RESEARCH

REPORTS

Improving the International

Classification of Nonprofit
Organizations
David Hovton Smith

T
HIS articlesuggests substantive improvements in the Interna-
tional Classification of Nonprofit Organizations (ICNPO)
scheme and the larger system of which it is part. The general
approach is to see what this well-known nonprofit classification does
in categorizing smaller, volunteer-run associations locally, not just
larger, paid-staff organizations. The whole of the nonprofit sector
needs to be included.

National Taxonomy of Exempt Entities

Classification
The National Taxonomy of Exempt Entities (NTEE) is a major clas-
sification achievement aimed primarily at U.S. nonprofit groups
(NPGs) (Hodgkinson and Toppe, 1991; Hodgkinson, Weitzman,
Toppe, and Noga, 1992; Hodgkinson and Weitzman, 1993), covering
a wide range of NPG purposes or fields of action. (The term nonprofit
organizations is avoided here because many NPGs are less formal
[Smith, 19721. Groups is the appropriate broader term, including both
organizations and more informal groups [Smith, 19671.) Much time,
money, and effort has doubtless been spent to get NTEE to its present
state. Bania, Katona, and Keiser-Ruemmele (1995, p. 317) noted that
beginningin 1995, the 1% will adopt this taxonomy as their primary
classification scheme for organizations that apply for nonprofit sta-
tus. This shows the substantial political success of NTEE. Salamon
(1993) has criticized the NTEE, nonetheless, and some have found
NTEE to be quite unreliable when used for coding or classifying non-
profits (Turner, Nygren, and Bowen, 1993).
NTEEs creators might have better utilized prior work by schol-
ars in the field (for example, Amis and Stern, 1974; Hougland, 1979;
Smith, Seguin, and Collins, 1973). The nonprofit classification
scheme of Smith, Baldwin, and White (1988) in their widely avail-
able The Nonprofit Organization Handbook might also have helped

VOI. 6, no. 3. Spring 1996

MANAGEMENT & LEADERSHIP,
NONPROFIT 0 Jossey-BassPublishers
31 7
318 SMITH

avoid current gaps, which, by my count, omit about thirty-five mil-

lion American adults memberships.

ICNPO Scheme
ICNPO, developed by Salamon and Anheier (1992,1993), is another
excellent effort at NPG classification and attempts to deal with NPGs
in virtually every country. I deal with it here in some depth. ICNPO
(with twenty-seven basic categories) is far more economical than
NTEE (with over five hundred categories). This makes ICNPO much
easier and less costly to apply. Where NTEE tries to omit nothing
(though it fails somewhat), ICNPO seeks to winnow down NPGs of
the nonprofit sector to their purposive essence. Similar activities by
Where NTEE groups are classified into the same category, even if they seem super-
tries to omit ficially to be different. The best example I can give is the Group 1,
nothing, ICNPO category 1 200 Recreation (Salamon and Anheier, 1993, p. 190).
Many apparently different kinds of grass-roots associations all fit into
seeks to winnow this category, where NTEE would separate or ignore them; fraternal
down NPGs of groups, sports clubs, veterans groups, youth groups, and so on.
the nonprofit ICNPO is outstanding in its provision for grass-roots associations,
and I am very grateful to the creators of the classification for this
sector to their appropriate attention to an important worldwide phenomenon (over
purposive one hundred million members in the United States [Smith, 19941).
essence However, I have three important and substantial changes or additions
to suggest that flesh out the coverage of grass-roots associations in
three activity areas where the scheme is not strong enough, in my
view: education, health, and religion. In each case, my perspective is
that of trying to make ICNPO more useful for the classification of
grass-roots associations, as well as the paid staff nonprofits.
First, ICNPO needs a category 2 500 SchooVStudent Service,
into which would fit school services nonprofits such as parent-teach-
ers associations, alumni associations, and school sports booster
groups (that raise money for school sports programs). These non-
profit association memberships account for 17 percent, or nearly one-
sixth, of the American adult population (Verba and Nie, 1972, p. 42)
and do not fit well into Group 2s subtypes at present. Just as research
is different (category 2 4001, so too is service to schools and students
different and deserving of a new category. The activity here is sup-
porting the educational establishment in its work rather than directly
providing education per se, as the establishments in 2 100, 2 200,
and 2 300 do. I think that honorary and academic societies for stu-
dents (for example, Phi Beta Kappa and Phi Kappa Phi) also proba-
bly fit into this new categoxy, since they do not fit clearly into any
other category of education and research, or elsewhere).
Under Group 3: Health in ICNPO, it would be useful to add a
category 3 400 Health Associations, which would include, in the
United States, the hundreds of disease and disorder associations and
their thousands of local chapters, as well as hundreds of thousands
 I M P R O V I N G I N T E R N A T I O N A L C L A S S I F I C A T I O N319

