Podcast | How Charity Navigator Is Leveling the Nonprofit Playing Field

In the highly competitive nonprofit world, your organization needs a way to show that you’re a high-performing charity in your sector. Similarly, it can be hard for donors to find nonprofits that align with their values. Charity Navigator stands as a unique solution for both.

Charity Navigator is the nation’s largest not-for-profit rating organization. For more than 20 years, the free website has rated charities based on their 990 tax form information. However, recent changes to the rating system are giving users a more holistic view of a charity and leveling the playing field for smaller nonprofits.

In this episode, we’re talking with Laura Andes, Chief Program Officer for Charity Navigator, about the changes. We’re also joined by Amy Warren, Associate Vice President of Product Solutions at Pursuant and Allegiance Group. 

How Does Charity Navigator Work?

Any 501c3 nonprofit that has filed a Form 990 for three years in a row is automatically rated on Charity Navigator. That’s a database of approximately 207,000 charities. Donors, foundations, and media can then search the site to learn more about a specific organization.

It’s an especially great way for donors to make an informed decision on where to spend their charitable dollars. Charity Navigator makes it easy for them to find an organization that makes an impact.

It’s like the Better Business Bureau of the nonprofit world. Organizations can put the website’s logo and rating information on their fundraising communications to assure donors that their support is well-placed. 

What’s Changed in the Charity Navigator System? 

For 20 years, Charity Navigator has focused on finance and accountability: Is the organization financially healthy? Does it have good governance practices in place? This information told a helpful but limited story.

In 2020, the website launched a new system called “Encompass.” It reimagines the charity rating methodology and puts impact at the center.

Nonprofits are now rated based on their performance in four areas or “Beacons:”

-       Accountability and Finance

-       Impact and Results

-       Leadership and Adaptability

-       Culture and Community

The result is a holistic system that provides more information to donors and helps them find charities that align with their values. It also tells a truer story about nonprofit effectiveness. 

What Does This Mean for Nonprofits? 

The new rating system has brought more engagement from nonprofits who are taking a more proactive approach to updating their Charity Navigator profile. Basically, there’s now an opportunity for nonprofits to narrate their story and boost their prominence on the website. This gives greater insight and relevance than the previous focus which was purely financial.

Through the new Encompass system, Charity Navigator has also launched a Community Choice Award to spotlight nonprofits on the site. The PAN Foundation, which provides financial assistance to help people with serious illnesses afford their treatment costs, is the inaugural award recipient.

Perhaps the biggest benefit for nonprofits is that the rating system puts all organizations on an even playing field. So, charities that don’t have large marketing budgets can still receive a high rating and be found by donors.

There are other opportunities on the website for nonprofits as well, such as being listed on recommendation lists for various crises or on “Best Charities” lists for key categories of causes. It all adds up to Charity Navigator’s mission of making impactful giving easier for all.

Want to hear more? Listen to the full episode:

Transcription

Leah Davenport Fadling: Welcome, everyone, to another episode of Fundraising Today. We're talking all about Charity Navigator and some of the changes that have been made to its rating system that are really exciting for nonprofits and donors alike. We've got a couple of experts with us today to dive into what those changes are and how your nonprofit can prepare to meet them and be ready in this brave new world of the Charity Navigator rating system.

So, without further ado, I'm excited to welcome Laura Andes to our show today. Laura, I would love to know a little bit more about your role at Charity Navigator. Some of your background about what your career was like before you came to work for Charity Navigator and any other details you'd like our viewers and listeners to know about today.

Laura Andes: Hi, everyone! Hi, Leah! Thanks so much for having me on today. I'm so excited to share some of the big news coming out of Charity Navigator. I'm Laura Andes, I'm the Chief Program Officer for Charity Navigator. That basically means I'm in charge of our ratings and our ratings methodology.

I have worked in the nonprofit and government sectors my entire career. I've worked in international development, affordable housing, and human services. It's really great to bring all these skills to Charity Navigator.

Leah Davenport Fadling: We also are thrilled to be joined by Amy Warren today. Amy and I have enjoyed working together at Pursuant and now Team Allegiance at the Allegiance Group for many years. Can you tell us a little bit more about your role at Pursuant and your experience in the nonprofit space?

Amy Warren: Thanks for having me today. I am the Associate Vice President of Production Solutions at Pursuant and Allegiance. So, that means I live in the direct mail production world. Love the environment. I love that I get to work with all of our clients and serve alongside our agency teams and clients in managing all of the direct mail production, strategy, and execution.

Leah Davenport Fadling: I'm excited to have you on this conversation today because I've never gotten to talk about direct mail with you on the podcast, so that's still TBD. But you were able to attend a webinar with Laura, where you walked through the Charity Navigator rating system and some of the changes being made to it. And I know that you got a lot of value out of that, and that was something that you were really passionate about bringing to our agency team. And I'm really excited to dive right into our conversation.

