Podcast Summary: "Nonprofits Are Messy: Lessons in Leadership | Fundraising | Board Development | Communications"

Episode: Ep 212: Street Cred, Trust Capital, and Impact-Focused Fundraising (with Michael Thatcher)
Release Date: September 28, 2024
Host: Joan Garry
Guest: Michael Thatcher, President and CEO of Charity Navigator

Introduction

In Episode 212 of "Nonprofits Are Messy," Joan Garry engages in a deep and insightful conversation with Michael Thatcher, the President and CEO of Charity Navigator. The discussion revolves around the evolving landscape of nonprofit evaluations, the shift from emphasis on overhead costs to impact-focused metrics, and the broader trends affecting philanthropy in the post-pandemic era. This episode offers valuable perspectives for nonprofit leaders, fundraisers, board members, and marketers aiming to navigate the complexities of effective fundraising and organizational development.

Guest Background and Journey

Michael Thatcher introduces his diverse professional background, highlighting his unique path from the arts to technology and eventually to leading Charity Navigator.

• Eclectic Beginnings: Michael shares, "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." [04:07]

• Passion for Data and Technology: His fascination with data and technology, influenced by his father’s work as a mathematical modeler, led him to oceanographic research and later to a pivotal role at Microsoft. "Everything I was at Microsoft was about using data to transform things." [05:19]

• Transition to Charity Navigator: Michael describes his transition to Charity Navigator as a blend of professional alignment and serendipity: "It was just sort of one of these things where it was just dumb luck that we found each other." [06:45]

• Current Engagements: Despite his demanding role, Michael maintains his connection to music, emphasizing the balance between his professional responsibilities and personal passions. "Music's still there. It's not my main thing." [07:05]

Understanding Charity Navigator

Joan and Michael delve into the mission and operations of Charity Navigator, emphasizing its role in facilitating impactful philanthropy.

• Core Mission: "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." [10:05]

• Founding Principles: Michael underscores the importance of accessibility and impartiality: "We don't charge the donors, we don't charge the charities to be evaluated." [10:05]

• Services Offered: The platform rates over 225,000 charities, offers topical "give now" lists, best-of lists, and an alert system for potential issues within organizations. "We have impact assessments for a little over 3,000... we look at over 50 different elements in a rating." [12:05 - 14:40]

Evolution of Charity Navigator's Evaluation System

Under Michael’s leadership, Charity Navigator has significantly expanded and refined its evaluation methodologies.

• Scaling Up: From rating 8,000 charities on financials and governance, the organization now assesses 225,000 charities with a comprehensive set of metrics. "We have impact assessments for a little over 3,000. Right now we look at over 50 different elements in a rating." [15:19]

• Shift from Overhead Focus: Michael explains the strategic move to de-emphasize overhead ratios, integrating them as one of many metrics. "We've also really backed off on overhead. So overhead is one of 50 metrics and it is very lightly weighted." [15:19]

• Addressing Challenges: Despite the advancements, Charity Navigator faces ongoing challenges such as expanding ratings coverage and combating a decline in overall charitable giving. "There's a decline in giving in the United States right now... And that bothers me." [16:07]

Navigating a Crowded Evaluation Landscape

Michael compares Charity Navigator with other nonprofit evaluators, highlighting its unique positioning.

• Distinct from Candid: While Candid collects and distributes information, it doesn't evaluate charities directly. "Candid collects information and distributes information about charities. They don't actually evaluate charities." [29:00]

• Comparison with Other Platforms: Charity Navigator differs from the Great Nonprofits platform, which relies on user reviews, and the Better Business Bureau's Wise Giving Alliance, which requires payment for compliance seals. "Great nonprofits is more of a Yelp type platform... Better Business Bureau's Wise Giving alliance... you have to pay for it." [29:48 - 31:04]

• Collaborative Growth: Emphasizing collaboration, Charity Navigator has acquired Impact Matters and Causeway to bolster its impact assessment capabilities. "We acquired an organization called Impact Matters... We acquired Causeway... launching it in June of this year." [31:48 - 32:58]

Trends in Philanthropy Post-Pandemic

Joan and Michael explore the shifting dynamics in charitable giving, especially after the COVID-19 pandemic.

• Decline in Giving: "There is a decline in giving in the United States right now... Trust is also down." [33:32 - 35:10]

• Generational Shifts: Younger generations like Gen Z show less trust in traditional institutions but seek purposeful engagement. "The younger the demographic, the less trust... I need to work for a company that has a purpose." [35:10 - 35:56]

• Corporate Influence: Michael discusses how corporations have adapted to offer purposeful missions, attracting young talent and indirectly influencing philanthropic behaviors. "Corporates have figured out that if they can have a mission that is motivating to their young talent. They're going to hold on to people." [35:56 - 37:22]

Crisis Giving and Donor Retention

The conversation highlights the ephemeral nature of crisis-driven donations and the importance of sustained engagement.

