Oh No! Charity Navigator just trashed my nonprofit!

by guest blogger George Crankovic

Charity Navigator, the charity watchdog, has lots of power, which it can unleash at will with ratings that can influence how much donors give. Research proves it.

A study by Daniel Neely, Associate Professor at the University of Wisconsin-Madison, found a strong correlation between the rating and donor behavior. A drop of just one star in an organization's Charity Navigator rating corresponds with a decrease in donations of 39% on average. Adding a star correlates to a 39% increase.

That's power.

But Charity Navigator is not without its problems. Two prominent ratings are simple ratios -- program expenses divided by total functional expenses and administrative expenses divided by total functional expenses. These are supposed to tell you how low a given charity keeps costs. But they don't tell you how effective charities are at helping. The fact is, really effective nonprofits need super-talented people (including some who can command higher salaries), investments in technology and infrastructure, and continual self-evaluation. These take money.

But whether the ratings are right or wrong, there they are. What's a charity to do when the stars are too few? One option is to show -- in annual reports and newsletters, for example -- how the money they spend generates a greater impact.

Another is to reframe, and create your own metrics — goals for number of people helped, pounds of food delivered, number of dogs rescued, etc. -- based on realistic and defensible appraisals of the need you are responding to. Then you must do your best to meet or exceed these metrics, and of course make sure every one of your donors knows about it when you do.

All said and done, it's better to hold our own feet to the fire.

Comments

[Fundraising Guide]

One way we used to avoid this was to do a detailed investigation into fundraising before we made a decision...

We used the tool in my name link to do it.

Good luck

Ted

[Fundraising Guide]

We avoided this problem by doing some research and taking the time to compare fundraising ideas and pricing...

Check out my link - this is one place we found some great resources...

[Julie]

Is Daniel Neely's study published? Where can I find it?

[Jeff Brooks]

Julie, the study is available for purchase (it's not expensive) here:

http://www.sciencedirect.com/science/article/B6VBG-4X9V31T-1/2/0e2a04f7d1cf89b3b53d7721962121e6