So, Laura, let's start with you. Could you explain who Charity Navigator is — for folks who are maybe new to the nonprofit space, or they’ve heard of it, but they haven't really been involved with it — and what types of nonprofit organizations Charity Navigator evaluates?

Laura Andes: Charity Navigator is actually the nation's largest, not-for-profit rating organization. We're a free website that's been around for 20 years. And if you're a 501c3 nonprofit, and you filed a 990 for three years in a row, you are automatically rated on Charity Navigator. So, we rate about 200,000 charities. And it's a place where donors, foundations, and media come to look and get basic information about a charity and basically find out if a charity is a high-performing charity in the sector.

Leah Davenport Fadling: Having a place where donors, media, and the general public can learn from an independent third party about the effectiveness of an organization is so valuable. Amy. I'd love to hear a little bit more from you about your relationship with Charity Navigator, and how we talk about it with our clients and your industry knowledge of the organization.

Amy Warren: Sure. So, Charity Navigator is universally known, we found, and very highly respected by all of our nonprofit clients and partners. They're the Better Business Bureau of the nonprofit organization. Not sure if that's fair, Laura, but that's how I think of it. Most of our clients have very high ratings and are very proud of those ratings.

And we typically will print the Charity Navigator logo and their star ratings on all of our direct mail communication and fundraising information. And it's really a great way to even the playing field and condense a lot of different information from different organizations and charities into a format that's easy to understand and digest, and is really a great tool for the charitable people all through our nation, and really making informed decisions on where to spend their nonprofit dollars, and really where they can find an organization that makes an impact.

So, Charity Navigator is a really great organization that levels the playing field and serves as a very beneficial resource to those who are interested in making sure their charitable donations go to a worthy organization that fits their values.

Leah Davenport Fadling: Yup, I think that's such great context to have. Laura, one of the things that's really exciting is because Charity Navigator is this place where people go to learn about nonprofits and learn about where they can potentially make the biggest impact with their with their dollars, it was really important to sit down and think about how we evaluate nonprofits, because if the framework is not necessarily setting nonprofits up for their most optimal success, it can, it's may not be a helpful framework. So, you guys have recently made some changes to the charity navigator system, and I'd love to get an overview of kind of what those changes are, why these changes were necessary, and what prompted the shift.

Laura Andes: Thanks, Leah, and thanks, Amy, for that great overview of Charity Navigator from your perspective. That was great to hear. I like to joke that if you haven't been paying attention to what Charity Navigator is doing and how we've been rating, you might find it very unfamiliar compared to maybe even a few years ago.

We've been in the business for 20 years. And for the first 20, we really focused on finance and accountability. So, was the financially healthy organization, and do they have good governance practices in place? It was basically off an organization's 990 and told a helpful but a limited story of nonprofit effectiveness.

We often are rightly criticized for including a pretty heavy emphasis on overhead or program expense ratio, and that was a poor part of our rating for a long time. We've since shifted away from that fairly dramatically, and we have a whole new system that we have. We launched in 2020, and then we've continued to evolve over the past three years, which we call the Encompass system. And it really reimagines the charity rating methodology and puts impact in the center.

So, we still have a foundational Finance and Accountability, what we call “Beacon,” but we've added three other beacons that we think are really necessary to be an effective organization. So those additional beacons are Impact and Results. So, we do try, for those who are eligible, to actually rate organizations on Impact, Leadership, and Adaptability, which looks at, “Do you have the basic leadership, strategy, and adaptability principles in place?” And then Culture and Community, which currently rates on equity practices and whether or not you solicit feedback from your beneficiaries, which is a key marker for quality. So, we now have this holistic system that provides so much more information to donors, helps them find things that are more aligned with their values, and, I think, tells a truer story about nonprofit effectiveness, and if a nonprofit is effective than we did a few years ago.

So, that might seem very different than what you remember because it is, and it's a much broader system.

Leah Davenport Fadling: Have you already seen shifts in how nonprofits talk about their impact, or how nonprofits communicate with their donors based on these changes to the system?

Laura Andes: I think so. We've seen really great engagement from nonprofits, and they've really taken the time almost to curate their own rating a bit. So, under Leadership and Adaptability, there's a great place where you can tell a story about how you've adapted to a challenge. And a lot of them, we got some really great stories about COVID, but then also other challenges that nonprofits face. So, there's this opportunity for nonprofits to craft the story that they want donors to hear on our site.

And then, of course, Impact and Results, which we are building out the methodology, so not everyone is eligible. But for those nonprofits, we give a Cost Effectiveness Score. And that's almost like getting a free third-party evaluation for your work. And so, those nonprofits that score really highly, I think that that's often the lead in a lot of their literature, about how effective and cost-effective they are. So, it's really exciting to see how nonprofits are being creative and how they can present themselves on our site in a way that I don't think was possible a few years ago.