• Increased Crises: "There are more crises now on a regular basis... We're getting all these storms, we're getting fires, we're getting tornadoes." [38:13]

• Budgeting for Uncertainty: Michael advises donors to "budget and actually leave money for unintended events," drawing parallels to personal financial planning. [38:50 - 39:47]

• Missed Opportunities in Donor Stewardship: Joan reflects on the pandemic's impact, noting that the surge in donations during crises often doesn't translate into long-term support. "The pandemic... that many of those individuals didn't stick. And I do think it is incumbent upon us to really think about... steward them." [39:47 - 41:22]

Emphasizing Impact Over Overhead

A significant portion of the discussion centers on Charity Navigator’s pivot towards impact-focused evaluations.

• From Metrics to Impact: Michael asserts, "It's the what the money accomplished," moving away from purely financial metrics to assess real-world impact. [19:43 - 22:54]

• Balancing Heart and Head: While acknowledging the emotional drivers of philanthropy, Michael encourages donors to "follow your heart, use your head and make a difference." [23:50 - 24:45]

• Storytelling and Engagement: Emphasizing the need for organizations to tell their impact stories, Michael suggests that effective storytelling can sustain donor engagement beyond immediate crises. "Tell your impact story. Stop telling me your problems." [42:17 - 43:05]

Commitment to Equity in Nonprofit Evaluations

Charity Navigator has restructured its evaluation criteria to promote equity across organizations of varying sizes and capacities.

• Lowering Barriers: Michael discusses reducing the eligibility criteria from seven years of IRS filings to three years, allowing newer and smaller nonprofits to be evaluated. "We changed that... we reduced the eligibility to... at least three years worth of data." [44:26 - 47:07]

• Tailored Metrics: Implementing different assessment criteria based on an organization's size and revenue ensures fair evaluations. "We have small, midsize, large, and mega charities... different metrics are used." [47:07 - 47:36]

• Inclusivity in Ratings: This approach prevents the marginalization of smaller or newer nonprofits, fostering a more inclusive philanthropic ecosystem. [45:35 - 46:02]

Strategies for Nonprofits to Engage with Charity Navigator

Joan seeks Michael's advice on how nonprofit leaders can effectively integrate Charity Navigator's ratings into their organizational strategy.

• Leveraging Accreditation: Michael highlights that third-party accreditation can enhance a nonprofit's credibility and visibility: "Third party accreditation is a super useful way of saying the work I'm doing is meaningful." [48:57 - 49:26]

• Enhancing Discoverability: Being rated on Charity Navigator increases a nonprofit's chances of being discovered by individual donors, foundations, and corporations. "It makes it easier for foundations, individual donors, corporations to find you." [49:26]

• Facilitating Fundraising Conversations: Ratings provide a structured framework for discussing organizational performance and accountability with boards and stakeholders. "The ratings can help you with that... It can help you with your fundraising." [49:26 - 51:25]

• Encouraging Sustained Giving: Michael advises nonprofits to encourage donors to opt for recurring donations, ensuring sustained support: "Sign up for a monthly donation off your credit card." [42:45 - 42:46]

Conclusion and Key Takeaways

The episode concludes with Joan and Michael reflecting on the importance of adaptability, trust, and impact in the evolving nonprofit sector.

• Adaptability is Crucial: Nonprofits must continuously adapt their strategies and operations to remain impactful and trustworthy in a dynamic environment. [44:26 - 47:47]

• Building Trust: With trust in nonprofits declining, demonstrating impact and accountability through comprehensive evaluations is essential for regaining donor confidence. [33:32 - 35:10]

• Sustained Engagement: Moving beyond crisis-driven giving to foster long-term donor relationships can stabilize funding and support organizational missions more effectively. [39:47 - 43:05]

• Equity in Evaluation: By lowering entry barriers and tailoring metrics, Charity Navigator promotes a more equitable philanthropic landscape, ensuring that all nonprofits, regardless of size, have the opportunity to be recognized and supported. [44:26 - 47:47]

• Emotional and Rational Giving: Encouraging donors to balance emotional impulses with informed decision-making leads to more meaningful and effective philanthropy. [23:50 - 24:45]

Michael Thatcher emphasizes a holistic approach to evaluating nonprofits, focusing not just on financial health but on the tangible impacts organizations create. This shift aligns with the broader trends in philanthropy, where donors seek accountability, transparency, and measurable outcomes.

Notable Quotes:

• "I think there's a through line to your professional trajectory... data and the use of data." — Michael Thatcher [04:07]

• "Follow your heart, use your head and make a difference." — Michael Thatcher [24:45]

• "Third party accreditation is a super useful way of saying the work I'm doing is meaningful." — Michael Thatcher [48:57]

• "It always seems impossible until it's done." — Michael Thatcher [52:53]

This episode provides a comprehensive look into the strategic evolution of Charity Navigator and its role in shaping more effective and equitable philanthropy. For nonprofit leaders seeking to enhance their organizations' impact and sustainability, the insights shared by Michael Thatcher offer actionable strategies and a reaffirmed commitment to meaningful, data-driven giving.