit. The tangible example I’ll give is often in financial statement preparation, if you’re doing that work, you embed and you copy and paste a section of an Excel document and embed it into a Word file. It’s like a live, automatically updating picture in a picture. So it’s a really helpful way of drafting financial statements. But there’s this little error where it resizes over and over. So there’s like 15 of these and you open the file, you have to right click on each of them, resize it, fix it over and over and over. It’s a really well-known registry issue in Microsoft. You literally change one little value in the registry and it’ll go away. So if you can imagine for a firm doing 3000 financial statements a year, each one of those clicks every time someone has to fix it, every time there’s a new draft, every time there’s…It adds it to a lot of time, and more than that, it’s really annoying. Or if you have slow internet or you have bad computers, you know, it’s expensive to buy good equipment, but it really makes an impact on staff’s life. 

So I think those are some of the major ones is figure out what the most annoying parts of your staff’s life are and fix it. A simple example for my firm was when I just started out with my firm, I bought one of my employees, you know, a decent refurbed Dell laptop from their corporate site. But it was just a little slow, a little unreliable. I said, why am I doing this? And so it was about $1000, $1500 to get a top-of-the-line machine, but the speed, the technology was so much better for my staff’s experience. And that’ll easily pay for itself in a year from a financial standpoint, but from just your life isn’t frustrating standpoint, it was an immediate return for all my employees. 

Jean: Right. And right. And pretty simple, as you say, to do. So not all these problems require a big, you know, lengthy fix. It could be done pretty quickly. 

Michael: Yeah, exactly. 

Jean: Right. I want to ask you also from a an economic standpoint about aligning the economics or compensation across all the levels of the firm, as opposed to the leaders at the top are making a whole bunch of money and those at lower levels aren’t. So I guess what I’m saying is that you need to make sure that everybody is being paid what they’re worth and they feel like they’re all in the cause together. 

Michael: Yeah. Yeah. I think even just giving people the most marginal control over their their income is so empowering. And what I mean by that is my ideal model, like I said, in the pod would be, you know, say an average audit fee is $12,000 of a certain size. Like, the dream would be over that revenue cap or the revenue minimum we give them, like why not take $3,000, $4,000, $6,000 of that extra $12,000 and just bonus it out to the team? So it can be a really easy pathway. And of course, you might have to bonus so the senior manager gets a little bit more and the intern gets a little bit less. But I would be surprised if people weren’t happy with that ability to raise it. And it’s not that you have to go sell that work. It’s just saying, hey, this is our commitment to you is any time you cross that revenue threshold because we’ve assigned work to you, you’re going to share in that. 

Because the fundamental thing that always happened is a partner would run up to my desk, say, “Oh, we just won five new audits.” And you’re like, great, I’m going to do them. You’re going to make, you know, $80,000, $100,000 more and maybe I’ll get a bonus at the year. I hope I will., but it’ll be a couple thousand dollars. And so the firm just generated $90,000, $100,000 of additional profit, essentially. My salary didn’t change and very little of that ever came down to the employees. So it creates this mindset of, “Ugh, we won more work,” as opposed to, “Ooh, awesome, we won more work. I’m going to see a bonus check in a few months when we’re done.” 

Jean: And coming from a marketing consultant’s perspective, you know, I do want my clients to say, “Yippie, yes, we got new business,” and not be disappointed at it. Or, you know, we know there’s firms too that, you know, say they’re not doing a whole lot of marketing or business development because of that very same reason. You know, we don’t have the people to do it or, you know, whatever the reason is. 

Michael: Yeah. And from, like, honestly, a selfish perspective too is if you incentivize your employees with compensation as things grow, you really take away that risk-benefit reward for them to leave and start a firm, right? So say, say a person running that pod, they and their team get to keep 50% or 60% of any revenue over the bonus. Like, that’s most of what you would get if you ran out and started your own firm. So it asks that question of, if I can increase my…I want to make $400,000. Great. Well, go do that. You know, bring in the work and it’s going to be much easier to do that in an existing framework. Yes, you give up a little bit of the profit, but when you give them such a large percentage of the revenue over a certain limit, then the incentive for them to leave is so much lower. That’s the other part. 

Jean: Right. Right. That’s another interesting point. So when you gave your presentation at Engage…because I’ve got one question left, a bonus question, but I want to ask you a couple before I get to that. Do you remember one of the points or failings that you mentioned that got the biggest reaction? 

