A board's road to transformation.

• Author: MUSCHEWSKE, ROBERT C.
• Position: Tower Automotive Inc. - Brief Article

How one board matched itself up against the critical success factors for effective governance.

TOWER AUTOMOTIVE INC., a leading manufacturer of structural stampings, assemblies, and modules for the automotive industry, grew from $83 million in revenue in 1993 to nearly $2.5 billion in 1999. It went public in 1994, and although the board functioned effectively, it recognized that it needed to strengthen a number of its processes to fully exercise the fiduciary responsibility it now faced as the board of a large, highly visible public company.

The board's road to transformation began in the fall of 1997 with a comprehensive assessment. The purpose of the assessment was not to criticize the board, but to identify areas to be improved to best support and lead the company's long-term plan.

The model for the evaluation study was based on critical success factors for an effective board. While boards may choose to define their success criteria slightly differently, research suggests the criteria generally fall into the categories discussed below.

Through a simple questionnaire, members evaluated the extent to which the board met the critical success factors. All directors completed the questionnaire. Personal interviews with each director rounded out the board evaluation process.

Following are those criteria, beginning with the definitions of the critical success factors they support, and the board's initial action.

Clarity of Purpose. Definition: The board has a clear understanding of its purpose.

The board discovered that it was not spending enough time discussing strategic issues. It decided to conduct an annual off-site meeting to review the company's strategic plan, as well as set aside more time at board meetings to discuss strategic issues.

Commitment. Definition: The board demonstrates commitment to the overall success of the business.

Stock ownership among board members did not represent an adequate level of commitment and shared risk with shareholders. The board now includes outside directors in a deferred income stock ownership plan.

Practices. Definition: The board uses effective procedures and processes to manage its work.

Several outside members of the board did not feel adequate opportunity existed to meet and review issues independently. The board now provides this opportunity at each meeting. The outcome of these discussions is shared later with the chairman and the CEO.

Capabilities. Definition: The board possesses the right skill...