← Nonprofits Are Messy: Lessons in Leadership | Fundraising | Board Development | Communications
Nonprofits Are Messy: Lessons in Leadership | Fundraising | Board Development | Communications
Ep 212: Street Cred, Trust Capital, and Impact-Focused Fundraising (with Michael Thatcher)
00:53:35
I sat down with Michael Thatcher, CEO of Charity Navigator, to explore how nonprofits can use data to build trust with donors and move beyond the outdated focus on overhead. Michael shared valuable insights on how nonprofits can better engage donors,
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- [00:00]
Joan Gary
When you as nonprofit leaders think about activities you just absolutely love, two of them come immediately to mind. I just know it. The first one is writing grant applications or the update reports that are required. It's just so much fun to dive into the details and rewrite that same grant application with just enough of a twist to keep it slightly intellectually stimulating. Am I right? And the second is updating your data on Charity Navigator or one of the others that propose to help funders make wise decisions about their philanthropy. This is the exhilarating stuff that makes nonprofit leadership so meaningful. You did know I was kidding, right? Today we are joined by Michael Thatcher. He's the President and CEO of Charity Navigator, and after a great conversation he and I had a few weeks ago, I thought you'd benefit from a podcast to talk about this issue of ratings how overhead became a four letter word. Actually, it's two four letter words. And then while we have him here, let's get his perspective on the stories the data tell us, as well as his perspective on our sector through his nearly nine year tenure. Lastly, Charity Navigator was founded 20 years ago. In fact, during my own tenure as an Executive Director. Let's ask Michael what life was like 21 years ago and the benefit Adding rigor and metrics to a public picture of your organization, how it's benefited your organization and the sector as a whole. I promise information and insights worth your time for sure, and a welcome break from grant writing and updating profiles. Greetings and welcome to Nonprofits Are Messy. I'm your host, Joan Gary, founder of the Nonprofit Leadership Lab where we help smaller nonprofits thrive. I'm also a strategic advisor for executive directors and boards of larger nonprofits. I'm a frequent keynote speaker, a blogger, and an author on all things leadership and management. You can learn more@joengarry.com I think of myself as a woman with a mission to fuel the leadership of the nonprofit sector. My goal with each episode is to dig deep into an issue I know that nonprofit leaders are grappling with by finding just the right person to offer you advice and insights. Today is no exception. Michael Thatcher is the President and CEO of Charity Navigator and he leads its efforts to make impactful philanthropy easier for all by increasing the breadth and depth of evaluation methodologies to facilitate ratings coverage of substantially larger numbers of charities and expand how this information engages new and existing audiences. Prior to joining Charity Navigator, Michael spent more than 15 years with Microsoft, the last 10 of which he spent as their public sector Chief Technology Officer, responsible for technology policy initiatives and engagements with governments academic leaders in Asia, the Middle east and Africa. Michael's eclectic background includes years at sea conducting oceanographic research with Woods Hole Oceanographic Institution. It also includes composing music and dancing internationally as the co founder and co director of Dance Music Lite. First off, welcome, Michael, and thanks a lot for joining us today.
- [03:31]
Michael Thatcher
Thank you, Joan. It's a real treat to be here. I've been looking forward to this discussion for a while now. So.
- [03:38]
Joan Gary
What an eclectic biography. I actually loved reading it and pronouncing all the words. I'm always interested in how guests become the cool experts that they are now. You, Michael, the path, when you described it, it felt like the path was clear. When I read the bio, I bet a lot of people were thinking, wow, that's eclectic. I wonder if maybe you could characterize, is there a through line to your professional trajectory that you could share?
- [04:07]
Michael Thatcher
I think there is. There's also. There's a classic irony in it too. And your intro really triggered that for me, hearing it just now, which was, I left the art world as I was a dancer and a musician because I spent all my time writing grant applications and reporting on grants. And I was like, wait a minute, I'm an artist. I did not come here to do that. To hell with this. So I'm going to go work in the areas where I cared about, which was the thread, which is actually data and the use of data, whether it's to do oceanographic science, provide better public sector systems like education, health, government. I got excited about data and I think so that came also from my childhood. My father was a mathematical modeler. I grew up learning how to code. Now sounds kind of typical today, but this was the late 1970s, right?
- [05:07]
Joan Gary
Yeah, that's right.
- [05:08]
Michael Thatcher
I was coding for my dad. My first program was moving data from five and a quarter floppy disks to three and a half floppy disks. Right. So something that not a lot of people even know what a floppy disk is.
- [05:20]
Joan Gary
Yeah, I was gonna say, I think I was in that period of time, I think I had. Was learning Fortran programming in college or something.
- [05:28]
Michael Thatcher
Exactly. And I started to see also as a musician, the power of technology as a means of getting things done. Because I'm trained as a classical guitarist, I was writing music. The guitar is not a great composition instrument. The piano is better. But learning the piano was like, no way. I could do faster on the computer working with the synthesizer. I could create the compositions that I wanted to create. And that helped me. The work in the oceanographic was the other passion I have is the ocean. And I could make money as an artist. I would go to sea for scientists, helping them collect data, and that helped me. I would go out to sea for six weeks, make a ton of money, then I would live off of it for a few months. That became a livelihood. Then Microsoft was a whole other part of it. But everything I was at Microsoft was about using data to transform things. So the move to Charity Navigator was somewhat of a natural move, but again was just sort of one of these things where it was just dumb luck that we found each other because I was living in Singapore, they had just started looking for a new CEO and I knew somebody who knew somebody on the board and we came together like that.