Michael: Let me think. I do remember the pushback about entity structure being one that got some. Like, “Well, what do you mean we shouldn’t have partners?” Or, “What do you mean they’re not owners?” That, of course, came back. And I did a quick poll just by raising hands and it was a large percentage of like, say, direct senior manager to director to partner owner in the room. I’d say almost like 60%, 70%. I thought it would have maybe been a bigger slip between the positions. But yeah, that was definitely one of them is like, “Well, what do you mean? How else would you change the equity model? Like, can we change it?” And the conversation we had there, kind of in dialoguing with the individual who brought it up, is it’s already being changed. 

So here’s a really important point for anyone listening is private equity is currently changing the ownership model in the accounting profession. The question is, do we want to cede control of that innovation to another party, an outsider party? You know, I have no direct experience with private equity transactions. I have no negative or positive. I have no vendetta against it. But my thought is that they’re changing it. And so it’s not a question of will the model change, it’s going to be who’s going to be guiding and leading that change? And there are some concerns from other professions that have gone through the private equity transition saying that there’s some concerns about how it’s handled. So I advocated for more of, hey, let’s involve private equity if it makes sense for a firm. But we should be the drivers of what the best model is for, not allow it to happen to us. 

Jean: Right. So our discussion today, I would describe it as failings of accounting firms and leaders. All of the issues are fixable, some of them much easier than others. And it takes the desire of leadership to want to make the change to whatever that failing is. 

Michael: Yeah. And I think it’s the point of things are not complex to fix, they’re hard to fix. And what I mean by that is, what do you think would happen to a firm…if you had a firm with average partner comp of $750,000 and you have 10, 20 partners and each of them said, “You know what, we’re taking $150,000 of our comp,” which is getting taxed at a preposterous rate. We don’t need to get into the details. But once you get into that level with a lot of the tax benefits that phase out, you’re getting taxed at a preposterous rate anyway. What if we just took $150,000 each? You know, we’re still each making $600,000 a year, a wonderful salary anywhere in the country, and we dedicated that $2 million, $3 million to just having the best compensation around, in our city, in our state. I mean, you would have no staffing problems. You would have no motivation problems. You could hire the best people and retain them. But here’s the problem. It’s it’s really hard to say, I’m not going to make $150,000 extra. It becomes an issue of can you ever say I have enough money, or I have enough work, or I have enough prestige? And if you can’t ever say no, then no amount of money will fix it and you’ll have the problem forever. 

Jean: Right. Yeah, that would that would take a very brave leader with the ability to sell that fix. In my view, that would take an extraordinary person to be able to make that happen. 

Michael: And so I have to do it, and I want to be totally transparent because it can be so easy to maybe come across high and mighty. Like, every time I give bonuses to my staff, I love it, and it also is so painful because it is, it can be thousands, tens of thousands of dollars that could have been your money. And so it’s like, wow, that’s, you know, college savings for my kids, that’s this and that. But it’s such a bad way to think about it because there will always be a reason to have extra money. It doesn’t matter if you make a million dollars or $10 million, you’ll always need the money. So you have to make a decision about what you want to do with your money and not let your needs drive it. 

Jean: Right. Right. Okay. So my last question, what is something that you had to unlearn in your own leadership journey? 

Michael: I had to unlearn that do it because we’ve always done. I’m still working on that. So much of what I do is simply because I’ve always done…A tangible example is, so I own my own company. I routinely work from home. I’ll still work like a 9-to-5 schedule, that’s my baseline. And there’s not necessarily a need for that or I don’t give myself flexibility sometimes. And so what I’ve started doing is trying to really examine, like, hey, what’s the best cadence for my family and being around my kids and my health? And it often isn’t an exact rigid 9 to 5. And so just really rethinking why you do that or, hey, here’s how we schedule work. Still, a lot of what I do now is how I always did it in my current firm, my old firm. So I’m really trying to critically examine every piece of why we’re doing…Thankfully I have an outsider operations manager. She was never a CPA. And so it’s been really helpful. She was like, “Well, why are we doing things this way?” I’m like, “That’s a fantastic question, because I have no idea other than I’ve always done it that way.” So I think that’s the biggest one I fall into is I’ll just do things because they work and not think about the best way to do things, particularly for my staff, because everything’s probably working pretty well for me. 

Jean: Right. Right. Michael, I’ve enjoyed this conversation immensely. I mean, you’ve mentioned quite a few things, just a very different or interesting way to look at it. I appreciate that a lot. 

Michael: Well, thank you so much for having me. I really enjoyed this, a great conversation. So thank you. 

Jean: So I’ve been speaking with Michael Meihaus, Owner of Meihaus CPA. Michael, thank you again for your time today. Such interesting comments. 

Michael: Absolutely. Thank you. 

Jean: And thank you for tuning in to “Gear Up for Growth.” Be sure to check us out next time when we focus on another topic crucial for accounting firms aiming for smart growth in today’s competitive marketplace. I’ll see you then.