When I am asked about Charity Navigator I often joke that they are a “frenemy” of GuideStar. But the truth is that they are a friend. We’ve worked on projects together and have an amicable relationship. Our two organizations joined with the BBB Wise Giving Alliance in 2013 to launch the Overhead Myth campaign, a collective attempt to shift the conversation about nonprofit performance away from financial ratios ... and toward programmatic results.
Now, one can still have disagreements with one’s friends. At GuideStar we believe that while looking at a nonprofit’s overhead ratio might occasionally help you identify fraudulent behavior, it tells you nothing about the organization’s effectiveness. Moreover, we believe that many nonprofits should actually spend more on overhead in order to increase their impact and resilience. The Charity Navigator ratings system, in its current form, penalizes nonprofits for investing to improve their operations. At GuideStar we continue to disagree with this particular aspect of Charity Navigator’s methodology and would like to see it change.
To his credit, Charity Navigator’s CEO Michael Thatcher has been clear about his desire to move toward a system “that effectively measures impact.” Charity Navigator has already made some concrete steps in that direction. In 2011 they added transparency indicators to their rating methodology, moving beyond a reliance solely on financial data. In 2016 they made some significant improvements in how they analyze financial data. And Charity Navigator’s new strategic plan indicates continued commitment to move its rating system to focus on results, not ratios. Michael has explicitly acknowledged the importance of partnership: “We’re going to need people to help us with the outcomes reporting so that we can get it right.”
So we’re pleased to (jointly) announce yet another step toward a better future for nonprofit information. GuideStar’s data about nonprofit programs and results will be available on Charity Navigator’s nonprofit pages starting on Giving Tuesday, November 28, 2017. We’re sharing two kinds of data: first, answers to our questions about a nonprofit’s goals, strategies, and capacity (questions that arose from our “Charting Impact” partnership with BBB Wise Giving Alliance and Independent Sector); and, second, the Platinum-level data in which nonprofits share the specific quantitative metrics they believe best reflect their progress toward their missions.
This data will not affect a nonprofit’s Charity Navigator ratings, but perhaps that will be a possibility down the road. To start, Charity Navigator will run a set of experiments on how donors use programmatic information. There won’t be perfect overlap: 12,678 nonprofits have earned either a Gold or Platinum Seal of Transparency on GuideStar, and about 9,000 have been rated by Charity Navigator. By our current count, 1,991 organizations rated by Charity Navigator have either a Gold or Platinum GuideStar Seal of Transparency. That means that more than 7,000 nonprofits have an opportunity to enrich their presence on Charity Navigator by updating their GuideStar Nonprofit Profiles with program and results information. Over time, we hope to see this exchange of data going both ways, with GuideStar integrating data from Charity Navigator.
As a field we still have work ahead to help donors understand nonprofits. We need ratings agencies like Charity Navigator and we need data platforms like GuideStar. And to lessen the burden on nonprofits we need more collaboration and more data sharing. This experiment is a step in just the right direction.
Jacob Harold is GuideStar's president and CEO. Harold came to GuideStar from the Hewlett Foundation, where he led grantmaking for the Philanthropy Program. Between 2006 and 2012, he oversaw $30 million in grants that, together, aimed to build a 21st-century infrastructure for smart giving. Jacob was named to the NonProfit Times (NPT) Power and Influence Top 50 list in 2014, 2015, 2016, and 2017. He has written extensively on climate change and philanthropic strategy; his essays have been used as course materials at Stanford, Duke, Wharton, Harvard, Oxford, and Tsinghua. Harold earned an AB from Duke and an MBA from Stanford. He grew up in Winston-Salem, NC, where his parents ran small, community-based nonprofits.