A Conversation with a Five Star Executive

In the spring of 2017, the Board of Directors of Elwyn, the nation’s longest-operating human services nonprofit of its kind, selected The Tolan Group (TTG), a Hunt Scanlon Top 50 Healthcare Executive Search firm, to lead a search for a new CEO. Eight years later, substantial changes have taken place at Elwyn, and we wanted to understand the impact and the changes made under the leadership of Chuck and his team.

Recently, Tim Tolan, TTG’s Founder and Managing Partner, sat down with Elwyn’s CEO, Chuck McLister, to discuss where they have been, where they are going, and what we can expect for the next 8–10 years. This interview has been condensed for clarity and space.

ABOUT CHUCK

Charles “Chuck” McLister is the President and CEO of Elwyn, where he sets strategic direction and works closely with the board to advance the organization’s mission. He brings extensive leadership experience in behavioral health and human services, having overseen programs in psychiatric care, addiction treatment, brain injury services, special education, early intervention, and support for individuals with intellectual and developmental disabilities. Chuck has been recognized with the 2023 Philadelphia Titan 100 Award and the City & State Pennsylvania Impact Award. Under his leadership, Elwyn was named the 2019 Non-Profit of the Year by the Delaware County Chamber of Commerce, and he received the Penn State Harrisburg Alumni Achievement Award.

Chuck is an active volunteer and philanthropist, currently serving on the Rutgers Health Leadership Council. He previously served on the boards of Bancroft Neurohealth and Hopeworks and held professional certifications in addiction treatment and supervision from the PA Certification Board. He holds an MA in Applied Psychological Research from Penn State and an MBA with honors from Villanova University. Chuck lives in Haddonfield, New Jersey with his wife, Elizabeth, and their three children—Madeline, Ian, and Charlotte—and is a proud Pittsburgh native and lifelong Steelers and Penguins fan.

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TOLAN: Hi Chuck, great to see you and glad you could join me this morning. By the way - are you at home or in the office?

MCLISTER: I'm at home. I'm in the office probably three days a week now. That's just a permanent change that occurred after we saw how effectively we were able to manage remotely during the pandemic. I was a big skeptic about remote work prior to COVID, but it’s worked so we've continued to use it. Overall, I've adopted a pretty liberal stance on remote work. In part because we're doing a major construction project on the campus and renovating buildings. We’re building a new school, and a new headquarters building, among other things. And so, we're going to lean-in to remote work for the support and admin staff, for probably two, maybe three years. Of course, the folks who do the work have never been remote, they've always been in-person. There are staff – nurses, DSPs, and counselors – who never shifted to remote work, they came in every day and put themselves at risk, so those of us who can consider remote work are fortunate.

TOLAN: Wow, you've seen so many things happen in the last seven and a half years. It's remarkable, the things that you've been through. I remember you and I talking about how you were navigating COVID in 2020. I think you were trying to do a workaround on some of the financing and dealing with bank covenants. As I recall, it got to be a bit of a bear.

MCLISTER: I remember asking for the financial results and key ratios before I was hired, just to get, like a financial ‘lab report’ on the organization. Looked okay. What I thought was going to be a strategic realignment was really a turnaround. We had developed some pretty bad habits. I mean, you were a bit of a witness to some of this too, between the board and my predecessor there was conflict, and that didn't just turn off when I joined, it persisted and then we got tested. We were first tested with the financial issues that had been brewing for a very long time and then COVID hit. So yes, it was different than what I thought it was, but probably the most impactful and important work that I've ever done. Elwyn changed me, and it continues to change me. I’ll be a different person after Elwyn. Better, I hope.

TOLAN: We were just talking about how you've navigated through and obviously COVID was a big deal. I know it impacted your organization in a lot of ways just given the residential programs that you have, so I wanted you to touch on this big project that I've been reading about.

MCLISTER: When everybody thought we were in this realignment phase, we were all focused on creating a strategic plan. Well, that approach simply failed to factor in the true condition of things. I love talking about the turnaround, because it allows me to contrast with where we are today, and to give you a little bit more color on what we were facing.