of self-help groups focused on health issues (for example, self-help

ostomy groups and self-help depression groups), which do not really
belong in 4 100, and visiting nurse associations. These kinds of asso-
ciations, especially the self-help health groups, tend to be missed
even by national surveys of associations (Verba and Nie, 1972),
unless the surveys focus on such groups (Wuthnow, 1994). The
existing ICNPO categories do not really fit well with these health
associations. Putting health associations into the category 3 400
Other Health Service would mix apples and oranges and mask the
special nature of health associations, which have a different opera-
tional style and membership base than the medical services non-
profits otherwise classified into this category, In fact, the better
solution is to have separate categories for other-helping hcalth asso-
ciations and self-help health groups.
A third category I suggest adding to ICNPO concerns religion
(Group 10). The existing category, 10 100 Religious Congregations
and Associations, is fine but misses lower-level phenomena within
the congregation memberships that I am concerned with in my stud-
ies of local NPGs. Therefore, I suggest adding the category 10 200
Nonintegral Congregation Groups. My earlier research in many
communities suggests the importance of an analytical distinction
here: Groups within congregations that are essential to the running
of the religious congregations should be called integral congrega-
tion groups. Examples are the choir, the Sunday School (or equiv-
alent) and its teachers, and the finance committee. All are basic to
running the local religious establishment. Most consist of volunteer
staff members of the congregation, with guidance from the paid
clergy. However, there are frequently other, more nonintegral con-
gregation groups. The local religious establishment can function
well without these groups. Their attachment to the establishment is
looser, they are less controlled by the clergy, they are often open to
outsiders who are not actually formal congregation members, and
they often tend to have a strong recreational or social component,
or both. Verba and Nie (1972, p. 42) reported that 6 percent of the
adult population are members of such groups.
If these nonintegral congregation groups are mainly recreational-
social, they fit into ICNPO category 1200. But many are focused on
religious activities, outsider services activities based on religious val-
ues or religious fundraising of a peripheral nature (that is, not part
of the central fundraising of the religious establishment). These lat-
ter are very numerous among the 350,000 religious congregations in
America, and they need the proposed category 10 200 Nonintegral
Congregation Groups. The fact that some nonintegral groups within
congregations may fit into category 1 200 or category 4 100 should
not bar the inclusion of a new 10 200, just as Salamon and Anheier
(1993, p. 189) correctly pointed out that certain NPGs can be classi-
fied as either environmental or advocacy groups, both of which are
provided for in ICNPO (category 5 100 or category 7 100).
320 SMITH

