NPF Week: Johanna Morariu and Debra Natenshon on Nonprofit Rating Systems

Hi!  We are Johanna Morariu (from Innovation Network) and Debra Natenshon (from the Center for What Works).  Today we will be sharing some tips on non-profit rating systems.

Efforts to use common measures to assess and compare nonprofit performance have multiplied. Interest in comparing nonprofit performance is in a dramatic upswing, and new approaches seem to emerge frequently, ranging from sector-wide research on shared metrics to a variety of new rating systems.

Nonprofit rating systems are designed to offer an apples-to-apples comparison of organizations working towards vastly different missions, employing infinitely varied strategies. Primarily, the systems are intended to inform giving: sharing assessment of organizational effectiveness with large funders and individual donors.

The best known nonprofit rating system is Charity Navigator. Charity Navigator assesses nonprofits on financial health, organizational efficiency, and organizational capacity (with information from the IRS Form 990). The assessments are conducted by Charity Navigator staff of “professional analysts [who have] examined tens of thousands of non-profit financial documents” (from the Charity Navigator website).

Lesson Learned: Through the work of organizations such as Charity Navigator (founded in 2001), the nonprofit sector has benefited from an increased focus on organizational efficiency and effectiveness. Additionally, rating systems stimulate dialogue about how to best compare organizations—resulting in more robust understanding (i.e. beyond finances) of what makes a high-performing nonprofit organization.

Other nonprofit rating systems, such as GreatNonprofits (founded in 2007), have joined the fray more recently. GreatNonprofits generates their ratings differently than Charity Navigator: they collect opinions and reviews from anyone that has interacted with the organization (e.g., clients, employees, volunteers, donors). This new approach is a manifestation of society’s acceptance of the democratization of information: everyone and anyone—not just the experts—can contribute valuable information.

Hot Tip: Currently there are two main nonprofit rating system approaches, as typified by Charity Navigator and GreatNonprofits. Both approaches strengthen the dialogue about nonprofit effectiveness, but fall short of providing a rigorous comparison of an essential component: nonprofit outcomes and impact.

One day, getting to an apples-to-apples comparison of nonprofit results would be great. Until then, we’re eager to push dialogue forward in this area. At the AEA conference in November, we’ll be facilitating a think tank on this topic. We’ll share a current landscape of nonprofit rating systems and participants will be asked to discuss questions such as:

• Is it possible to develop meaningful common measures for a field as diverse as the nonprofit sector?
• What can we learn from the experiences of fairly well-known, sector-wide approaches such as Charity Navigator, GreatNonprofits, etc.?
• What is the effect of nonprofit rating systems on traditional program evaluation?

Tell us what you think: share your comments/questions, and we’ll include them in our session. Or better yet, join us as we build on this discussion in San Antonio!

The American Evaluation Association is celebrating evaluation in Not For Profits & Foundations (NPF) week with our colleagues in the NPF Topical Interest Group.  The contributions all this week to AEA365 will come from our NPF members and you may wish to consider subscribing to our weekly headlines and resources list where we’ll be highlighting NPF resources.