When we released our fiscal 2019 audit in May of 2020 –six months late – it showed an operating loss of over $11.6M and multiple debt covenant violations, including a coverage ratio miss. And then, prior to that, original audits for fiscal year 2017, I was there for just three months, and then 2018 —both had to be restated to show operating losses in each year. And, at the time, we had $97M of debt, including almost $40M of short-term draw, spread across multiple credit lines with different obligated groups, and it was not easy to follow. We replaced our auditors, obviously. Then, we consolidated all that with two main banks and one participant smaller bank, but we were still sitting on over $90M in debt. And when the short-term debt needed to be renewed for the first time, and we were posting losses, we knew we were in trouble. So, those were tough days. And with that, combined with the onset of COVID, the new auditors gave us a going concern opinion, and with the losses and with being late on finalizing the audit, S&P lowered our rating to “junk” status. Fast forward to today, we're double B plus, and in the best financial position in the organization’s history.

Despite the rating, our banks treat us as if we're triple B, and the new banks are great partners. And, this year, we think we have a good case for S&P when they do their surveillance in the spring to possibly get another upgrade and put us back into investment grade status. But we'll have to see, it doesn’t always play out the way you want it to.

TOLAN: Were these loans with the bank, were they going on the same financial data that you were going on?

MCLISTER: They were, yes. So those re-statements and 2019 were a surprise, and the loss of $11.6M was the real deal, and finally accurate. The turnaround was led by a new finance team, including Deb Paul, the CFO who joined Elwyn as part of an affiliation that we did. That year, we took our medicine. But, since then, we've been break-even or better, since Feb/March of 2020. That doesn't mean we didn't lose money annually in 2020 and fiscal year 2021, but we were stabilizing by the time COVID really hit.

As it turns out, when you look back at it, the uncertainty that people were worried about regarding the downside/worst-case scenario really became the opposite; providers received lots of cash, and there was a lot of support from customers in the industry. But because we were already changing processes, this was supplemental for Elwyn. We were already changing our fundamentals, and so we used those opportunities very differently than many of our peers.

TOLAN: So, in some ways, in kind of a weird way, the timing of COVID was a little bit of a gift. I don't mean that in a bad way, but I think the banks looked at companies differently and they gave them a little bit more of a break.

MCLISTER: You're right. It's hard to qualify the COVID crisis as good in any way because we lost too many people in the early days, before we had the equipment and rapid training. We lost far too many residents and staff at Elwyn in that first year from COVID, mostly in the first six months. So, it's hard to say that it was anything other than bad, but the crisis created an opportunity for us. But, a couple of things happened. One was that it gave us some cover to just pull in cash, to reduce spending, and just not reopen (and thereby eliminate) programs that were losing money. Some of these programs were culturally protected by the organization, historically. In the long run, doing this—while unpopular—benefited the organization and its mission. It helped our financial recovery, that’s for sure. In 2021, our old bank gave us time to take them out and replace them with the banks we work with today: KeyBank and Citizens—and those relationships are fantastic. Today we’re with banks that see our progress and value, and believe in Elwyn.

TOLAN: Plus, I recall you really got your arms around the whole revenue cycle piece, right?

MCLISTER: Yes, we did. That started in early 2020, and by reducing our accounts receivable, we put cash on the balance sheet and reduced debt. At one point, we had almost 90 days of outstanding receivables. Today, we’re at 40 days. That’s transformational for an organization like Elwyn. Also, this last year we had a 1% positive operating margin. First time in decades of audits; we never generated a margin of more than a couple of dollars, mostly lost money. So, 1% was a surplus of around $4M. And we think we're on track for 2% this year.