One solution to the problem of particular NPGs belonging in two

or more categories is the following: Use ICNPO three times for every
NPG to be classified. The first coding would be as now, the primary
activity category where the NPG fits in the coders judgment. Then
the second and third codings would use the same ICNPO scheme to
indicate any secondary or tertiary activity that also fits the NPG else-
where in the classification. I n this way, coding information is not lost
and intercoder differences are to some extent reduced when all three
codes are used. For instance, one coder may rate a NPG like the Sierra
Club as primarily 1 200 Recreation, while another coder may rate
Ducks Unlimited (which is similar in many ways to the Sierra Club
One solution to in combining environmental, advocacy, and recreational interests) as
the problem of primarily environmental. These stylistic coding differences are over-
come if one uses, in later analysis, any coding for environmental (first,
particular NPGs second, or third) or any coding for advocacy or recreation in study-
belonging in ing intercoder reliability or the relationship of activity type to other
two or more variables of interest. (Note that NTEE should be applied three times
also, for the same reasons. A single primary code is not reliable
categories is the enough.)
following: Use The ICNPO focus on the establishment (essentiallya place of
ICNPO three operation of an organisation [Salamon and Anheier, 1993, p. 1891)
is excellent. (NTEE lacks this emphasis and should add it.) I would
times for every like to see added to this focus some consideration of how one de-
NPG to be termines where an organization is located or established if it has no
classified regular headquarters, as is the case for millions of grass-roots asso-
ciations in the United States (Smith, 1994). They have no regular
buildings, rented or owned, but meet either in members homes or
in buildings loaned by other organizations, such as libraries, schools,
and churches. Their establishment, in my view, is their regular pres-
ence in localities as groups of people who hold regular meetings, who
have regular leaders, who have proper names (for example, Ladies
Aid Society of Alcoholics ,4nonymous, meeting Saturdays at 9:30
A.M.), and who can roughly discern members from nonmembers at
any given time. These latter points constitute a way of determining
formality or of being a formal group (Smith, 1972). Such an estab-
lishment criterion for determining formality is more open than the
incorporation criterion suggested by Salamon and Anheier (1993,
p. 184) but close to their alternative criterion of having regular
meetings, officers or rules of procedure, or some degree of organi-
zational permanence (p. 184). The second set of criteria is more
useful than the first one, which forces us to omit most of the U.S.
nonprofit sector in terms of numbers of NPGs, members, and
amounts of time invested by volunteers (Smith, 1994). The utility of
the more inclusive establishment criterion of formality is clear also
from work on semiformal NPGs, which are quite numerous among
grass-roots associations (Smith, 1992).
Salamon and Anheier ( 1993, p. 192) raised the point that, unlike
NTEE, their scheme can be used to distinguish member-serving
 I M P R O V I N G I N T E R N A T I O N A L CLASSIFICATION 321

NPGs. I agree and see this as a major virtue of their scheme because
this distinction is so important theoretically (Katz, 1993; Wuthnow,
1994). But in addition to focusing on the categories of Group 1 1
Business and Professional Associations and Unions and 1 200 Recre-
ation, we must also include parts of several other categories (for
example, 1 300 Service Clubs, the self-help part of 4 100 Social Ser-
vices, and 7 100 Civic and Advocacy Organisations). It turns out that
member-benefit activity can be present in every one of the ICNPO cat-
egories. Hence, I suggest that instead of tinkering with the ICNPO
categories to deal with this, we add another code for primarily mem-
ber benefit versus primarily other helping and use this with each
establishment (possibly with a middle-type category that combines ~ ~~

