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Wednesday, April 29, 2020

The Road to 100,000

Written by Stephen Rockwell, Chief Ratings Technology Officer at Charity Navigator. Stephen is leading the team of charity analysts, program specialists, and development engineers that will launch the new rating methodology and criteria. Read the first installment in this series, An Invitation to Experiment and to Learn With Us

One of the most important goals of our new experimental rating system is to scale to 100,000 nonprofits, from just over 9,000 nonprofits presently rated in our current CN 2.1 star rating system.  This strategic goal is vital because it acknowledges that many nonprofit organizations that are doing incredible work are excluded from Charity Navigator’s current rating system. This is due to the fairly strict barriers to entry, and the criteria skews against the evaluation of different kinds of organizations, especially newer and smaller nonprofits.

We also know that many individual and institutional donors rely on our ratings to assist them in their giving and philanthropic investment decision-making.   Some donors report that they decided against a gift to an organization they were considering because we did not have a rating for them. This is an unintended consequence of developing a ratings system that has gained wide acceptance by the donor community.  We can fix this issue through scaling the number of organizations, thereby giving donors visibility into a much wider swath of the nonprofit community.  And we intend to fix this in a substantial way. Our CEO Michael Thatcher set the audacious goal for the Charity Navigator team: rate 100k nonprofits this year!

Inherent Challenges in Getting to Scale
Our team set out to meet that goal, addressing the challenges of achieving scale.  In 2004, J. Gregory Dees, Beth Battle Anderson, and Jane Wei-Skillern published an article in the Stanford Social Innovation Review, identified five questions that challenge social entrepreneurs when finding the path to scale:
READINESS Is the innovation ready to be spread? 
RECEPTIVITY Will the innovation be well-received in target communities? 
RESOURCES What resources, financial or otherwise, are required to get the job done right? 
RISK What’s the chance the innovation will be implemented incorrectly, or will fail to have impact? 
RETURNS What is the bottom line? Impact should not just be about serving more people – it should be about serving them well.
Let’s use this framework to think about our challenge of scaling Charity Navigator’s Ratings.

Readiness – A Core Capacity in Evaluating Nonprofits
In my last blog, I recounted our history that led to our core capacity in evaluating nonprofits.  Much of this capacity is focused on evaluating financial, accountability, and transparency measures.   Our first scale indicator will focus on these indicators to leverage that core strength.  However, we will add measures over time to provide a more all-encompassing view of the nonprofit and its activities.  For example, we currently render partner data on the impact that 30,000 nonprofits are making on the world.  We intend to deepen our analysis on impact to help donors gain insights into the difference their gifts are making.

Receptivity – Demand from Donors and Nonprofit
Charity Navigator is building new ratings products and scaling because of the demand from all players in the philanthropic marketplace.  Nonprofit organizations want their mission and work recognized on Charity Navigator, knowing that many donors utilize our ratings as a component of their decision-making.  Donors may search for a nonprofit and find that a local organization of particular interest to them is not rated.  In both of these instances, we often hear from donors and nonprofits requesting a rating or an explanation as to why they’re not.

Resources – Investment in Automation and Other Technical Capacities
Scaling often means creating the capacity to automate tasks that were previously done manually.  In the early days of our organization, staff and volunteers manually entered IRS 990 forms into a database, creating a real bottleneck in the rate at which we could rate organizations.  Over the last many years, Charity Navigator invested in automation of ingesting and categorizing data.  We will continue to experiment with analytical and artificial intelligence tools that automate our processes in order to deliver on high-quality ratings that encompass an increasing number of attributes of organizational efficacy.

Risk –  Why Not Expand the Current System?
So, why not just scale the existing system instead of taking on the risk of building a new set of measures? The easiest answer is capacity.  With our small team, we would not be able to scale without automating the generation of a rating.  In our current practice, our very capable team of analysts reviews each organization in-depth as they build each rating, using judgment in tasks like determining how to place the nonprofit’s work into a particular cause.   Because we won’t be able to put our analyst eyes on every rating at a scale of 100k, our systems will not be able to account for those kinds of nuances.