COVID also allowed us to do some things with financial support from the federal government and our customers by reducing our debt from $100M to about $40M. And as I mentioned, this also came from improving collections. We’re a different company today: we haven't drawn on the line of credit for more than a few days in over four years. Today, our net assets are over $100M, which is an almost 50% increase since 2020. We’ve reached half a billion dollars in revenue and are positioned for some rapid growth. I’d like to achieve $1B in revenues if we can, before I leave. The only way to do that is through acquisitions. Partnerships. So, we’re starting back up, and we’ve returned to that part of the strategy. A few years ago, we had to push the pause button on the campus stuff that we were doing and on any new acquisitions, but now we're in the best financial position of our long history. In fact, in 2027 Elwyn will be 175 years old.

TOLAN: So, correct me if I'm wrong, the organization was about $340M - $350M or so when you came in, is that close? So, you've grown it quite a bit, given all the stuff that's happening.

MCLISTER: Yes, about that. We've really done a good job with some of our older contracts, and the cost- reimbursed programs. The one we have in the city of Philadelphia for early interventions has grown significantly. The need has grown, and the program with it. We've also stabilized the cashflow from the campus programs and the school. And we have great top-line growth through rate increases and modest volume expansion. It’s happened naturally, as we’ve made improvements to the fundamentals.

TOLAN: When you came on versus where you are now?

MCLISTER: Yes, we made some tough decisions. One was to invest in ourselves, during the crisis. While we fixed, we also invested and added resources, amid the financial crisis. We didn't adopt a ‘scarcity’ approach. Instead, we resourced the finance team, we resourced in the IT department. Those budgets increased our overhead to 10% while, at the same time, we started to generate income and cash. So, there is an interesting, counterintuitive dynamic that when you're in trouble, throwing everything over the side of the boat isn't necessarily going to improve your situation. So, we were up and down during the pandemic because of the labor correction and the stuff that affected everybody, both during the pandemic and in what I like to call the pandemic hangover.

TOLAN: But you also did some top grading, right? You really stepped up and the level of some of the folks that are on your team – right?

MCLISTER: We did two things during the pandemic. The C-suite, except for the CHRO, has been with Elwyn for six or more years. Really the same as me for the most part. The new CHRO, Michele Deuterman, she joined us because Jennifer Stryker, who your firm placed with us, took a new role as Elwyn’s Chief Strategy Officer. It has just been one year and we're building a strategy department that will help us grow. She was a good fit because she's got broad skills and I knew she could adapt quickly. The rest of the team—Nikole Cabrey the CFO; Dave Bowers; Elwyn’s Controller, Chuck Naus the CIO; Len Kirby, the COO; and our longstanding general counsel, Regina MacKenzie—they’ve all been with me through the tough times, so this is a stable leadership team that is also, frankly, battle-tested. They can think through and handle anything.

And, of course, the board. The board I inherited—the one that hired me—was distrustful of management. Not necessarily of me, because I was new, it was more a cultural dynamic. Of the 20+ board members that voted to appoint me, only two remain. Today, the board is very stable, and has a lot of confidence in management, not just me, but the whole team. Overall, the officers set the tone, especially the chair. And the board chair today (and for the last few years), Jim Sebra, he sets the right tone.

TOLAN: So, when you look ahead, what's the biggest item on your plate for 2025?

MCLISTER: We’re launching Elwyn’s second strategic plan – second in that we had an original one in 2018. But we redid that plan during the pandemic in 2021, and now we're finishing it up this year, to launch the new one on July 1. And just last week, I reviewed the final draft with the board and they're going to vote on it on February 14th. Four pillars to drive growth and change.

The first one is top line growth—to approximately $750M, or even - $1B in revenue. And that's going to be through acquisitions, much of it. And then the rest through organic growth that is tied to another pillar, optimizing our property assets--which is the 175-Year Anniversary Master Campus Plan. So far, we've spent about $17M on new projects over the past few years, including children’s residential beds, behavioral health beds for young adults, education transition services for older students, and a new campus kitchen. So, we've been doing these little projects that are part of a bigger plan. And now, we’re ready to launch the bigger plan, and we have approval from the board and a development and construction partner for a new school.

