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Monday, August 23, 2021

As Encompass Matures, Making Meaning from the Rating System

Written by Stephen Rockwell, Chief Ratings Technology Officer at Charity Navigator. Stephen leads the team of charity analysts, program specialists, and development engineers that launched the new Encompass rating methodology and criteria.

Charity Navigator launched the Leadership & Adaptability beacon this month, filling out the fourth and final domain within the Encompass Rating System. The new beacon provides donors with data on the leadership capabilities of a nonprofit organization in regards to:

  • Strategy - Strategic thinking and goal setting. 
  • Leadership - Description of how the organization mobilizes on their mission and develops leaders.
  • Adaptability - Stories of how organizations changed and evolved during this tumultuous last pandemic year.  

With the launch of this beacon, Encompass is out of beta (or, the testing phase) and moves into an official rating system from Charity Navigator. Encompass will continue to evolve and grow with three releases each year for the foreseeable future as we add (and perhaps take away) metrics and evaluative domains.  

This significant milestone provides an opportunity to explore the multiple ways in which donors may make meaning from Encompass and the beacons that make up the rating system.  Indeed, one of the primary benefits of the Encompass Rating system is that it communicates nonprofit performance across multiple domains.  Donors can choose to focus on the overall score or any one of the beacons or some combination thereof.  For example, for donors that trust the finance and accountability and transparent metrics of our Star Rating System, they may want to focus on the Finance & Accountability score. Others may focus on all or various components of the Leadership & Adaptability beacon, such as the quality of strategic thinking found in the strategic goals.  As we release new domains and metrics, we share deep dives into how donors can leverage them in decision-making.  For now, let’s focus on the meaning of the overall Encompass rating. 

The top-level Encompass Rating seeks to communicate a sense of trust, sustainability and results so that donors may “Give with Confidence.”  Under the hood, the focus is very much a shift away from only evaluating Financial and Accountability and Transparency (A&T) metrics as we have historically in the Star Rating System. Rather, an Encompass rating considers:

  • Total Impact - Measurement of impact in achievement of outcomes and community benefits.

Direct Program Impact - Achieving outcomes through programs run by the nonprofit organization.

Community Benefits - (often called indirect impact) –  Other social benefits (or costs) that the organization generates that Charity Navigator deems as valuable to donor decision-making.

  • Enablers - Evaluate organizational attributes that enable future and sustained success.

Capacity Metrics - Practices that support the nonprofit’s infrastructure, creating capabilities to better deliver on their mission, improve program quality/efficiency, or expand their reach into the future

Organizational Effectiveness Measures - Indicators that the nonprofit is healthy and implements sound management practices, and thus is more likely to achieve goals/outcomes into the future.

Note that finance and A&T metrics are included, but we look at such capacity and effectiveness metrics to determine the likelihood of sustaining the impact and community benefits into the future.  This is a profound shift in what meaning we hope donors will derive from the rating. 

Implications For Our Rating Development
Charity Navigator is making these changes in order to serve donors, almost all of whom tell us they want to support nonprofit organizations because they believe in the mission of the organizations to which they give and want to see that mission achieved.  Put simply, donors most often give because they want to make the world a better place. Our rating system ultimately aims to support donors' desire to make an impact with their dollars.

Methodologically, Charity Navigator will be asking ourselves these questions for existing and future metrics. 

  • Does the metric answer: “Will this nonprofit achieve their mission, the change the donor wants to see with their donation?” We will evolve our metrics until data show that ratings are providing donors the best possible answer.
  • Is this domain/metric an enabler for future and sustained outcomes achievement? Does this create the enabling environment for keeping those impacts going into the future? 
  • As emergent community benefits metrics are considered, we need to decide their value to donor decision-making and how best to measure.  

We will keep these questions in mind as we continue to build Encompass, experimenting and learning together as donors, nonprofits, and experts who all work together to see more good happen in the world.

Written by Stephen Rockwell, Chief Ratings Technology Officer at Charity Navigator

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