- [06:45]
Joan Gary
So I happen to know that we are talking this morning and both of us are actually near the ocean. Same ocean, different locales. So your tie to the ocean is actually quite literal these days. I'm just actually curious. Are dance and music still a part of your life at all?
- [07:06]
Michael Thatcher
Music both on a. More like, I would say, what's the right word for it? Just sort of personal. I love to go dancing. I love to. Whenever there's an event where I can get to go dancing or even dance parties, I adore that. But sort of formal, formal, you know, I was a Martha Graham style dancer. Did a lot of ballet. No, I'm not. I haven't taken a ballet class in 20 years. And music, I still play. I play the guitar. I've moved away from the classical guitar. I have a steel string guitar. I also play a rav drum, which is one of those tuned, tuned drums like, or like a pan. I have a shruti box and I do have a keyboard. So in other words, there's. Music's still there. It's not my main thing.
- [07:48]
Joan Gary
Well, there's, there's a lot about, there's a lot about the connection between music and math, isn't there?
- [07:56]
Michael Thatcher
Well, and composition. Right. So what excited me in music was writing music. And you know, in particular, you know, I'm kind of weird in that what excited me the most was modal counterpoint.
- [08:08]
Joan Gary
Yeah. I think that would make you. That would make you kind of weird. Yeah, it does.
- [08:12]
Michael Thatcher
And it's so interesting because of what you're, you know, the rules. I like constraints as a means of actually finding ways of creating expression. Right. So modal counterpoint has the really, really strict rules and yet it can be highly emotive. Right. And so it's this idea of like, how can you, with an intellectual structure also stay within an emotional context. But again, that's what excited me in music and then the transition to writing software. I'd already been writing software. It's just there's a logical structure to it and the rules and syntax matter and get the commas and semicolons where they belong.
- [08:52]
Joan Gary
I know this. We are going to talk about Charity Navigator. I promise you all who are listening. But I do want to say that at the age of 60, I decided that I wanted to learn how to play the piano. And so I, I take piano lessons every week. And it is the rules and the technique, right? I don't make a lot of progress because I'm busy. So I don't always practice as much as I should. But it is that it is both those, all of those rules. It is the hand eye coordination because I'm big on aging well. And it's also just, it shuts out the world around me while I practice. And all of those things just feel like self care in a lot of ways. So anyway, so okay, we're going to move away from music now and we're going to talk about where Michael landed. He landed at Charity Navigator. So why don't you tell everybody a little bit about Charity Navigator from your point of view, what it does and I guess what has also continued to fuel you as its president and CEO for almost nine years.
- [10:06]
Michael Thatcher
You know, at its simplest, Charity Navigator is first and foremost a nonprofit. So we're a 501c3 charity and we provide information, ratings and tools to make impactful giving easier for all. There are a couple of key points I want to highlight in that. Please, you know it's free, right? Always has been, always will be. We don't charge the donors, we don't charge the charities to be evaluated. And so that's a founding principle of the organization and we want to keep it that way. The other element which is new to our and within our current mission, which is this element of for all and what we mean by that is absolutely everyone and whether everyone in terms of access to all charities. So we want to be able to evaluate all organizations so that everyone has access to this third party accreditation. And then also we want to access all types of donors and whether that's from different demographics or also particularly different financial brackets. So we don't care if you have $5 or $5 million to give away. We want to get you the best possible information available. Third piece, which I think is really important is impartiality and that, and this may sound funny, but sort of let it sink in. We don't care what you care about. We care about helping you find the best organization that addresses what you care about and what you value. So we're trying to keep our own personal biases out of evaluation. And even what the available marketplace, we're really trying to have a system that allows all, everyone to give to what they care about.
- [11:50]
Joan Gary
And so, and when you talk about you, your audience is a funder, our.
- [11:56]
Michael Thatcher
Audience is an individual donor.
- [11:57]
Joan Gary
Okay.
- [11:58]
Michael Thatcher
We have multiple audiences, but our primary audience and the audience that we focus our attention on is the average American donor.
- [12:06]
Joan Gary
Okay.
- [12:07]
Michael Thatcher
And just so contextually they're giving 50 to $500. Right. So it's small individual donors, we have rough. It kind of ranges between 9 and 11 million unique visitors coming to the website every year. So these are the people that are actually coming, using the information and then going and doing. And actually going and doing. I want to talk a little bit about in terms of what Charity Navigator offers today, because everyone knows this for the ratings and you access the ratings through the website. So it's. Charitynavigator.org is the website. But on the website you're going to find ratings on 225,000 charities. You're going to find lists broken up into three areas. We have what we call give now lists, which are topical lists addressing real life situations. Tornadoes in Oklahoma. Right. We have a list for the tornadoes in Oklahoma. These are highly rated charities that are actually doing something about the relief effort in Oklahoma.
