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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. 

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