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Tuesday, August 3, 2021

Encompass Advances with A New Rating on Leadership, Strategy, and Adaptability; Invites Nonprofit Storytelling

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.

Today, Charity Navigator launches the final of four beacons that comprise the Encompass Rating System. This first version of the Leadership & Adaptability beacon will provide donors with insights into the strategy, leadership and adaptability of nonprofit organizations.  It draws upon the deep reservoir of thinking and lived experience of nonprofit leaders and experts in the field of leadership and strategy to deliver key data points that allow nonprofits to demonstrate their strategic thinking and goal setting, their leadership activities and development, and their stories of adaptability in this tumultuous pandemic year. 

This latest release occurs a year after the launch of the Encompass Rating System that scaled the number of nonprofit organizations rated from 9,000 to over 160,000, while still focusing on Finance, Accountability and Transparency metrics.  From the beginning, the intention for Encompass was not only to cover a much broader range of organizations, but also to deepen the analysis well beyond the traditional domains that Charity Navigator evaluates. Our progress towards this goal has been steady this year, living into an agile frame of methodology development with more rapid releases and adjustments:

  • October 2020 - Encompass Beta V2 launched. Charity Navigator announced the acquisition of ImpactMatters and launched the Impact & Results beacon utilizing the ImpactMatters methodology and data acquired.   
  • March 2021 - Encompass Beta V3 launched with the first version of the Culture & Community beacon focusing on Constituent Feedback practices and a second version of the Finance & Accountability beacon.

With this 4th release, Charity Navigator also pulls the Encompass Rating System out of Beta connoting our belief that an Encompass rating provides donors with an increasingly sophisticated rating and information to assist them with charitable decision making.  This doesn’t mean that Encompass won’t continue to evolve.  It will. A lot. Our current plan is to do three releases each year for the foreseeable future.  Some releases will only make minor adjustments while others will address whole new domains.  More condensed release periods allow nonprofits to positively affect their rating on a more ongoing basis and provide donors with up to date information about their favorite nonprofits.  

The methodology development process for each release is extensive, even more so with a domain that is new to Charity Navigator’s ratings system like Leadership & Adaptability. Our process involves countless hours of interviews with experts in strategy and leadership development and amazing leaders from high performing nonprofit organizations.  Our team also engaged the Consultative Council of Nonprofit Leaders and our Ratings Expert group to test ideas about what metrics to include in the methodology.  We also survey donors and nonprofit leaders to understand their preferences in which metrics they value most. Charity Navigator performs this intensive engagement and listening process to yield the most informed methodology that we can produce.

Let’s explore the results of this process and what’s in the first version of the Leadership & Adaptability beacon! 

1. Strategy: Nonprofit organizations provide insights into their  strategic thinking and goal setting.

In business school, classes are based around discussion of cases in which students are graded on whether they can present a succinct, cogent argument about the issues presented in cases developed  by the Harvard Business School.  The cases read like formulaic serial novels, each with the same opening: A manager whimsically stares out their office window perplexed about some organizational challenge. The protagonist is carefully considering their options. The potential solutions lend themselves to a classroom case discussion. Students vie for classroom air time and are taught to build off of one another’s comments. Why have business schools so heavily relied on a pedagogy focused on story-telling and the Socratic method?  

One answer is that this form of education yields managers who have honed their strategic thinking capabilities. The most important task of leaders and managers is to shape the mission, vision, and strategy, align and mobilize resources to that strategy.  In our day to day work in social change organizations, do we create the time for stepping back and looking at our organizational challenges from multiple perspectives?  Do these conversations happen only around 5-year strategic plans?  3-year or annual program planning cycles?  Do they happen at all?  

Our first metric looks for evidence of strategic thinking in the form of a mission, vision and strategic goals. While many nonprofits can pull these directly from  a strategic plan, we realize that not all organizations have a strategic plan. But most can and should be able to articulate the purpose and primary goals of the organization. 

2. Leadership: Nonprofits organizations provide insight into their organization’s investment in leadership development and mobilizing resources for their mission.

Our interviews with leaders of high performing organizations affirmed two main points: 

  • Leaders have an external orientation, and mobilize external resources and engage networks of support to deliver on the mission.  Missions aren’t just achieved through delivering effective programs, but also in other external engagements such as partnership and network building, policy advocacy, and other activities that raise awareness.
  • Organizations invest in developing leaders at all levels. Those investments aren’t always in the form of formal leadership development training, but can show up in activities like performance reviews and more informal coaching and encouragement.

3. Insight into how the organization adapted to tremendous change in the last year.

Each nonprofit organization experienced tremendous forces in the last year with the health and economic crises of the pandemic. Some experience a growth in demand for services or a drop in revenue or both. Many organizations also initiatied substantive change on racial justice issues responding to the national reckoning after the murder of George Floyd.  Each nonprofit has a story to tell about how they adapted.  We want to provide the opportunity for the organization to share that story to donors.

As you can see, Leadership & Adaptability is a much different domain and set of metrics than we have ever included in the rating system, but from all that we heard on organizational performance, strong leadership is the key ingredient to success. Donors want to invest in nimble organizations with strong leaders who devise and deliver on effective strategies. The Leadership & Adaptability beacon allows nonprofits to tell their stories to provide the critical insights that donors seek to make the best possible giving decisions.  


If you would like to read more about our methodology click here for our ratings brief that we include with each release to explain our metric choices.


If you are a nonprofit organization who did not have an opportunity to submit your Leadership & Adaptability answers to us, you can go to our new Nonprofit Portal.  We’ll publish your answers and change your rating in our next release in early October before the giving season.  

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

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