The Leadership & Adaptability Beacon

Complete Ratings Help Your Nonprofit Stand Out

While it’s not required for nonprofits to fill out all four of their Charity Navigator beacons, it’s best practice to do so. Charity Navigator says 80% of donors would rather donate to a charity with a complete rating than a higher-ranked charity that hasn’t completed all its beacons.

Leadership Comes in Many Shapes and Sizes

Ask 12 people for a definition of leadership, and you’ll likely get 12 different responses. That said, at nonprofits, leadership should include a focus on mission and goals, while adhering to ethical principles and collaboration as a means to create the desired impact.

How to Assess Leadership and Adaptability

There are 3 major components to assessing leadership and adaptability. Each of them involve metrics or another set of questions to answer. Regardless, effectively displaying leadership and adaptability when required will set your nonprofit up for success.

Webinar Recap: Laura Andes, chief program officer at Charity Navigator, sheds light on one of the key factors of Charity Navigator’s rating system: Leadership & Adaptability.

Nonprofit organizations depend on donations to achieve their mission. But before securing donations, nonprofits must first work to earn the trust of potential donors.

Charity Navigator enables donors to easily identify trustworthy, mission-driven organizations. “Any organization with a 3- or 4- star rating is a good or great charity,” said Laura Andes, Chief Program Officer at Charity Navigator. “Any donor can give with confidence to those nonprofits.

A charity’s star rating is calculated based on a combination of four areas, which are called beacons. Recently, Andes joined Jeremy Ladyga, nonprofit board consultant at OnBoard, to zero in on one of those Beacons: Leadership & Accountability.

During the masterclass, Andes and Ladyga discussed:

Why leadership practices matter for nonprofits
Charity Navigator’s Leadership & Adaptability Beacon’s methodology and scoring criteria
Tips for effectively engaging with the Leadership & Adaptability Beacon

Read on to explore key takeaways from this session.

Complete Ratings Are a Way to Set Your Nonprofit Apart

In the past, Charity Navigator ratings were based solely on accountability and financial metrics. Of course, these metrics still matter. But today, Charity Navigator weighs 4 factors – called beacons – to determine a charity’s rating.

Impact & Results: The impact of the organization’s programs, relative to the costs required to run them
Accountability & Finance: This beacon measures whether the charity is accountable, transparent, and financially effective and sustainable. In the past, this beacon was the primary factor for which ratings were based.
Leadership & Adaptability: If the organization has the leadership capacity, strategic plan, and ability to adapt or respond to changing circumstances to better achieve its mission.
Culture & Community: Whether the charity implements practices that strengthen its overall organization health and is responsive to its beneficiaries.

Not all beacons are required. However, it’s best practice to complete them all. Doing so is a great way to stand out to potential donors. According to Charity Navigator, eight in 10 donors would rather donate to a charity with a “complete” rating than one with just one or two Beacons completed – even if the charity with more Beacons had a lower overall score.

Leadership Has Many Definitions

If you ask a dozen people to define “leadership,” you’ll get that many responses. “There are as many definitions of leadership as there are stars in the sky,” said Andes. “It’s a very complex concept.”

When developing the Leadership & Adaptability Beacon a few years ago, “Charity Navigator really leaned on the Bridgespan Group’s Definition.” According to the Bridgespan Group, leaders in nonprofits must:

Lead the organization with strategic thinking, decision-making, and change management
Lead others
Endorse and embody the core values and beliefs of the organization

Charity Navigator then settled on the following definition: “Nonprofit leadership involves guiding an organization toward its mission and goals while adhering to ethical principles, fostering collaboration, and mobilizing resources to create positive social impact.”

Charity Navigator Has a Simple Framework for Assessing Leadership and Adaptability

According to Andes, “This framework will set your organization up for success from a leadership management and adaptability standpoint. At the end of the day, this is something that’s universal, regardless of sector.”

The framework has 3 major components.

1. Vision, Mission, And Strategy

Charity Navigator accesses this component using the following metrics:

• Presence of a Vision Statement

Charity Navigator determines if the nonprofit has a vision statement. The statement – which is typically between five and 20 words – describes how the world would look if a nonprofit completed its mission. As an example, Feed the Children’s vision is to “Create a world where no child goes to bed hungry.”

Charity Navigator doesn’t assess the quality of the vision statement – simply the fact that one exists. That’s because there’s evidence that going through the exercise of establishing a mission makes an organization more effective. According to the Harvard Business Review, “Organizations with a well-defined purpose/vision statement perform better than the industry average.”

• Presence of a Mission Statement

Charity Navigator also looks for the presence of a mission statement, which Andes called “a cousin to the vision statement.” The mission statement is the definition of the nonprofit’s focus, who it serves, what it does, its objectives, and its approach to reaching those objectives. Andes shared the following mission statement example from Khan Academy: “Our mission is to provide world-class education for anyone, anywhere.”

Again, Charity Navigator doesn’t access the quality of the mission statement – but simply the presence of one. “In the nonprofit sector, there’s a lot of great evidence about how a great mission statement can inspire and improve your fundraising,” said Andes. “Donors are motivated by mission statements.”

• Presence of a Strategic Plan and Goals

Andes shared a startling statistic. In 2016, only 49% of surveyed nonprofit leaders had a strategic plan.

“A strategic plan is a really important document,” she explained. “This is an area a lot of nonprofits don’t take the time to do.”

This is a big problem, and it’s an area where board members must get involved. “A strategic plan is fundamental and couldn’t be more important for board members,” said Ladyga.

Not surprisingly, evidence suggests that strategic planning has a positive impact on organizational performance in both the private and public sector.

On Charity Navigator, nonprofits are asked to provide their three most important strategic goals, along with the key reasons their organizations have committed to these goals. “Honestly, the absence of these goals says maybe you’re not a very mature organization,” said Andes.

2. Leadership

Charity Navigator also looks at an organization’s leadership by asking two key questions:

• Does the organization invest in leadership development?

Investing in leadership development is important. But it doesn’t always happen.

Andes shared a statistic from 2015 that found the average amount spent per employee in the social sector on leadership development was $29. In comparison, the private sector spends about $1,200 per employee.

“I know professional development is often one of the first things that gets cut,” said Andes. “But it’s important for the sector to know that investing in itself should be a priority. We’re not doing ourselves any favors if we don’t invest in ourselves.”

• Does the leadership have a focus on mobilizing for mission?

Why does this matter? Because organizations can’t solve the big issues they tackle without engaging stakeholders around them.

“We know we can’t do it alone,” said Andes. “We want you to think about how you’re working collectively to get people to care about your issue.”

Andes reminded attendees that “even the best nonprofits in the world can’t solve the world’s problems by themselves. It takes a village. We should be willing to work with anyone with a shared vision.”

3. Adaptability

If the last few years have taught us anything, it’s that adaptability is key for nonprofit success. But even in “normal” times, organizations must have a culture of learning to be impactful.

As such, Charity Navigator also considers an organization’s adaptability. For this portion, nonprofits are asked to share an example of when they adapted to external change within the past year.

“This is my favorite part of Charity Navigator’s rating system because it allows nonprofits to tell a great story,” said Andes. “Donors look at this and love it.”

Curious about the other beacons that weigh into your nonprofit’s Charity Navigator rating — and how you can boost your score? Check out the other masterclasses in this series, each focused on a key beacon.

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