Switch to Nonprofit Offers CFO Less Pressure, But It’s Still No Vacation

In the second of two articles about CFOs who have made the shift from public companies to not-for profit associations, Bob McLean tells the story of his transition. After a long finance career at both public and private companies, McLean has been CFO of Promotional Products Association International for three and a half years . His most recent previous CFO role was with QI Systems, a startup technology company that made smart-card readers.

I was looking for a new opportunity and connected with PPAI through my network. I was impressed with the organization’s professionalism, though I was concerned that, because I’m in my 50s, it might be hard for me to go back into private enterprise after taking this job.

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On the other hand, this particular not-for-profit organization is profitable, which is different from many of the for-profit companies I’ve worked for. That had some appeal. And PPAI is good-sized for an association, with about $15 million in revenue.

Not-for-profit jobs don’t have the equity upside I had in a lot of my previous jobs — the opportunity to make a killing. But the last few equity plays I had didn’t work out, and they’re paying me very well, so it was a good move for me.

The biggest difference from a public company is not having the intense pressure to immediately report financials, whether quarterly or monthly. Before I got here there wasn’t even a monthly close. But even now that there is, whereas at a public company you have to report to the board by about the 10^th of the month, here we’re closing and reporting the previous month’s financials at the end of the current month.

The pressure is also not there to always exceed your targeted number. We don’t have outside shareholders, and we don’t have a bank, so there are no loan covenants.

I was aware of all that coming in, and in fact I thought I might be on vacation the rest of my career, compared to my previous work. But it hasn’t really worked out that way.

There are still a lot of accounting issues and also member issues. We have a top-50 trade show in Las Vegas [one of the 50 largest trades shows in the country] annually, we have a magazine of which I am publisher, and we do live education events, like conferences and webinars. There are a lot of different business lines. That’s what surprised me the most. I didn’t fully realize I’d have to learn so many new industries or the complexity of that, on top of selling memberships and sponsorships. It keeps me busy.

The profit we turn from all those activities goes into reserves. We have a rainy-day reserve, a building fund, and reserves for future use. That in itself can become a concern, though. When a not-for-profit is very profitable, you can get pushback from members. They might start saying you’re charging them too much for dues or making them pay too-high fees for booths at your trade show.

It’s a nice position to be in, but not a normal one for a not-for-profit. When we get to a certain level, we can start to look at investments or commitments that don’t generate financial returns but generate benefits for members.

For example, we spend money to lobby Congress about promotional products. A lot of people view them as trinkets and throwaway items, but they’re actually very effective advertising media. We don’t get a penny out of that, but it helps the industry, which arguably is a long-term investment for the association.