Leah Davenport Fadling: I love that. Amy, one of the things that we spoke about in some of our prep conversations for this podcast was that charities can now narrate their story and boost their prominence on the Charity Navigator site. I'd love to know a little bit more about your perspective there.

Amy Warren: Sure, yeah. So, that's a really exciting update to these new ratings, because now, nonprofit organizations have the tools to communicate their impact more directly to their supporters and potential donors. So, charities can now be proactive in explaining their mission in their own words, as Laura mentioned. They can celebrate their impact and results and share details about their organizational leadership and strategy, instead of relying only on those, kind of, colder financial metrics.

So, I think this shift really provides greater insight and relevance to donors over the previous purely financial focus, which may not accurately convey the value of the organization or the mission impact as directly and as fully as this new beacon system can.

Leah Davenport Fadling: Yeah, I think shifting away from the cold, hard numbers was a really important change to make because, I believe that there have been certain kinds of unfavorable stories from some media organizations written about nonprofits focusing on the way that they invest in their nonprofit, whether it's with overhead or salaries or anything that someone who's outside of the story can criticize and draw some unfavorable conclusions. And so, I think that offering nonprofits the opportunity to talk about more than that is really key and valuable, because, as we know, sometimes, things that are on paper don't tell the full story of how a nonprofit is effective and how it's investing in its mission and its people and its broader impacts on the world.

Amy, there was a great story that you wanted to tee up about some real-life examples of how this new beacon system has impacted some of our clients.

Amy Warren: We are really excited to be celebrating with one of our clients, the PAN Foundation, who recently won the Charity Navigator’s inaugural Community Choice Award. So, this award, in addition to the PAN Foundation's perfect four-star rating and assessments on all four of the beacons, assures donors that their philanthropic giving will benefit a nonprofit that's focused on integrity, operational excellence, and commitment to their patients.

So, we at Pursuant and Team Allegiance are very excited for the many impactful organizations we work with to receive similar recognition and affirmations from Charity Navigator’s Effectiveness Assessments. And of course, it's great PR when an organization is able to tell the community and tell their donors that they are a Community Choice Award winner.

Leah Davenport Fadling: Absolutely. It reminds me so much of the importance of technology and having the five-star rating on something. People nowadays, I think, even more than ever rely on reviews and ratings to make informed decisions. You can see evidence of that in all the paid review campaigns that you see on sites like Amazon. For better or for worse, we're definitely a society that has come to really rely on reviews. And so, to see nonprofits like PAN Foundation and some of our other nonprofits that we work with being able to be rated well in these beacons is something that's really exciting to see.

Laura, I'm curious. Anytime you change a framework in this kind of a monumental way, there's going to be some barriers to fully scaling it up, and to nonprofits who perhaps maybe ran themselves in a certain way or were reliant on the old system. So, I'm curious to hear some more about the journey to ramping up to this new rating system, and how nonprofits can make it easier on themselves to get on board of this new system.

Laura Andes: It's a really great question. We are really trying to just get the word out to nonprofits that they are rated. And they have this new opportunity to craft the rating in a way that allows them to tell a story on a lot of different metrics than the cold, financial health and accountability metrics.

So, the first thing is letting people know, and letting people know that this is an option out there. We rate 200,000 organizations. That's a lot. Many of them aren't as familiar with Charity Navigator. We do have others who, they have us on speed dial. And so, we do want to level the playing field so that everyone knows [and] has this equal opportunity. So, we're trying to get the word out.

And then, second, we do have a nonprofit portal that's pretty easy, where you can go in and complete the assessments. It takes, depending on your organization, maybe up to an hour, once a year. And then your site is up to date, and you can use that throughout the giving season.

We also partner with Candid GuideStar, which also has their own information that they collect, and they share some of that data with us. So, if you've already completed most of your Candid GuideStar profile, your data already flows over to us, and you don't actually need to do very much at all. So, we're looking for ways to make it a lot easier for nonprofits to engage with us so that they can all benefit.

I love hearing about the PAN Foundation, because our mission is to make impactful giving easier for all. And one of the ways we can do that is by finding the PAN Foundation and lifting them up and profiling them on our site in a way so some donor who, that's their cause, can really connect with them. So, we're really trying to find ways where we can really lift up these nonprofits, the effective ones, and highlight them to donors.

Leah Davenport Fadling: I also think that this rating system gives nonprofits a lot more freedom to talk about the story of their organization and the impact that they're making in the world. And so again celebrating the changes that have been made there.