- [13:08]
Joan Gary
Right.
- [13:09]
Michael Thatcher
You have the aim for, you know, whether sadly, we have wars going on right now. We have relief efforts for the war in, you know, with, in Israel and Hamas. We have, every time something happens, we put together a list. We're trying to reduce the friction to people finding what they're looking for in a disaster.
- [13:28]
Joan Gary
Right.
- [13:29]
Michael Thatcher
We also have best of charities lists, which are the best charities at CO2 emission control, the best charities at poverty, global poverty alleviation and things like that. And then fine. And then the third list is a little bit more whimsical in the sense that it's most popular. So most popular in certain categories.
- [13:48]
Joan Gary
Gotcha. Gotcha.
- [13:50]
Michael Thatcher
Yeah. I think the other thing, Other things, two other things I think are worth mentioning. We have a giving basket which allows you to actually do the transactions. You can have up to 100 charities in your giving basket and do a single checkout. And then we do reporting. So it's just making it easier to give. The last piece is the alert system. And the alert system is more helping, you know, when Something either a known inappropriate action takes place in a, in a nonprofit or, or there's an accusation of it. So it's an attorney general's investigation is ongoing with an organization. Donors need to know that these things are going on and then they make their own choices around that. So there are different levels of alerts to just sort of say, hey, heads up, somebody wrote an article about this organization that you might want to be pay attention to before you make your giving decisions.
- [14:40]
Joan Gary
Got it, got it. It is, as you describe it, really a comprehensive and quite valuable asset to the donors in the world. And I think you hear this all the time, oh, what can I do about those tornadoes in Oklahoma? And the answer is plenty. So you started nine years ago. And so I think it's a kind of a twofold question. One, what has continued to fuel you in that work? And yeah, and I suspect this will come out of that question, which is what are you proud of about your nine year trajectory there so far?
- [15:19]
Michael Thatcher
Let me start with what I'm proud of. When I joined Charity Navigator nine years ago, we were rating 8,000 charities and we were doing that on really just two axises. One was we were looking at the financials with the primary focus on sort of where the money was spent, big weighting on the overhead. And the other part was what we called accountability and transparency, which were really more governance practices and privacy policies and things like that. We now rate 225,000 charities. We have impact assessments for a little over 3,000. Right now we look at over 50 different elements in a rating which are telling you about overall health of the nonprofit, how they listen to their beneficiaries, their internal equity practices, the impact and a cost per outcome way. So we've essentially scaled and deepened is we've also really backed off on overhead. So overhead is. We still look at that ratio, but it's one of 50 metrics and it is very lightly weighted. So that I'm the proudest of. Just like the transformation of the evaluation system has been just mind boggling and I'm super proud of that and I'm proud of the team that built it and made it happen. And so I'd say the pride also relates to Charity Navigator, the organization, because I love the people I work with and I love the team and we couldn't have done it without just a brilliant group of people what keeps me awake at night or what, you know, and keeping me awake at night is one way of stay keeping me engaged. Right. In other words, I love challenges and we've barely scratched the surface. Right. So even though we've gone like, it's a huge step change. Right. There's still so much more work to be done, and the ratings still don't actually adequately cover everybody. And so we're in this constant cycle of change. We also have. And I think this is important and this is. There's a decline in giving in the United States right now. And so we have a bit of a giving crisis, I think, in the country. And I. And that bothers me. Right. And I want to. And when I, you know, I think giving and giving and doing happens for. We get motivated by different things. Either we get really annoyed by something or bothered by something, we fall in love with something, or we're deeply hurt by something. And I think these are the things that to me are kind of, those are the triggers for doing my philanthropy. And my, my approach has been by giving my time in my life to things. I think you're doing that with the work you're doing. Right. In other words, you're like, it's like, I've got to do this. I don't know.
- [18:08]
Joan Gary
It's, it's, it's kind of vocational, kind of. Yeah. A little bit of a calling sort of.
- [18:15]
Michael Thatcher
There's, I forget who said this to me, but I loved it. It's, you know, talking about how we choose the things that we support in philanthropy. And, and he said, you know, causes grab you by the heart and you have no choice but to go do. Right.
- [18:28]
Joan Gary
Yeah, I love that.
- [18:30]
Michael Thatcher
And the fact of the matter is we. There's just. There are more problems than I, than. Than I'm ever going to solve. And so what I love about the work that I do is I'm never done.
- [18:41]
Joan Gary
Right, right. You're constantly marching forward. Constantly marching forward. I wanted to ask you. I often try to imagine my listeners standing in my Converse and it's interesting to hear about the trajectory of Charity Navigator, but sort of a little bit of an elephant in the middle of the room is that Charity Navigator may be saddled, rightly or wrongly, with the responsibility of getting funders to focus on overhead and moving donors. You know, sort of getting donors to believe that low overhead is the key to high impact or responsible management of donor dollars. And clearly Charity Navigator has evolved away from that. You said one of 50 and lightly. So I wonder what kind of strategies you have employed over time to attempt to shift the narrative.
