Self-regulation and ratings

Ratings and self-regulation guidelines want to help nonprofits to become better organizations. This article gives you some examples and presents criteria to select the right certificate for your own organization.

One of the major drivers of normative isomorphism among nonprofits are ratings such as Guidestar or Charity avigator. They provide donors and other relevant stakeholder groups with helpful information to decide on which organization they want to support. Additionally, regulations and guidelines of self-regulation such as governance codes have emerged throughout the past two decades. Both methods, ratings and self-regulation guidelines aim to develop and professionalize the sector.

AbouAssi and Bies (2017) name several positive aspects associated with self-regulation:

  • Strengthen legitimacy of nonprofits through transparency and accountability
  • A mechanism for learning across the NPO sector and within individual nonprofits
  • A means to prevent strong government action and restriction
  • A supplement to government concerns
  • Strengthen the moral commitment of a NPO

In the following, you find examples of ratings and self-regulation guidelines. Some of them are very prominent, others are less known in public, but of high relevance for nonprofits.

Icon rating

1. Charity Navigator

On their website Charity Navigator describes their organization like this:

Founded in 2001, Charity Navigator has become the nation’s largest and most-utilized evaluator of charities. In our quest to help donors, our team of professional analysts has examined tens of thousands of nonprofit financial documents. We’ve used this knowledge to develop an unbiased, objective, numbers-based rating system to assess over 9,000 of America’s best-known and some lesser known, but worthy, charities.

2. Guidestar

Guidestar is a nonprofit organization itself. It uses financial statements and tax files from nonprofits to generate a rating of nonprofits. Based on a search machine, donors can find the best rated organization in their field of interest. Guidestar is predominantly a US-focused service (guidestar.org), but there are also operations in a few other countries, including UK, Israel, India, South Korea and Japan (guidestarinternational.org).

3. GiveWell

On the GiveWell website you can find the following self description:

GiveWell is a nonprofit dedicated to finding outstanding giving opportunities through in-depth analysis. Thousands of hours of research have gone into finding our top-rated charities. They’re evidence-backed, thoroughly vetted, and underfunded.

The aim of GiveWell is to go beyond financial statement in their evaluations of nonprofits and provide evidence-based results. They follow a utilitarian approach and look for organizations that help as many people as possible with a given amount of resources. Thus, it is not surprising that all of their ‘top charities’ work in the field of malaria prevention or deworming.

4. Swiss Foundation Code

The Swiss Foundation Code stands as an example of many governance codes developed specifically for nonprofits. These code offer recommendations on transparency, checks and balances and efficiency of nonprofits, especially for management and board.

Contrary to the rating systems before, a governance code is a tool of self-regulation with no public rating. Thus, the aim is not to surpass a given level of acceptance or to measure your organization with others, but to apply the recommendations in the best ways onto your organization in order to better fulfill its mission.

Checklist: Criteria for selecting the right certificate

Before applying and adopting to guidelines or certificates, one should check the following questions:

  • What is the principal aim of the guidelines or the rating?
    This can be donor orientation, governmental acceptance, or simply public transparency.

  • Which quality criteria have to be met?
    Do these criteria cover your own expectations and values?

  • How high are the financial and temporal expenses for your organization?
    You should check for costs of accreditation, costs of renewal, etc.

  • Is there a governmental minimal expectation of self-regulation?
    In some countries, governmental institutions expect specific certifications or acceptance of guidelines in order to collaborate or fund a nonprofit organization.

  • Which constituents do you want to address?
    Internal constituents expect other forms of self-regulation than donors or clients.

Note: you can find a print version of this checklist in the ‘downloads’ section below.

Self-regulation and ratings in your country

We invite you to check for ratings and self-regulation guidelines in your country and search for nonprofits with these certificates. Analyze these examples according to the five aspects mentioned before.

Please share your findings in the ‘comments’ section below. Remember: you can also ‘like’ and reply to other learners’ comments.



References

Khaldoun AbouAssi & Angela Bies (2017): Relationships and Resources: the Isomorphism of Nonprofit Organizations’ (NPO) Self-regulation, In Public Management Review, DOI: 10.1080/14719037.2017.1400583.

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This article is from the free online course:

Entrepreneurship in Nonprofits

University of Basel