Sharing insight: Charity evaluations just got a bit better

Thousands of donors visited Charity Navigator in the wake of hurricanes Harvey and Irma, looking for charities to support. They got some help, but not enough--the Harvey page of the Charity Navigator website lists about 50 organizations, the Irma page another 25 or so. They include the American Kidney Fund, to help dialysis patients in distress, First Book, which is shipping books to affected children, and the much-maligned American Red Cross. Huh?People ask Michael Thatcher, who runs Charity Navigator, where to give. “How can you answer that?” he wonders. The fact is, you can’t, you can’t even know which organizations are effective and which are not, and that’s a problem: A list of 50 choices is only marginally better than no list at all.This week, though, Charity Navigator, which is the most popular charity evaluator in the US, and GuideStar, which is the world’s largest database about nonprofits, said that they will work together for the first time to share more information about nonprofits and their effectiveness. It’s a small step in the right direction for both organizations.Who knows? Maybe the two organizations, whose missions are aligned, will merge someday. It’s been discussed, Thatcher and Jacob Harold, the CEO of GuideStar, told me, although nothing is imminent, they say.Here’s how the new collaboration will work: Beginning on Giving Tuesday in November, Charity Navigator (CN) will publish information about goals, progress and results that charities have provided to GuideStar. It will also note whether charities have achieved Gold or Platinum status on GuideStar; charities achieve status by providing qualitative or quantitative information about their outcomes. This moves CN closer to reporting on what matters about nonprofits: their impact.If nothing else, the new information should put another small dent in the overhead myth -- the misbegotten notion that nonprofits should be judged by how much they spend on programs versus overhead.Charity Navigator now regrets its longstanding focus on overhead. Thatcher says: “Let’s stop talking about overhead ratios and let’s start talking about outcomes.”Of course, that’s easier said than done. Charities can achieve Platinum and Gold status by reporting on their goals and results, but they decide for themselves what to measure and how to measure it. The value of that is more than zero, but not a whole lot more. [See my 2016 blogpost, Polite applause for GuideStar Platinum.]What’s more, because GuideStar and Charity Navigator measure different things, the information they provide doesn’t necessarily align. The American Red Cross, for example, has achieved Platinum status on GuideStar and gets three out of four stars from Charity Navigator, despite its well-documented problems. The American Kidney Fund has not reported on its impact to GuideStar, so it hasn’t achieved Platinum or Gold status, but it gets four stars on Charity Navigator. Lately, I’ve been hearing great things about a nonprofit called Team Rubicon that has put veterans to work on hurricane relief, but it's evidently too new to get a rating from Charity Navigator.Pity the donor who wants to make sense of all this.Still, collaborations like this one are clearly the future for both organizations, and for others that care about improving the performance of nonprofits.With a budget of about $3m, Charity Navigator can’t deliver thorough evaluations of nonprofits by itself, so it has chosen to leverage results information gathered by others. Recently, it put a spotlight on charities that are top contenders for the MacArthur Foundation’s 100 & Change competition for a $100m grant to solve a critical global program. The attention helped drive donations to those charities, Thatcher told me.GuideStar’s most recent attempt at information-sharing ended less happily. In a laudable effort to steer charitable donations away from groups that promote hate, GuideStar adding warning labels to charities identified as hate groups by the Southern Poverty Law Center. It later reversed itself, and with good reason. (See this from Megan McArdle at Bloomberg and this from Politico which says that the authority of the Southern Poverty Law Center “to police the boundaries of American political discourse is facing its greatest challenge yet.”) Of the experience with the Southern Poverty Law Center, Harold says: “It reminded us of how important it is to be thoughtful about how we pick our partners and how we share information.”Harold and Thatcher say their new partnership will help donors make more informed decisions, and that it could lead to further collaboration. “This is a toe in the water, in terms of how our two organizations might work together,” Harold says.For now, GuideStar’s Platinum and Gold charities should benefit by having their status showcased on Charity Navigator, the go-to site for individual donors. More charities will have the incentive to report on their goals and outcomes. And, eventually, GuideStar will look for ways to improve and standardize the data it is collecting.In the long run, if all goes well, these efforts will move us to closer to an information marketplace about nonprofits, roughly akin to a Yelp or a TripAdvisor, where donors, potential employees or others can learn more about nonprofits.For such a marketplace to work, it will need good information about nonprofits-- collected from their newly-digitized IRS Form 990s, from the nonprofits themselves and, perhaps, from beneficiaries, employees or, dare we say it, from foundations that have troves of evaluation reports about their grantees. Importantly, it will also need donors who are willing to do more research and give more wisely.That may sound like a pipe dream but remember that Charity Navigator launched in 2001 and GuideStar isn’t much older. More recently, they have joined by others who want to improve the performance of the nonprofits, among them GiveWell, Feedback Labs, The Fund for Shared Insight, The Life You Can Save, the Center for High Impact Philanthropy, Impact Matters and Giving Compass. The Hewlett, Gates and Raikes foundations are all working on improving philanthropy.All this counts as progress. Slow progress, to be sure, but progress nonetheless.