- [19:44]
Michael Thatcher
Yeah, I think a couple of things, and this one's hard. Right. Because overhead's a really simple Metric and just we definitely take accountability for amplifying overhead. We do not feel that we invented that. We didn't add it to the US Tax form. We didn't tell the US Government don't give money for overhead. We didn't tell the major foundations not to give money for overhead. We amplified their best practice and we did a really good job, unfortunately. Right. But. And now we have this problem. Right. The foundations have changed. Government hasn't entirely changed in how they fund overhead or don't, but foundations have definitely, you know, there's been enough. And just to say, I came to Charity Navigator to work on impact assessment. That was what I was looking for. My predecessor, Ken Berger, was working on getting us to impact before he left. So this is not new for Charity Navigator. We now have a system. It's not perfect, but it's a lot better. And now the whole thing is about getting adoption of that system. So one of the challenges we have with the ratings is Charity Navigator rated organizations based on the IRS tax forms. That was a patent process for the charity. So the charity did nothing and they got rated. Now people loved it and they hated it. Right. But there was no work involved today to get a Charity Navigator rating and to get an impact assessment. There's a bit of work involved.
- [21:16]
Joan Gary
Right.
- [21:17]
Michael Thatcher
So we have to. Which is a complete. From an engineering standpoint, you went from a single data source with thousands of data points to thousands of data points with thousands of collection points. Right. We have to get the data from each individual charity, whereas before it was just coming in from the. From a single source. And so that's a big change. Charities are reluctant to give information on something they're not quite sure they're going to get how the rating is going to work out. And so I think that's part of that is we've got to get more adoption of the new system. We've been doing things like, for example, there was a thought piece that we published, or I published it technically, I wrote it at the end of December this last year, which was essentially, it was really falling on our sword saying we've got to rethink the value of charities at this time of year and emphasis needs to be placed on results. And so we're doing a lot of messaging. We're also working with some of the other infrastructure players and the foundations that care about nonprofit infrastructure to figure out how do we get the. How do we just keep sort of sending the message? Because unfortunately, it's a bit of a knee jerk reaction that you get from Folks, when you have a, you know, you're having a coffee with someone and they start talking about charities and they say, oh, I just want to make sure every dollar, every penny of my dollar goes to, you know, paying for programs. And you have to just, you have to take, we all have to do the work to say, no, that's not it. It's not where the money was spent, it's what the money accomplished.
- [22:55]
Joan Gary
Yes, I think that's a, I think that's a really important distinction. I was also thinking too about. You said earlier your quote about the heart. Right. And heart isn't necessarily captured in ratings. And so many people will go and be connected to an organization by its leader. Right. By the passion or the charisma of a leader. And how an organization leads as an organization or in its sector is a different kind of metric about. I mean, does it lead to impact? I think that's a fair question. Right. But how do you deal with what I would call more of the heart based, subjective kinds of things that drive decision making in donors?
- [23:51]
Michael Thatcher
We're trying to. That sort of the emotional appeal that actually drives you towards giving.
- [23:58]
Joan Gary
Yes.
- [23:58]
Michael Thatcher
Ultimately we're trying, I'm trying not to interfere with that. Right. Because that is, that's powerful, that's fuel. Right. And that drives change. But what our hope is, and I've got a little. My personal mantra is follow your heart, use your head and make a difference. And all we're trying to do is insert, literally, it's like take a breath before you actually click send or hit or write that check. Figure out, yes, you've had a very compelling pitch or someone's know or the, the situation. You saw the picture of this child that's really in need, they need help. But if you really want to help that child, make sure you're really helping that child.
- [24:46]
Joan Gary
Right.
- [24:46]
Michael Thatcher
And not just falling for good marketing.
- [24:49]
Joan Gary
The I. There were so many times when I ran GLAAD in the late 90s, you know, where donors would say I admire your leadership or I, you know, I'm making this contribution because I believe in your leadership. And flattering. Yes. However. Right. The conversation always drove to. I want you to feel like you are making a contribution to an organization that is well run and that has an impact that you can feel proud of and do that homework. And if you believe that my leadership is a part of that, great. But. But. Right. So how many charismatic leaders don't run great shops? There's probably the answer would be too many.
- [25:40]
Michael Thatcher
Too many. And the one thing I'LL say in terms of the rating. We do have a section of the rating is looking at leadership and adaptability. And what we want to know in that is one just can you articulate your plan? What's your mission, what's your strategy? What's your plan of action to achieve that strategy? And then this one's sort of sneaky. But do you invest in your leaders?
- [26:02]
Joan Gary
Yeah.
- [26:03]
Michael Thatcher
Right. But it's, it's super important because if you're not investing in the leadership, you're actually, you're starving your organization at that point. The last piece, I'll just send that the adaptability piece was very much Covid inspired. But Covid really showed the metal of. Of leaders.
- [26:22]
Joan Gary
Indeed.
- [26:24]
Michael Thatcher
And we just wanted to basically say and it gave charities an opportunity to tell their adaptability story. And we didn't rate it, we just wanted you to rate it. And that way the donor could actually digest it. So that was the approach.