So, Laura, one of the key goals of Charity Navigator’s new rating system is to help donors make smarter decisions about which nonprofits to support. I feel like every day we're hearing about more and more nonprofits coming onto the map, so I feel like donors have more choice than they ever have before. So, could you explain how this updated system provides donors with more valuable information and guidance when it comes to choosing where to allocate their generous donations.

Laura Andes: I think what's great about our system now is that we're giving especially the savvy donors more options about how they assess a nonprofit. We definitely have long-time users of Charity Navigator that they're going to pull up the charities that they always give to, double check that they're four-star, double check their financial ratings. And that helps drive their decision. But we have a lot of new donors who are really looking for an organization that's aligned with their values, that's in their cause. And so, they can use our search. And our search does prioritize by your rating and how complete your score is, how many beacons you've earned. So, if you've got four-beacon charity with four stars, you're going to be at the top of that search algorithm.

The other thing is, we have really carefully curated recommendation lists, and those are actually where most of our users go to. So, after a crisis, we always put up a list, really in short order, and then continue to improve it. So, if you're really moved by some natural disaster or something else, and you're a highly rated charity who works in that, there are ways to make sure that you end up on those lists if you qualify. And then that's where donors go. They want to go to our Ukraine list, they want to go to our Turkey earthquake list, our hurricane list, etc.

We also have what we call our Best Charities List, which is my personal favorite part of the site because I think it's really fun. We have several categories of key categories that we know donors care about: poverty, homelessness, food insecurity, climate change. And we create a list of the best charities in those fields, and we update them. And we often are working with experts to create those lists, and we keep those up to date. So, if you're a nonprofit who's like, “I work in climate change, and I'm four-star, and I have four beacons, and I've been proven to be impactful,” you might end up on that list. And that has real value to the donors because it makes it super easy for them. But it also has real value to the charities because it really ups their profile.

So, those are a handful of the ways where we try to find ways to intentionally connect a donor who's looking for that charity that's going to warm their heart with that charity — especially impactful ones.

Leah Davenport Fadling: I'm curious to know if you use some of the search data or data from the site to gain insights about what types of organizations that potential donors that visit your site most care about.

Laura Andes: We do. We track which are the most donated and most looked at charities for sure. And we often try to make sure that they are highly effective charities. We also have a similar mission, which is we want to lift up smaller charities that maybe are very impactful but don't have the name recognition as some of the ones that get the most hits on our site.

So, we're always trying to balance that. There are charities that people are the brand names that everyone's going to want to look at. And they get a lot of donations. And they are pretty effective at getting their word out. Like, maybe it’s that local food bank down the street that's 100 out of 100 on impact, and your donation is really going to make a difference. So, we do look at that data to try to kind of balance our two aims of, again, making impactful giving easier for all.

Leah Davenport Fadling: I'm glad to hear that because, to me, that's such a precious position that you hold as an organization, to be able to introduce potential donors to nonprofits that they may have never heard of before, and that ability to curate lists for folks who are entering the world of philanthropy for the first time. Because there may be some organizations that don't have a lot of money they can put into SEO, or other ways of being discovered. It's good to hear that's something that you are responsive to and listening to and making sure that you're trying to give an equal voice to as many different organizations as possible.

Laura Andes: One change I want to highlight that we made, actually, with that bigger introduction of Encompass, is that we used to only rate 9,000 charities. And they were the ones you knew. You would know everyone on that list; they were all your name brands. And we thought we, weren't serving the sector by doing that, and it was an equity issue in some respects. And so, with this system, with this change, we now rate 207,000 as of today.

And so, you could be an organization that's 3 years old, you have a $400,000 budget, but you're super impactful. So, you're relatively small, and you end up on our homeless list because you're doing really great work. And that's what gets me excited is finding that charity and lifting them up and giving them a spotlight that they may not be able to create for themselves.

The PAN Foundation — we hope that they really benefit from our Community Choice Award in a positive way. And that's an example of us trying to do that with the Community Choice Awards.

Amy Warren: Yeah, I love that, Laura. Thank you for adding that. I also really love that there's a service out there for people that feel led to a cause. And it's such an easy, compact way where they can go to one site that is trusted. And I love the idea of a search bar — type in your cause or type in your area of impact — and to be provided a list that's already pre-qualified, if you will, and super easy for donors to expand their charitable giving. That’s a great piece of this.

Leah Davenport Fadling: Laura and Amy, thank you so much for joining us today. I hope that anyone listening today who is a nonprofit or a donor and wants to get more involved with making sure that their nonprofit is represented well on Charity Navigator or wants to be able to share their Charity Navigator rating with their donors, that they've got more information that they're equipped with to now go do that.

And of course, if you're a donor, that you now have some more resources in your toolkit to discover some great organizations to give to.

Amy Warren: Thank you, Leah.

Laura Andes: Thank you. This has been a pleasure.

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