A lot of big things around the corner. We're going to knock down the administration building and erect a new school on that site, which was the purpose of that site originally—a school—over 168 years ago. That’s a $47M project and then followed by probably another $30M - $40M in projects on the campus, such as replacing the administration building, and moving our bed count for children services to from 32 to 80+. Wealso want to do more adult behavioral health. There are growth opportunities there, but overall, this is a $100M+ Master Campus Plan.

In addition, there are parts of the campus that we don’t need for our services, but rather than sell those parcels outright, we want to retain control and consider long-term—maybe 50 to 75-years-- land leases. We’re looking for aligned and adjacent partners, like healthcare, housing, etc… It’s an interesting way to unlock the value of the land while aligning with the company’s mission. We would use these new revenue streams to fuel the other parts of the project, and add to that donations and grants, and we have a long-term plan. Over the last few years, we’ve built operating reserves, which we will treat as a cushion for the unexpected. It’s important that we don’t ‘raid the endowment’ for this project, but we reserved a part of it that's been earmarked for construction projects. But, the school is next, and it’s a very ambitious part of the plan that we hope to be cutting the ribbon in September of 2027, in time for the new school year.

TOLAN: Wow, how much landmass is there on the campus?

MCLISTER: We have 259 acres, and we believe we need 100 acres or less to operate. As we shrink our physical footprint, we’ll grow our service offerings. And then the rest of it is subject to smart development, or some open space preservation (maybe with organizations that would buy the land or pay to preserve it), or both. The right developer who will help us create a mixed-use ‘community’ that provides new revenue streams for Elwyn and meets the needs of both ours and the surrounding community.

TOLAN: It sounds like an ambitious plan, but one that you can pull off. And obviously for you to get to a billion dollars, you're going to have to do something.

MCLISTER: Affiliations. We've worked out what kind of affiliation partners we hope to attract. We think organizations between $50M - $100, have very solid operations, but probably a weak balance sheet. So, they will benefit from being part of a larger organization with a stronger balance sheet, and in turn, we will benefit from continued revenue and margin growth. But to pull it off, we need people inside the organization who are assigned to that kind of growth. Which is why we formed the strategy department. You can't just do affiliations in your spare time. That’s a very intentional effort; one you have to resource. So, you can imagine I said to the board, “if you vote yes on this plan, expect to see things in the budget that tie to these initiatives.” You can't execute a plan unless you resource it. So, I think they trust me at this point to find a balance between resources and efficiency.

TOLAN: Well, obviously, that leads to my next question that is some of the challenges that non-profit leaders are facing. And one is obviously, sounds like you've done or you're doing and that's securing sustainable funding and then being able to demonstrate results to donors.

MCLISTER: We’re keeping a close eye on the service-based funding, obviously. But another thing we’re doing is cultivating philanthropy, more than we have in the past. To do this, we have formed a new corporate structure, because today our structure is a little odd for a company of our size. Specifically, Elwyn’s fiduciary board, the parent board, is also the foundation that holds the endowment. That’s not the best practice. Many other organizations have standalone foundations that are controlled by the fiduciary board but have their own board to manage that endowment. So, we're going to try that. We’ve set it up initially with eight members, and hope to increase it to approximately 20. It might seem like an effort to create some cleaner governance, but it's also an opportunity for us to really turbo-charge our fundraising. The members of this new board are impressive, they have gravitas, but some might not have the time to serve on the fiduciary board. They understand how to build endowment funds and have fantastic business networks. By and large, they’ve been friends of Elwyn but haven't yet fully opened their networks to us, mostly because we haven’t created opportunities to do so until now. By becoming part of our board, one of their goals will be to grow our endowment, creating new fundraising opportunities and managing investments. We want it to become a personal mission, and I’m really excited about kicking it off in March.

TOLAN: What kind of a part does technology play in what you're trying to do?

