Navigating Charity Navigator Notches

<p>An increase from 3 to 4 stars on <a href="https://www.charitynavigator.org/" rel="noopener noreferrer" target="_blank">Charity Navigator</a> can be associated with a 6% rise in contributions. For smaller charities, the impact can be as much as 11%. That’s not too surprising but what about when ratings drop? According to new research, there’s no impact on contributions.</p> <p>“There seems to be this asymmetric effect,” said <a href="https://www.jennifer-mayo.com/" rel="noopener noreferrer" target="_blank">Jennifer Mayo, a Ph.D. student at the University of Michigan</a> and author of <a href="https://media.thenonprofittimes.com/wp-content/uploads/2021/12/16170745/Navigating-the-Notches.Charity-Responses-to-Charity-Navigator-Ratings.Jennifer-Mayo.pdf"><em>Navigating the Notches: Charity Responses to Ratings</em></a>. Some charities respond to incentives by changing behavior to try to get themselves above the star thresholds, which leads to “bunching.” Mayo explains more about that and what fields that’s more likely to occur during this episode of <em>Fresh Research</em>. “You always see this tradeoff between how much you want to incentive the organization or person to improve their score versus how many people are facing that incentive,” she said.</p> <p>A notched rating system like Charity Navigator’s four stars, induces more behavioral change than a continuous measure, like <a href="https://www.thenonprofittimes.com/column_database/charity-watchdog-launches-new-rating-system/" rel="noopener noreferrer" target="_blank">its new Encompass Rating System, which affects a smaller number of charities</a>. About 9,000 nonprofits are included in Charity Navigator’s four-star rating system. Last year, the organization <a href="https://www.thenonprofittimes.com/podcast/episode-29-charity-navigator-encompass-rating-system/" rel="noopener noreferrer" target="_blank">began to roll out its new Encompass Rating System</a>, based on four beacons. About 60% of that rating – which is on a 100 scale – is based on the impact and r