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?

Those Pesky Independent Directors

A young CEO recently asked for some advice. She had just signed off on a third party investment which came with the requirement to add an Independent Board member to the team. The CEO commented that "The dynamics and complexity of the Boardroom has changed in a number of significant ways. I need some help in understanding what is unfolding." The key changes as she described them included:

1) "The new Independent member has asked for a lot of background material about the company, our shareholders, suppliers, accounts receivable, contracts, payables, risks, issues and opportunities, personnel files, incentive plans - the list was long and the more I provided the more information I was requested to deliver." I respond -it is very important that a new member of the board come up to speed as quickly as possible. Much of the material that you have used in your recent due diligence will provide the Director with the necessary background for an effective Board Orientation.

2) Prior to the meeting, a Detailed Agenda was requested that included a start, stop and time allocation for each agenda item. In addition, we were asked to categorize the agenda into a) Standing Matters (CEO Report, Financial Update, Pipeline Review), b) Committee Reports: (Finance, Human Resources, Governance & Risk) c) New Items: (For Information Only or Decision Required), d) In Camera session (excludes CEO). I respond - this is just common sense. Directors are busy and organized professionals. An appropriate well constituted meeting agenda is critical to ensure meeting efficiency. The Chair of course will need to be strong to ensure that the meeting plan stays on track. An In Camera session without management is a must.

3) A couple days prior to the meeting a detailed Board Package of supporting materials was sent out to all members. Our new board member was looking for at least 5 days with the supporting materials. Twenty four hours in advance of the meeting, the final materials were emailed or faxed - Our new member was happy that the changes to the final package were small. I respond - Directors are appointed to help enhance management's decision making. They will need to see a sufficient level of detail to understand the options and recommendations made by management. Given schedules and commitments 5 days is the minimum period of time to allow the member to read and absorb the materials. Often after the Board Package goes out there are critical updates that need to get sent - these updates should be sent no later then 24 hours in advance of the meeting and should not form the core of the agenda materials.

4) The meeting itself also changed quite dramatically. With all the materials sent out in advance everyone on the Board had a chance to understand where we were at. The board meeting dynamics now changed to a barrage of questions about the assumptions, the trends and associated conclusions related to the materials. I respond - Asking questions helps with the clarity and provides a real time mechanism to test the quality and validity of management recommendations. It is often stated that there are no "wrong questions" in the board meeting. Directors who don't understand a particular point will most certainly speak up.

The Board of Directors are appointed by the Shareholders and their purpose is to "Enhance Executive Decision Making". They are bound by a Duty of Loyalty that demands that they act in the best interests of the Stakeholders. Stakeholders include not only shareholders but customers, suppliers, NGO's, employees, government agencies and others with a "stake" in the companies business. Their Duty of Care is to act in a matter that is consistent with what a reasonable person would do when presented with a similar set of facts.

Directors perform their duties by a) demanding a high calibre Board Package that contains the right amount of detail and is delivered in well in advance of the meeting, b) asking lots of questions to improve clarity and test what if scenarios and c) digging into their wide and deep leadership expertise to help guide management.

The CEO who asked for the assistance left our session with a significantly enlightened view of that Pesky Independent Board member. Does it now make sense to you?