MCLISTER: McLister: In 2019 I hired a new CIO that your firm placed, Chuck Naus, and he is still with us. We have found a great rhythm with each other because he is solid and steady. His first order of business was to clean up hardware and do all the things that aren't very sexy; build a behind-the-house data warehouse and get us onto the cloud for most things. We're halfway through installing an electronic health record. We're using Netsmart’s MyAvatar. We are replacing ADP with UKG, and iCIMS for recruiting and onboarding; and in 2020, we replaced our finance system with Oracle, so overall, from a technology standpoint, Elwyn is growing up. When it comes to major platforms that allow us visibility, we need to make some of these changes just to be competitive. And then there's the innovative and interesting stuff, such as smart homes and AI on top of your electronic health record, making it easier for clinicians. Things that will ultimately make us easier to use and create crystal clear lines of sight. I think it's a huge part of what we've done and what we will continue to do.

TOLAN: How far are you in the roll-out?

MCLISTER: Since we have three service lines, one is fully adopted, one is halfway adopted and will be done by the end of this fiscal year. And the last one, which is the biggest line, has yet to start. So that's why I say the full roll-out is a solid year away, starting in July and through the next fiscal year.

TOLAN: Chuck, a lot's happened obviously in the last week with what's going on in Southern California. And I know you have operations out there. Have you guys been impacted at all?

MCLISTER: Yes, I wanted to talk to you about California on two fronts. One of your questions was, “What's the greatest challenge?” And so far, we've fortunately not been impacted directly by the fires. So, I'll talk about that shortly. On the other front, Elwyn California, in general. Truthfully, we have not yet been successful in really turning that subsidiary around. And it's partly because nowhere was hit harder from a labor standpoint during the pandemic, from an employee standpoint, than in California. I mean, you have workforce issues everywhere, but nowhere like in California. You have people, you have flight, you have retention issues. You have companies raising salaries, the financial ‘correction’ for labor costs, and even before the pandemic, we were already on that. That was, in fact, one of our company-wide investments, we were steps ahead and spent most of our energy getting compensation right for our DSPs. But in California, it just didn't matter. You couldn't keep up with it. This year we finally ‘leaned in’ to the pay rates there, just because the situation was so bad, with so many vacancies. In the six years preceding FY 2024, we lost over $6 million. After increasing wages to a more competitive level last year, we received health and safety waiver funding to partially cover it, but that was never a guarantee, and it still doesn’t get us to break-even.

The rate increases helped, but without them, we could have lost even more. And as I said, that doesn’t quite get us to break even, it just keeps us from bleeding out. In general, the funding environment in California is strong, but the regulatory environment is complex, and unforgiving, and then the employees can't live near where they work because it's too expensive. We're paying $25 -$30 an hour for a person without a college degree and they don't feel they're rich, they feel they're just treading water.

And now, the worst fire crisis in California's history is a new issue that wasn't even factored into my concerns with the state previously. We haven't had any of our homes forced to evacuate yet, although I know Len [the COO] has been out there to be directly involved. He flew out Sunday night because there are six homes that we're watching very closely because of their proximity to the fires near Pasadena. We have about ten employees who've been evacuated and most of those folks have continued to work. Pretty amazing. Regardless, no one's going to be the same out there, it's going to be years, maybe a generation of impact from what's happening.

TOLAN: Well, that was my next question. You've talked about acquisitions, have you talked about divestitures?

MCLISTER: Yes, California’s struggles have come up with the board. So that's a viable plan B. We are testing the market and looking around. Divestment is a possibility, because if done correctly, it's addition by subtraction. We spend so much of our time on ECA, and it's still not breaking even and remains a loss in the portfolio. We could use our time and our resources for other things in the strategic plan. So that’s a difficult consideration, but one we have to make.

TOLAN: Then, if you do that in California, you’ll likely take a short-term revenue hit, right?

MCLISTER: We would, no doubt about it. And then as part of this growth plan, we want to grow by $100M, so we would essentially replace the revenue with acquisitions. If we could do a couple of those, then we're kind of back to the starting line, but a new starting line with a really different set of circumstances doesn’t include the risk that California represents for the team.

TOLAN: Well, you've kind of already stated where you want to go. I think that's a great goal in your ability to grow to $1B.