- [26:40]
Joan Gary
Yep. I love that. And the investing in leaders is actually sort of a way of tackling the other side of the overhead coin. Right. So. Right. Is if I see an organization that invests in the professional development of current and emerging leaders, I think that's a smart organization. Right. And if it also increases my overhead, that's an investment. Right. And so I think those are the ways to think about that. Now I don't say that as a complete self serving comment as an executive coach for CEOs, but I do believe it is an investment. Honestly, it's a way to secure your investment as a donor as well. The Nonprofit Leadership Lab is led by Joan Gary and is the world's best online community for leaders of small nonprofits. Learn how to raise more money, build the board of your dreams, grow a large audience of supporters, and so much more. To learn more and request an invitation to become a member, please go to nonprofitleadershiplab.com that's nonprofitleadershiplab dot com podcast. We are having a conversation with Michael Satcher. He's the president and CEO of Charity Navigator. And I think that Michael and Charity Navigator is a 501C3 that works to make impactful philanthropy easier by increasing the breadth and depth of evaluation methodologies for to facilitate ratings coverage of a substantially larger number of charities and expand how that information engages new and existing audiences. And who doesn't want that? I want to talk about some of the things that you have seen from your perch. I do want to actually ask one more question before we go there, which is I feel like the field of assessing nonprofits for donors is more crowded than it once was when you first started Charity Navigator. And I don't need a compare and you know, a compare and contrast chart, but I can you talk a little bit about the crowded field and perhaps, you know, sort of the distinguishing characteristics of Charity Navigator or any others that you think are worth noting.
- [29:01]
Michael Thatcher
I think so. The, you know, the we're often compared to and asked how do you, how do you compete with Candid or guidestar by candidates as a sort of fellow evaluator? And I think one thing, Candid collects information and distributes information about charities. They don't actually evaluate charities. They have a SEALS program which is basically quantity of data provided. It's not in any way an evaluated set. Candid also much this is changing a little bit right now. But their data is behind a paywall. So and you know, foundations are paying to access it. The charities are paying to access foundation data. And so their business model is different than ours. It has there's payment involved.
- [29:48]
Joan Gary
It's also 501. Right.
- [29:51]
Michael Thatcher
They are a 501C3. Yes. And candid is the joining of the Foundation center and GuideStar. Right. So two rather large organizations that have been around for a while that are really information resources. They're also more business to business in how they interact with the sector. And we're more business to consumer in that we're dealing directly with the individual donors versus institutional donors.
- [30:17]
Joan Gary
Okay, that's useful.
- [30:18]
Michael Thatcher
That's one. Better Business Bureau's Wise Giving alliance is a SEALS program. So they have a compliance seal. They have a smaller number of organizations that they are evaluating. The other difference there is if you want to use the compliance seal, you have to pay for it. So again, there's a paywall. They are looking at seeing how a charity meets up. I think it's 20 different standards. And so if you meet the standard and you meet a certain number of standards, you get the seal. The other one that is out there is great nonprofits. And great nonprofits is more of a Yelp type platform where it's more it's people put comments in about charities that they either love or hate.
- [31:04]
Joan Gary
Got it.
- [31:05]
Michael Thatcher
And so it's more the popular vote on the organizations. And then the last one that's actually those are the main ones that I think are worth mentioning. And then you have periodically. I've seen in the nine years I've been doing this, I've seen lots of little startups sort of try and want to break in and it's a hard field to break into. And one of the things that we did at Charity Navigator would, and, and I'm a huge proponent for is collaboration. And collaboration for us has led to two acquisitions. So we acquired an organization called Impact Matters that was doing impact assessment on a cost per outcome basis and that became the basis of our impact assessments.
- [31:48]
Joan Gary
I was just going to say a smart move. If you're going to move away from ratings to looking more at impact. That seems like a good play.
- [31:57]
Michael Thatcher
Yeah. The other organization we acquired, and it was about a year ago, is an organization called Causeway, which their model was looking at almost like mutual funds. You'd have a fund for or like an issue fund. Right. You'd have a fund for global poverty. You'd have a fund for environmental clean oceans. Right. And so rather than pick a charity, the donor would pick the fund and then they would get an impact report on the. How the fund's performance was going to go.
- [32:27]
Joan Gary
That's interesting.
- [32:28]
Michael Thatcher
Yeah, we're really curious to see how this works for us. We're launching it in June of this year and that'll be something new that when donors come and look and they want to do something about an issue, they can just give to the issue. And the money will go to, you know, roughly up to a dozen charities that are highly rated that are focused on different elements of that particular issue, which is, I mean, I think this has potential and I'm hoping it can address some of the challenges that giving's having right now as well.
- [32:59]
Joan Gary
Yeah, absolutely, absolutely. So now let's take a sort of a higher altitude view from your perch. So 10 years, right? Nine. 10 years. You've had many touch points in the sector, funders, EDs than all the data that you see. I'd love some reflections on headline trends, especially what you have seen since the pandemic, because I do believe we are in a very different space post pandemic than we were before.
- [33:32]
Michael Thatcher
Yeah, I think the, and it's a good call because the pandemic was a bit, it was like, you know, someone took a snow globe and really shook it up. Right. And so it's. And everything settled quite, quite differently since then. A couple of high level themes that. And we're not the only one seeing this, but there is a, there is a decline in giving in the United States right now.
