The hard work of directorship.

Dramatic transformations in U.S. firms as they strive to become more competitive has deepened the involvement of boards of directors in the affairs of the companies they oversee. The recent wave of board activism at General Motors, American Express, Westinghouse, and Sears, Roebuck has received wide attention for having prompted management changes and corporate restructurings. At the same time, large institutional shareholders are seeking direct influence over corporate affairs, an initiative known as "relationship investing."

All of this activity stirs a broad and long-overdue debate on corporate governance. The real issue here is one of influence: Should directors or institutional investors take on additional responsibilities for operations and strategic decisionmaking?

Before answering this question with a "yes," directors and institutional investors should understand the time and hard work required to be effective in this role.

Directors of Clayton, Dubilier & Rice's portfolio companies have realized that being effective as a director usually requires four or five days a month. For example:

* In one month alone, two directors of Lexmark International Inc., a maker of printers, typewriters, keyboards, and office supplies, devoted three days to on-site operating reviews at the Lexington, Ky., plant.

* A director of The Scott Cos., maker of lawn care products, spent several days in London with company executives examining a potential acquisition.

* A director of the Homeland Stores supermarkets worked on labor issues in a two-day session at the firm's Oklahoma headquarters.

* And a director of APS, the auto parts company, helped formulate a new compensation and stock option plan.

As these efforts indicate, our investment firm works on a model of activist directors and investors. We typically control the board and hold a majority of a company's equity. Our directors tell us that to exercise their responsibilities properly they must immerse themselves in the dynamics of their companies and concentrate on specific tasks. This often requires substantive involvement in several important areas.

Getting a clear fix on competitive position. To make strong strategic judgments, directors or institutional investors need detailed knowledge of the competitive position of their company's products and services. This requires a thorough understanding of industry structure, supplier relations, customer needs, and other essentials of the business. In the case of Homeland, it means spending time in supermarket aisles in Oklahoma.

Setting high, specific performance expectations. There are two primary means by which directors can establish a high-productivity environment: setting specific goals, and rewarding performance. Essential to this is an informed view of what goals are needed and achievable. Our directors constantly encourage managers to push the limits of their thinking and performance and insist that measurement and compensation be tied to delivered results. This often means saying "no" to automatic raises for mediocre performance.

Challenging pivotal priorities. Our directors ask tough questions. How efficiently are resources allocated? Are commitments to nonessential and noncommercial products consistent with the overall strategy? Is R&D efficiently linked to the company's evolving product mix and changing customer needs? Are distribution programs appropriate to the market? Once again, a key director role is saying no -- in this case, to funding projects outside of the company's core strategy.

Reinforcing entrepreneurial behavior. Directors must counsel to eliminate extraneous supervisory layers, to look to other companies and industries for models of competitive success, to keep it simple, to encourage individual initiative. Often, this means loosening hierarchial controls that have been inherited from a corporate parent.

Reviewing managerial skills and talent. A director's responsibility is to determine current needs, expose deficiencies, set standards, evaluate performance, and press for management changes. This requires scheduled, in-depth reviews of the management team. To fulfill these roles, directors must press the chief executive officer to fire weak performers and, occasionally, must replace the CEO himself.

Ensuring investment for the future. Beyond the establishment of financial hurdles and presentation of "investment cases," an active director must work with the CEO to set an investment strategy that logically projects the company from where it is today toward a perceived destiny. This is the "vision thing" so lacking in many corporations.

All of this sounds like hard work. It is. If activists want a greater role in corporate governance, they should be prepared to work for it.

Donald J. Gogel is a Principal of Clayton, Dubilier & Rice Inc. (CD&R), a New York-based private investment firm specializing in acquisitions that involve management participation. CD&R manages a pool of equity capital in excess of $1 billion and, since its formation in 1978, has acquired 19 businesses, primarily divisions of large corporations, with annual sales of more than $10 billion. He joined the firm in 1989, having previously served with Kidder, Peabody & Co. Inc. and McKinsey & Co. Inc.