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Charity Navigator, one of the largest, most influential Web sites that evaluate nonprofits, has announced that it is developing a process by which it will rate the “outcome measurement” of a nonprofit, as well as its financial and efficiency status, the latter of which has caused controversy among nonprofit leaders.

President & CEO Ken Berger, in his December 8 message, wrote, “I believe this is a significant turning point in the ongoing development and improvement of our rating system. Once we add outcome measurement to our tool, we will be able to give you a good overall picture of not just the financial efficiency and capacity, but also a sense of the end results of the good works of the charities you care about.”

Berger doesn’t have a date yet for when the new measurement will be ready, but I suspect nonprofit leaders will be watching carefully, since many have complained that simply looking at the ratio of administrative overhead to program expenditures is misleading, that the bottom line should be whether the group is effective at accomplishing its mission or not.

Granted, measuring social outcome, for instance, can be very difficult, but groups such as Kaboom and Share Our Strength have found ways to do so and/or are piloting new types of gathering “metrics with meaning.”

The news should also cheer many small nonprofits, some of which carry considerable debt that looks grim on paper but remains manageable while the organization expands or responds to various crises in their mission efforts. Examining impact helps these organizations compete better among the ratings systems for diminishing donor dollars.

This move by Charity Navigator may finally be an acknowlegement that assisting donors in their quest to connect with organizations of true positive impact versus just organizations with low overhead is what so many people want most.