- [33:52]
Joan Gary
Right.
- [33:52]
Michael Thatcher
And this happening, there are kind of multiple themes across this. One is there's a actual reduction in the dollar amount going into the charitable sector. There is a reduction in the number of US households that are giving. So where we've Been on this since early 2000s. We've been on a gentle decline. We're below 50% now of American households that give A chunk of that is religious giving, but it's beyond that. And so what that means is that, you know, the money is sort of the dollar amount sounds about the same, but if you look at it, take you factor in inflation and you actually look at where it, where it's going, it's less donors giving. So it's the, the wealthy are, are still giving. And the. Thank goodness we have McKinsey Scott, who's been really sort of putting her wealth into the sector in the way she has. Is this artificial sense of we're okay and giving still the same. It's actually not right. There's actually less going into the sector. Trust is also down. So there's a decline in trust. And this is across all areas, government, private sector, et cetera. But trust in the nonprofits is at about 39% right now. We're doing better than most, but that's not a good number. Right.
- [35:11]
Joan Gary
Some of that is, some of that I suspect is. I mean, I don't know what you think about this, but I been doing some nosing around and the younger the demographic, the less trust. I mean, the less trust there is because, you know, Gen Z's and, and others just inherently haven't seen a lot of leadership or institutions that have served them particularly well.
- [35:38]
Michael Thatcher
And there's another side to that, which is, let's say I'm younger, I've just gotten out of school, I need to pay down my student loans. I want to work for a company that has a purpose, that actually has some form of a give back in what they do.
- [35:56]
Joan Gary
Totally.
- [35:58]
Michael Thatcher
The corporate America or let's say, and global entities have gotten really good at sort of being more purposeful. But look, I worked for Microsoft for 15 years because they had a mission that gave me purpose.
- [36:12]
Joan Gary
Yep.
- [36:13]
Michael Thatcher
And he saw the value of what I was doing. And so I thought I was doing, you know, and I, and I more than thought, I believed and I actually saw the results of my work when I was at Microsoft. But that can somehow lead, say, hey, if I'm working for one of these organizations that gives back 1% to the environment or has all these amazing programs, maybe that's my philanthropy. Right.
- [36:38]
Joan Gary
Yeah.
- [36:39]
Michael Thatcher
Which isn't necessarily a bad thing, but it's a dynamic change to the environment that we live in.
- [36:45]
Joan Gary
Yep. Changes the philanthropic ecosystem.
- [36:48]
Michael Thatcher
And corporates have figured out that if they can have a mission that is motivating to their, to their young talent. Young and top talent. They're going to hold on to people.
- [36:59]
Joan Gary
Yep. It's a key to retention, no question.
- [37:01]
Michael Thatcher
You know, and then you have, you have entity, you know, you have, if I buy a Tesla, am I being environmentally sound? Right. In other words, there's that kind of a thing where there's this, you know, and you can. That, that was a wonderful debate that sort of flurried up on social media around some of the statements there. But it's. But if I could actually go down that path and say I'm doing my part.
- [37:22]
Joan Gary
Yeah.
- [37:23]
Michael Thatcher
And there's a bit. This is sort of a weird. And I don't have good data on this, but I've been hearing this anecdotally a lot that because of some of the large donors that are actually putting significant amounts into the sector, people are saying, oh, I don't need to do that. Others are doing it for me. And that's problematic because I think we all have to do our part, whatever that is. And, and I was a little preachy than the way I said it, but I actually believe it.
- [37:53]
Joan Gary
I'm all about preaching. I think it's important. We talked a little bit about. You offered some year end reflections at the end of 2023 about crisis giving. Any observations or reflections about this world of crisis giving that you think folks would benefit from hearing about?
- [38:13]
Michael Thatcher
I think the one thing just in the nine years I've been with the organization and this is more a reflection on the world than it is on Charity Navigator. But there are more crises now on a regular basis. Really. Significant, significant natural disasters are happening every month. Right. It used to be we'd get a big hurricane sometime in September or October. Right. And now we're getting all these storms, we're getting fires, we're getting tornadoes, we're getting. And so part of that is we're in a world that is much more dynamic. There's more fighting going on in the world.
- [38:50]
Joan Gary
Yeah.
- [38:51]
Michael Thatcher
And that's so I guess the. And this, I hate saying this, but it's when you think about, and you budget for your giving, you need to leave some money, keep some money aside for unintended events that are going to happen, you know, unknown events that are happening in the world and almost keep. If you want to be able to be supportive to these things, you've got a budget. And I think, you know, I've been saying all along about increasing generosity, but the last thing, you don't want to give till it hurts. You want to Give until you're at your, you know, at your, at your budgetary limits. Don't over, don't over give. But then make sure you budget and actually leave money for unintended events that, you know, you just don't know what's going to happen. But it's like we're, we do that, let's say, in our daily lives, like we keep money aside for when the car breaks down or something like that. It's the same thing as you're giving. Just be.