MCLISTER: I think the market is still very fragmented and full of mid-sized players. For example, Maryland is on our list of states that we would want to be in because of their progressive practices around behavioral health. Just recently, though, I heard a rumor that there was a budgeting error coming out of the human services department, underfunding the budget for this year. Now that it’s caught, the word is the department would have to live with it for the year.

There are a few big providers in Maryland, and they're going to be hurt, but will surely survive. It’s not going to be fun for them…but it’s the $50M organizations and even the $100M organizations that are at real risk, and they may be looking for life rafts. So, I think that there is some opportunity for us to engage there and do so while maintaining good quality. Upheaval and challenges create opportunities. We aspire to be big. Bigger. And I think the bigger we are, the more we can spread our administrative costs over the company and say yes to things that are good business decisions that you can make when you have some scale. And good for the mission. We’ll have to be focused and take advantage of some of the industry’s instability and disruption over the next few years.

I’d like to see it through. As for me, my contract is up on June 30th, and I hope to be renewed through 2029 and then move onto my next (and probably last) thing. That would be 13 years at Elwyn, which is a good run. That gives me enough time to finish many of the big projects on the campus, including the completion of the growth plan.

The other thing that I want to finish is changing the culture of the workforce and our employees. I am really excited about what our new CHRO, Michele, is doing to improve that department and make changes –the UKG installation; a new recruitment platform, iCIMS. We get better by just discontinuing bad practices, and so I feel good about the three-year plan. Of all the things, I think that's going to be the biggest and most lasting change – bigger than even the construction projects. If we can create a culture that retains people, that feels good to be a part of and pays enough, all of that is a competitive advantage. Yes, it's got a high degree of difficulty, and for that reason I don't believe our competitors are approaching it with the same boldness as Elwyn.

TOLAN: Well, you've apparently built a culture, Chuck, that allows you to have people such as Jennifer, your CIO, and others that have stuck with you for almost since you've been there. That says a lot.

MCLISTER: Yes, it's humbling and I’m grateful. The team is seasoned and, in many ways, truly exceptional. Couldn’t be prouder of them.

TOLAN: Yes. Well, when you look at everything that's happened since you started, what would you say is, in your opinion, the greatest accomplishment for you since you joined Elwyn as CEO?

MCLISTER: When I arrived, there was chaos – some that was self-inflicted and then there was environmental chaos that came from COVID. When we emerged, we had financial stability, leadership stability, and some measure of operational stability. We eliminated programs that were destroying value and grew ones that added value and aligned with our mission. So, it's not sexy, but I think creating stability in the oldest non-profit of our type naturally just positions the people who follow me someday to do truly amazing things.

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About Elwyn:

Founded in 1852, Elwyn is the nation’s longest-operating human services nonprofit of its kind, with more than 170 years of continuous service. Headquartered in Media, Pennsylvania, Elwyn supports individuals with intellectual, developmental, and behavioral health needs through a wide range of person-centered programs and services. As a pioneer in the disabilities community, Elwyn is the birthplace of many innovative service models and best practices that have shaped the field nationwide. The organization operates in several states including Pennsylvania, New Jersey, Delaware, California, and Massachusetts, and continues to expand its reach and impact. Elwyn also serves as a vital training ground for professionals, many of whom have gone on to make a difference in communities across the country. With a legacy built on compassion, innovation, and inclusion, Elwyn remains committed to helping every person it serves live a meaningful, fulfilled life.

About The Tolan Group:

The Tolan Group is a full-service human capital solutions firm recognized for their performance-driven placement services. Our talented recruiting team makes placements for executive leadership and middle management roles in healthcare services, healthcare tech, behavioral health, and healthcare tech. We find and place the ideal candidate for our clients in the shortest amount of time possible. 90% of TTGs clients use them time and time again as talent needs arise. We have a 98% completion rate and most of our assignments are completed in 8-10 weeks. We take the time to understand each client’s goals and thanks to our deep industry experience, we know where to find the best candidates to meet and exceed our clients expectations.