It may make you feel better to know that your charitable donations are going to organizations that have been highly rated by any number of online charity rankings. But these sites fail to quantify the most-important and most elusive charity measurement: success in achieving its mission.
Like stocks, charities typically are rated by their financial numbers or by qualitative characteristics such as corporate governance -- or both. Unlike stocks, charities have no single measure akin to business profit to determine successful performance. There is a widespread search for such a number, but the challenges may be too daunting. Meanwhile, some of the measures that are used may inspire bad actors to try to game the system.
..."Our assumption is that the average person in our society doesn't have the time or expertise to wade through these kinds of financial statements," said Ken Berger, president and chief executive of Charity Navigator. "We're providing an analysis."
The ratings do more than measure charities; they can change them, not always for the better. Mr. Soper, the nonprofit consultant, said that some charities, focused too much on rankings, adapt to climb them, much like universities play to college rankings' criteria. Only "what gets measured gets done," said Mr. Soper.
Some critics of Charity Navigator said it can create backwards priorities, encouraging them to withhold funds instead of dispersing them. The ratings, for instance, encourage charities to keep assets in reserve that total as much as their annual budget -- and more for certain types of charities with big ongoing expenses such as museums and schools.
Carl Bialik, The Wall Street Journal