We shifted the work of our team a bit to building a rating system that distills our initial rating to a few items that could be automated. There is inherent risk in creating something new that’s purely based on automation, in that we will miss nuances and IRS data may not be as well put together as a nonprofit would like.  We will build opportunities to learn and self-correct.  And to be clear, the initial indicator will not be as robust as our current star rating system, but provide a more baseline validator of nonprofit organizations.

Returns – Scaling While Also Providing Measures that Encompasses a More Complete Picture of the Nonprofit
While we want to scale, we also intend to improve the quality of our ratings through experimenting with new measures that encompass various aspects of organizational effectiveness. This experimentation will take place outside the star rating system so that we don’t immediately affect the ratings of currently rated nonprofits that rely on the star rating in their fundraising efforts. Through experimentation and learning from user testing and nonprofit leaders, our goal is eventually to bring our rating system under one umbrella with robust data delivered in simple to comprehend visuals.

Look for our first scale indicator for a public beta launch in June, followed by other indicators later in the year.  We look forward to hearing your feedback as we build out this new system. 


Unknown said...

I admire and appreciate your on-going efforts to improve and expand your ratings . Charity Navigator is my go-to source for information about a charity. THANKS.
D. Milotzky

Unknown said...

Eagerly waiting to see what you develop. Hopefully the coverage of the organizations you currently cover remains as robust as current while the new methodology is rolled out

Unknown said...

I look to Charity Navigator first to decide if I wish to donate to a charity. I am one of the constantly frustrated donors when the charity is not rated. If a charity is local I can find out more about it by being more involved with it. If I get a request for a donation and it is rated I often think that the charity already is well supported, and shouldn't I be donating to the smaller, unsung ones? I heartily look forward to increased charity ratings.
At this point in our country they all seem to be hurting from decreased donations.I only wish I could donate more.

Unknown said...

This is very good news, as some of my favorite charities are small and unrated. My email is donnawarlick@rocketmail.com. The one below is incorrect. Thank you.

Pat said...

This will be very much appreciated by both businesses and contributors. I believe we all want to help someone doing something for a purpose we appreciate. Feeling comfortable 'That Someone' is or will no doubt be successful in their approach to meet the goal we desire is a great impetus for helping them with our contributions, small or large with the result of satisfaction/thankfulness for all participants.

Unknown said...

We are a small nonprofit but we are having an impact in our community where transitional aged foster youth in our program graduate from college at 8 times the national average. So we would love for you to expand your criteria so we qualify to get this rating. Keep us all posted, thank you, Emily Ballus, Mary Graham Children's Foundation.

Unknown said...

I base all donations on salary of CEO/President - no donations if salary above 99,999.99.

Unknown said...

Your approach sounds well thought through. The information you provide is invaluable in making decisions about how best to invest philanthropic dollars. Thank you!

Unknown said...

I will be eagerly looking forward to it! There have been charities I wanted to donate to but found no rating on your site. Now I hope to see them and make a more informed judgment. Onward!

Geno said...

Looking forward to it.

Unknown said...

I am among the many people who rely on Charity Navigator to make my decisions on charitable contributions. So, I applaud your plan. Even with no Charity Navigator information, I still make decisions after reading all the information on some small group websites. I think a lot of small groups will be encouraged by this decision. Many of them work very hard on whatever the chosen problem they want to control/reduce/eliminate. This will open their charity to a larger group of possible donors.

Barbara Beck said...

Thank you for expanding. I know it is a stretch for your organization, but you state the exactly correct reason: more nonprofits will have the benefit of the Charity Navigator mark on their work.

acseligman said...

This is very interesting, and I'm delighted as I just made a donation to a local organization despite some misgivings since they were unrated. But the 990 looked reasonable. As I read this post, though, I remained confused about what you're actually going to do to enable scaling by 10 times. Clearly, just automated digitization of forms is not enough.
Good luck, and I look forward to your continued success.

johnharnly said...

Good article and looking forward to seeing ratings on the smaller charities. My only thought is - "don't throw the baby out with the bath water". Too many times, companies have jettisoned a functioning system for a new system without vetting the new system adequately. I would suggest you keep the current rating system for at least a year or better and compare results from both systems to ensure consistency and integrity. Ya'll are doing great. Keep up the good work.