public and member benefit aspects, as in the Lions Club). No halfway

measure can provide this simplicity in dealing with the problem. The details ofthe
application of
Larger Data Collection and Coding System major NPG
The details of the application of major NPG classification schemes classification
such as NTEE and ICNPO are not always clear in the literature to schemes such as
outside researchers, such as myself. The health associations that I NTEE and
suggest adding to ICNPO should be obvious to coders from the kind
of data presently collected. Obtaining data on school and student ser- K N P O are not
vices NPGs would, however, probably involve more data collection always clear in
from high schools and postsecondary institutions. Collecting data on the literature
nonintegral groups in congregations is similar but more decentral-
ized and costly. It requires information from specific (probably sam-
to outside
pled) local religious congregations. Such congregations and their researchers
nonintegral groups, along with school and student services NPGs,
do not usually file Internal Revenue Service returns anyhow, so lack
of information here is no change. If we are interested in the whole
nonprofit sector, we must spend the money to gather data on such
nonprofits.
The multiple use of the ICNPO coding scheme should be exper-
imented with and assessed for its value. Obviously, it will cost more,
but the key question is whether it is worth the additional cost
because of its greater accuracy. The various other technical aspects
of the classification system (verifying, reliability levels, standardiz-
ing, storing, sharing, and so on) should be relatively unaffected by
the addition of three new ICNPO categories.
However, the biggest obstacle in the way of adding any new cat-
egory is that both ICNPO and NTEE have their own political and
social lives. Many people believe in them, finding them, if not per-
fect, at least to be the best there is. Both have their developers and
defenders, both emerged from prestigious institutional bases.
Specifically, what happens to already coded NPGs if one or more
of my suggested new categories are added to ICNPO? (I omit NTEE
here for space reasons.) My first answer is that this classification has
not been used verv lone. so Drior codines do not eo back far in time.
322 SMITH

thus it is better for the long-term time series of such codings if

changes are made now. My second answer is that for two of my sug-
gestions of new categories--school and student services groups and
nonintegral groups in congregations-the relevant data have not
been gathered much previously. These tend to be smaller and more
informal NPGs than most researchers wish to study, especially those
using Salamon and Anheiers (1992) definition of NPGs as necessar-
ily incorporated. If the data have not been gathered previously in this
area and processed by the classification system, then inclusion of the
My proposed data in the future will only make prior classification more complete.
additional My other suggestion, the introduction of health associations,
would definitely entail changes from prior coding or classification
categories for (whether as a single or pair of categories). I do not know into which
ICNPO would category such NPGs have been coded in the past. Obviously, they
must go somewhere in the general health category-I would guess
not serve to
Health NEC (Not Elsewhere Classified). If this is true, then my sug-
change or gestion would have the modest effect of pulling important NPGs out
invalidate prior of a catchall health category and into a new health category with
more theoretical meaning. This change is especially important
cZassif cations
because of the large number of self-help health groups in the United
but ruther would States (Katz, 1993; Wuthnow, 1994) and elsewhere, but also because
point toward of the many disease-oriented health associations and their local
branches. Data collection on health associations would need, in the
reFnernent in
future, to differentiate clearly other-helping from self-help NPGs, and
future data special effort would have to be exerted to find self-help health groups
gathering and affiliated with institutions such as hospitals and prisons.
classification In sum, my proposed additional categories for ICNPO would not
serve to change or invalidate prior classificationsbut rather would point
toward refinement in future data gathering and classification in three
areas. As proponents of current tracking systems take note of these sug-
gested changes, they may see the value of the changes for future track-
ing. However, additional data collection efforts would be needed to find
a cross section of some of these types of grass-roots associations that are
part of the rest of the nonprofit sector (Smith, 1994).

Conclusion
Both NTEE and ICNPO are major improvements over previous clas-
sification schemes for nonprofits. Of the two, ICNPO seems more
useful both to researchers and to practitioners because of its parsi-
mony and greater theoretical value to the field. NTEE seems to suit
certain purposes quite well, such as the Foundation Centers need to
classify grants and possibly the Internal Revenue Services need
to classify groups applylng for tax-exempt status. However, both omit
Categories that are necessary to truly represent the wide range of non-
profits in the United States as well as in other countries. The omis-
sions seem to be systematic in not having categories for some kinds
of member benefit associations, especially grass-roots (locally based,
 IMPROVING INTERNATIONAL CLASSIFICATION 323

volunteer-run) associations that tens of millions of Americans belong

to in the aggregate. Additional categories needed to overcome this
problem are suggested in this article, in effect tinkering with ICNPO
to make it more useful for broad samples of nonprofits, including
smaller and less formal local NPGs.

DAVID HORTON SMITHis professor of sociology at Boston College. The

founder of the Association for Research on Nonprofit Organizations
and the Voluntary Sectol; he is currently writing a book on grass-roots
associations.

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