A Few Very Critical Lessons from a Retiring Nonprofit CEO

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May 22, 2015; Olympian

As Baby Boomers begin to retire from their long-term CEO roles with nonprofits, the best of them will leave behind their thoughts about what makes an extraordinary nonprofit executive. NPQ intends to reprint the best of these for widest possible distribution. Director Charles Shelan announced his retirement from Community Youth Services in Olympia, Washington, effective July 31st. He has several insights on what it takes to run a successful nonprofit.

  • Community Trust is Essential: In order to function successfully, nonprofits must have the trust and support of the communities in which they serve. A nonprofit board, as well as the staff, should be well trained and motivated. “Board members must not have any conflict of interest and should not enter into business relationships with the nonprofit.” Volunteers are also crucial to nonprofits; not only does recruiting volunteers help the organization educate the community, but it also gives residents purpose and buy-in to the charity.
  • Keep Overhead at the Right Size: There is no question that nonprofits have a significant amount of labor needs, and that this is where a lot of expenses are focused. Technology can help to improve efficiency, but should not substitute for personal relationships. Debts should be kept to a minimum so that funds can be used for direct services. Any large purchases should be made through capital campaigns or bonds. Administration costs should stay between 12 and 20 percent.
  • Focus on Human Capital: Nonprofits need to decrease staff turnover so as not to lose funding to recruiting, hiring, and training new staff. “Ways that nonprofits can improve retention include: paying a living wage, providing adequate benefits including retirement, providing ongoing training and evaluation, holding staff to high standards, and supporting and encouraging staff.” With the funding and resource climate of the nonprofit sector, organizations need to work together and not in silos. Strategic partnerships need to be developed.

While Shelan’s points may seem obvious, they are often breached by nonprofits. For instance, his point about board members not entering into business relationships with the nonprofit is often negotiated away in bits and pieces, taking with it reputational resilience. A good example of this may be found in a recent NPQ newswire about DuPage College in Illinois. Shelan’s points about human capital could be the basis for a book. Without fairness to staff there can be no engagement, and without engagement the organization will function at a self-limited pace as people guard their energies for other scenarios that value them to a greater degree.

We are grateful for Shelan’s guidance both to those who are taking up new mantles and those that want to do better in the positions they already occupy.—Erin Lamb


  • SophieB

    Having been a CEO of a community nonprofit myself, I agree with most of Shelan’s insights, but must take exception to a couple of items. Business relationships with Board Members need not be avoided when they are advantageous to the nonprofit. Free or reduced legal fees, public relations campaigns, facility management to reduce operating costs were all services that my nonprofit received from Board Members–all of which would have cost the organization a good deal of money otherwise. And, while there is no question that right sizing overhead is important, suggesting that it should be between 12 and 20 percent continues to perpetuate the nonprofit starvation cycle. I admit making sure that overhead did not appear to be over 20 percent, because a major funder insisted on it. But, recent estimates indicate that to really be efficient and effective, generally requires a rate between 25 and 35 percent, with legitimate exceptions for some organizations being even higher.

    I do wholeheartedly concur with Shelan’s guidance with regard to staff. A nonprofit is only as good as the staff, so supporting them in a myriad of ways is absolutely essential. Besides the intangibles of showing them respect and valuing what they bring to the organization, providing them with the resources necessary to do their jobs well, means having a strong infrastructure–which often results in increased overhead too.

  • Cynthia Shields

    Keeping Overhead At The Right Size and Focus on Human Capital advice are in conflict with each other. To me, it would be impossible to use 12 to 20 percent as the measurement of overhead cost as a recommended goal. It is impossible to run a TV station with an overhead of 12 to 20 percent. There is no room for innovation or investment in developing new projects and methods. Trying to keep overhead under the 25% recommended by United Way makes it necessary to run Development Departments too lean to have the necessary relationships with donors that major donors expect.