- [39:47]
Joan Gary
So I'll say, I think, I think that we don't do, as a sector, a good enough job. So I think there are people that come into giving for that crisis. Right. And that we don't as a sector, do a good enough job of retaining them, drawing them in more effectively to philanthropy. The biggest actually example of this in my mind was the pandemic and money that went into 2020, that we didn't exactly hold onto those donors. Right. That many of those individuals didn't stick. And I do think it is incumbent upon us to really think about when someone comes in the door for a particular thing, how is it that we in fact nurture them, steward them, so that it is not just a one off, oh, there's a crisis. Right. But it is that I then stick to that organization or to that cause in a real way. Because in some ways I think the pandemic, the giving that happened during 2020 and it did not stay at that level. And I feel like it was a missed opportunity for us to continue to steward and nurture those folks, to understand the power of giving outside of an extraordinary situation.
- [41:22]
Michael Thatcher
You gave me a beautiful bridge or a segue to the whole impact conundrum. We tend to, when we're fundraising, we tend to speak about. We use urgency as a mechanism for engagement. Needless to say, Covid had a lot of urgency to it. So did social justice. Right. And I think there's been a significant with like pullback in money going to social justice issues since 2020 as well. And that's, that's also for the people sort of on the front lines there. It's devastating because there was this feeling like finally we're making some progress and now that is kind of pulling back. What I would suggest and what I think, and we're experimenting with this, with causeway, right. With the use of these issue funds, is that we're going to publish quarterly impact reports. So tell your impact story. Stop telling me your problems.
- [42:18]
Joan Gary
Yeah.
- [42:19]
Michael Thatcher
And how well you're balancing, you know, how much you're, you're managing your overhead. Tell me the difference you're making in the world. Get me involved. I think for the donors that are listening to this, it's like, sign up for, sign up for a significant, you know, once you've vetted an organization, stay the course.
- [42:37]
Joan Gary
Yeah.
- [42:37]
Michael Thatcher
Don't be fickle. Right. Organizations need you. And I think, one, I, I say this a lot, but sign up for a monthly donation off your credit card.
- [42:45]
Joan Gary
Totally.
- [42:46]
Michael Thatcher
You've got that. But what's hard about that is what we're trying to build. And I think the thing that's hurting us is engagement and it's attention. Right. How do you keep someone's attention? We talk about disasters. Right. These disasters happen in a heartbeat and then they take a decade to clean up.
- [43:05]
Joan Gary
Right.
- [43:07]
Michael Thatcher
People give for the news cycle, which is in some cases, 24 hours. Right?
- [43:13]
Joan Gary
Yeah. Till the next natural disaster.
- [43:16]
Michael Thatcher
Yeah. I mean, think about the earthquake in Haiti or the earthquake in Nepal. We tried to see if we could gain some engagement. We did a 10 years after on the Nepal earthquake. We did it 10 years after on the first major earthquake in Haiti. Didn't really get a lot of traction with the donors.
- [43:34]
Joan Gary
Yeah.
- [43:34]
Michael Thatcher
Yeah. And so I think it's part of it storytelling, but it's in the sense of building an engagement over time. As to the difference you're making in the cause area that you're caring about, that's outside of the ratings, but I do think that'll build engagement.
- [43:50]
Joan Gary
Yes. I totally agree with you. So as part of your origin story, you talked about holding the largest nonprofits accountable, but under your leadership, that has changed, especially in the last several years, shifting away from popularity and size and towards equity efficacy and performance. We've been talking about performance, but there is definitely a commitment on your part to bring more equity to the work. And I wonder if you could talk for just a couple of moments. I think we have one last question after that, just about what that looks like for you.
- [44:27]
Michael Thatcher
Sure. So I think at origin, we were created to evaluate the largest, most popular charities in the United States and really trying to add some value to where most of the money was going.
- [44:40]
Joan Gary
Right.
- [44:41]
Michael Thatcher
And what we realized pretty quickly, and what I realized when I first joined was, you know, I'd talk to people and they'd say, well, I only give to charity navigator rated charities. And I'd start pulling my hair out saying, well, wait a minute, you're missing, you're missing most of the ecosystem that you should, you could and should be supporting. And so we quickly realized that that wasn't what we wanted to be doing. We didn't want to be king making on some levels and just propagating inequities by only having money going to the top popular charities because they were the ones that actually met our criteria. So we looked at the eligibility criteria that we had and realized that it was highly restrictive. And so we changed that. It was. Originally you needed a million dollars in annual revenue and seven years of tax filing of a full fledged IRS Form 990.
- [45:35]
Joan Gary
Right.
- [45:36]
Michael Thatcher
Which is.
- [45:38]
Joan Gary
Leaves a lot of people out.
- [45:40]
Michael Thatcher
It leaves just. Yeah. Now there's a flip side of this, which is I don't know that we're ever going to be able to do startups in a meaningful way, but we can perhaps help startups get some exposure. So what we did was in order to do any kind of meaningful assessment, you need at least three years worth of data to play some kind of a trend line.
- [46:02]
Joan Gary
Sure.
