Friday, November 6, 2009

Nose In / Fingers Out (NIFO) Governance

Governance is the system by which organizations are controlled and managed. Paramount to this system is the relationship of the Board of Directors to its CEO - specifically "How Active is the Board in the operation of the company?"

At one end of the scale (The "A" End), we have the Passive Board often referred to as the rubber "Stampers" - In this model, we usually have a very dominate and knowledgeable CEO who is setting and driving the strategic agenda of the corporation. Board members are friendly to the process and few tough questions or contrary opinions ever get tabled. With Management setting and controlling, Board etiquette is often in a constant state of "scramble". These Boards are typical of early stage organizations where the CEO is a knowledgeable, strong willed and passionate. Board members are usually hand-picked from a group of friends or acquaintances.

At the other end of the scale (The "Z" End), we have a very Active, all Controlling Board who often spend a lot of their time managing the "Minutiae". Here the Board is usually large, comprised of a number of sub-committees and has a detailed process of checks and controls. The Board in this case, digs deeper into day to day management issues influencing Marketing, Sales, IT and HR procedures. Boards appointments are less likely to be influenced by the CEO and their friends. Sometimes we often see an executive committee of the board which essentially amounts to a "Board within a Board". Boards at the "Z" end tend to be Public, Not for Profit or Co-Op. Sometimes in crises mode, the Board does have transform itself into the Minutiae. This often happens when the CEO is not performing or has asked for help in managing the complexity.

Boards operate between the "A" and "Z" ends of the spectrum. The factors affecting the operating model include: Historical roots, Stage of Development, Competence of CEO, Experience of individual Board members and Stakeholder influence to name a few. Board operating models are also known to evolve over time as factors in the internal and external environment change.

A more sustainable approach will be one of Moderate ("M") Board participation and consistent with the notion of "Nose In and Fingers out" (NIFO). A NIFO board is more in tune with the fact that the Board exists to "enhance the decision making capability of Management". Best Practices in Governance suggest that Boards at both ends of the spectrum need to migrate towards the NIFO middle. Boards in NIFO mode operate with fewer committees, less meetings and prioritize their efforts on results, strategy, risk and policy. "Day to Day" details are left for Management to execute.

A good exercise would be to profile your existing board on the "A" to "Z" scale. A good place to start would be to pull the Board Charter documentation and re-read the language. A open dialogue on the topic at your next strategic retreat would also be helpful in analysing your Board's Effectiveness in its current Governance model. Is your Board's model consistent with the stage of growth, source of capital and skill sets of your members and its CEO? Is your Governance model consistent with "acting in the best interests of the Stakeholders"?

Can you see the Power in operating in a manner more consistent with Nose In Fingers Out?

1 comment:

  1. I think work-relationships depend heavily on each company