- [46:02]
Michael Thatcher
And we went from seven years to three years. We also reduced the eligibility to. You can get a rating with Charity Navigator without a. Well, you can get a rating with Charity Navigator without filing a 990, but it's hard because it would be the impact score. And that's a fair work, but you can do it. You can also get your profile enhanced by giving us the other information, even if you aren't filing the 990. So you can give us the culture and community information, the leadership and adaptability information, and we'll give you exposure for that. But ultimately what we're trying to do is not have any barriers to entry totally so that organizations get what they need. We're also, as we do this, we're adjusting our metrics to be equitable. And so there's a big difference now in how we do the, we do financial assessments, which is based on four different size and age and size. In terms where. Think of that as in terms of annual revenue.
- [47:07]
Joan Gary
Okay.
- [47:08]
Michael Thatcher
So you have the small, small charities. You have sort of midsize. It's a, it's about, you know, it's like a $2 million mark. Then you have the, the large from 2 million to 500. And then you have over, over 500 million, which are the sort of, the mega charities. Different, different metrics are used. For example, if you're less than 250,000 in annual revenue, chances are you're not doing an audit. So why should we rate you on that?
- [47:35]
Joan Gary
Right, Totally.
- [47:36]
Michael Thatcher
But if you're, but if you're over a million dollars, you should be doing an audit. Right. And we are looking for that. And so it's that kind of just being appropriate in how we do things.
- [47:47]
Joan Gary
Yep. You are also being adaptable to how the market is changing and all of that. And so if you are looking for adaptability in your charities, you probably ought to look in the mirror and be able to say, I do that too. So I want to end with a question that I think would be really helpful, which is about if you can, you know, most of the folks who are listening are people who run nonprofits of all shapes and sizes. What's the best way, if you're talking to an executive director, to get that buy in that's necessary? You know, I made, I made fun of it at the beginning, but it's not a, it's not an uncommon perspective to take. Right. Is how do you get buy in around doing this ratings work and keeping it up to date? I sort of worry that our listeners don't have quite the right language to change the mindset of the folks in their organization around the value of this, of investing time and doing this work with Charity Navigator. So you get the last word on what's the pitch to an executive director?
- [48:58]
Michael Thatcher
I think there are a couple of things and we talked about the generosity crisis and how there's a decline in giving where there's a need to differentiate oneself from others doing similar work. Donors are experiencing a decline in trust. So I think third party accreditation is a super useful way of saying the work I'm doing is meaningful.
- [49:26]
Joan Gary
Yes.
- [49:27]
Michael Thatcher
It's also our lists and just being on the platform with a full data set makes you more discoverable. You'll also see this, and this is with others like Candid, for example, you have access to certain things once you've given them enough data. So getting your data into the third party evaluators and the third party data systems, it just makes other, it makes it easier for foundations, individual donors, corporations to find you and you want to be found. And you know, discovery and bringing in new donors is one of the most expensive and hardest things that fundraisers face. So use all free systems. We are all free systems for the most part. The other thing is that the ratings can help you in your discussions with at a board level. And I think one of the things every executive director has, and this I have from a lot of conversations with different EDs around in, in the United States is hey, I spent 20 minutes of every board meeting talking about our charity navigator rating. You know what? Can you help me make that an easier conversation? Right. And so we, we do want to make that an easier conversation. But I do think the ratings can help you with that. Smaller organizations can gain value from some of the structures within the ratings. I think larger organizations, you know what you're doing, and we're not trying to guide you in that. We're trying to just sort of use the same set of metrics that we're applying across the sector. But it really is something that helps you be found. And we have good data from folks saying that, you know, hey, I got my first million dollar grant because I was a four star charity on Charity Navigator and I was doing work in X, y or z particular topic area. So it can help you with your fundraising, it can help you build confidence with your donor base. And ultimately our goal anyway is that it should help you in what you're actually trying to achieve in the world.
- [51:26]
Joan Gary
Yeah, I think the other word here is that you go to Charity Navigator and you see a smaller organization that has. Has a pretty robust profile and you say, okay, they're approaching this work with a great deal of intentionality. And I really like that. So it's not just a credibility thing. It's also a, how are they running their shop and how do they approach, you know, sort of all aspects of the work in a way that your ratings will help me to better understand what kind of shop they actually run. So I think. And what kind of impact they're ultimately having. So those all seem like compelling arguments and we are out of time. I have enjoyed, as I actually enjoy almost every conversation, I walk away with a greater and deeper understanding of trends in the sector from people who have been perched at leadership levels for a long time. And so I just wanted to say thank you, Michael, and keep up the good work. And I like what there's. You all can't see this, but there is a sign set right beside Michael Thatcher's over his left shoulder. It says, it always seems impossible until it's done. Good words to live by. Michael Thatcher. Good man and a great conversation. Thank you.
- [52:50]
Michael Thatcher
Thank you, John. This was great to be able to have this conversation.
- [52:54]
Joan Gary
And for those of you who are listening, it always seems impossible until it's done. Also, good words for you to live by. In the meantime, please take good care of yourself. Thank you for the work that you do every day to repair the world in ways large and small. And we'll see you next time. Thanks so much for spending time with me today. I hope you found the conversation valuable as you navigate the messy world of nonprofits. Check out all my other resources@joengarry.com hope you find them helpful too. Lastly, thank you for the work you do to repair the world in ways large and small. I'll see you next time.