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Case 22

If a man could flow with the stream, grow with the way of nature, he’d accomplish more and he’d be happier doing it than bucking the flow of the water.

—W. L. GORE

W. L. Gore & Associates: Rethinking Management

Malcolm Gladwell (author of The Tipping Point and Outliers) described his visit to W. L. Gore & Associates (Gore) as follows:

When I visited a Gore associate named Bob Hen at one of the company’s plants in Delaware, I tried, unsuccessfully, to get him to tell me what his position was. I suspected, from the fact that he had been recommended to me, that he was one of the top executives. But his office wasn’t any bigger than anyone else’s. His card just called him an “associate.” He didn’t seem to have a secretary, one that I could see anyway. He wasn’t dressed any differently from anyone else, and when I kept asking the question again and again, all he finally said, with a big grin, was, “I’m a meddler.”1

The absence of job titles and the lack of the normal symbols of hierarchy are not the only things that are different about Gore. Since its founding in 1958, Gore has deliberately adopted a system of management that contrasts sharply with that of other established corporations. While the styles of management of all start-up companies reflect the personality and values of their founders, the remarkable thing about Gore is that, as a $3.2 billion company with 9500 employees (“associates”) in 25 countries of the world, its organizational structure and management systems continue to defy the principles under which corporations of similar size and complexity are managed.

The Founding of Gore

Wilbert L. (Bill) Gore left DuPont in 1958 after 17 years as a research scientist. At DuPont, Gore had been working on a new synthetic material called polytetrafluoro- ethylene (PTFE), which it had branded “Teflon.” Gore was convinced that DuPont’s commitment to supplying large industrial markets with basic chemical products had

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caused it to overlook new applications for PTFE. When Bill Gore and his wife, Vieve, formed their own business in 1958, they were keen, not only to explore these novel applications, but also to create the energy and passion that he had experienced when working in small research teams at DuPont on those occasions when they were given the freedom to pursue innovation.

Working out of their home in Newark, Delaware, and with the help of their son, Bob, the Gores’ first product was Teflon-insulated cable. However, their break- through was Bob Gore’s discovery of the potential of Teflon to be stretched and laced with microscopic holes. The resulting fabric shed water droplets but was also breathable. Gore-Tex received a US patent in 1976. Not only did it have a wide range of applications for outdoor clothing, the fact that Gore-Tex was chemically inert and resistant to infection made it an excellent material for medical applications such as artificial arteries and intravenous bags. The potential to vary the size of the microscopic holes in Gore-Tex also made it ideal for a wide range of filtration applications.

Since then, continuous innovation has resulted in a growing array of consumer prod- ucts (such as guitar strings, dental floss, footwear components, and vacuum cleaner bags), industrial products (such as fuel cell components, electronic components, fire safety fabrics, and rope fibers), and medical products (such as implantable medical devices, pharmaceutical tubing products, and sealants).

Origins of the Gore Management Philosophy

FundingUniverse.com describes the development of Bill Gore’s management ideas as follows:

From their basement office, the Gores expanded into a separate production facility in their hometown of Newark, Delaware. Sales were brisk after initial product introduc- tions. By 1965, just seven years after the business had started, Gore & Associates was employing about 200 people. It was about that time that Gore began to develop and implement the unique management system and philosophy for which his company would become recognized. Gore noticed that as his company had grown, efficiency and productivity had started to decline. He needed a new management structure, but he feared that the popular pyramid management structure that was in vogue at the time suppressed the creativity and innovation that he valued so greatly. Instead of adopting the pyramid structure, Gore decided to create his own system.

During World War II, while on a task force at DuPont, Gore had learned of another type of organizational structure called the lattice system, which was developed to enhance the ingenuity and overall performance of a group working toward a goal. It emphasized communication and cooperation rather than hierarchy of authority. Under the system that Gore developed, any person was allowed to make a decision as long as it was fair, encouraged others, and made a commitment to the company. Consultation was required only for decisions that could potentially cause serious damage to the enterprise. Furthermore, new associates joined the company on the same effective authority level as all the other workers, including Bill and Vieve. There were no titles or bosses, with only a few exceptions, all commands were replaced by personal commitments.

New employees started out working in an area best suited to their talents, under the guidance of a sponsor. As the employee progressed there came more responsibility,

CASE 22 W. L. GORE & ASSOCIATES: REThINkING MANAGEMENT 631

and workers were paid according to their individual contribution. “Team members know who is producing,” Bill explained in a February 1986 issue of the Phoenix Business Journal. “They won’t put up with poor performance. There is tremendous peer pressure. You promote yourself by gaining knowledge and working hard, every day. There is no competition, except with yourself.” The effect of the system was to encourage workers to be creative, take risks, and perform at their highest level.2

Bill Gore’s ideas about management were influenced by Douglas McGregor’s The Human Side of Enterprise, published when Gore was starting up his own company. In it, McGregor identifies two models of management: the conventional model of management, rooted in Taylor’s scientific management, and Weber’s principles of bureaucracy, which McGregor termed “Theory X.” At its core is the assumption that work is unpleasant, that employees are motivated only by money, and that manage- ment’s principal role is to prevent shirking. “Theory Y” was McGregor’s alternative theory rooted in the work of the human relations school of management, which assumes that individuals are self-motivated, anxious to solve problems, and capable of working harmoniously on joint tasks.

Bill Gore’s dominant concern was the limits to organizational size. He believed that the need for interpersonal trust would result in organizations declining in effective- ness once they reached about 200 members. Hence, in 1967, rather than expand their Delaware facility, Bill and Vieve decided to build a second manufacturing facility in Flagstaff, Arizona. From then on, Gore built a new facility each time an existing unit reached 200 associates.

According to Malcolm Gladwell, Gore’s insistence upon small organizational units is an application of a principle developed by anthropologist Robin Dunbar. According to Dunbar, social groups are limited by individuals’ capacity to manage complex social relationships. Among primates, the size of the typical social group for a species is cor- related with the size of the neocortex of that species’ brain. For humans, Dunbar esti- mates that 148 is the maximum number of individuals that a person can comfortably have social relations with. Across a range of different societies, Dunbar found that 150 was the typical maximum size of tribes, religious groups, and army units.3

Organization Structure and Management Principles

The Gore organization does include elements of hierarchy. For example, as a corpo- ration, it is legally required to have a board of directors—this is chaired by Bob Gore. There is also a CEO, Terri Kelly. The company is organized into four divisions (fabrics, medical, industrial, and electronic products), each with a recognized “leader.” Within these divisions there are specific business units, each based upon a group of products. There are also specialized, company-wide functions such as human resources and information technology.

What is lacking is a codified set of ranks and positions. Gore associates are expected to adapt their roles to match their skills and aptitudes. The basic organizational units are small, self-managing teams.

Relationships within teams and between teams are based upon the concept of a lattice rather than a conventional hierarchy. The idea of a lattice is that every orga- nizational member is connected to every other organizational member within the particular facility. In the lattice, communication is peer to peer, not superior to sub- ordinate. For Bill Gore, this was a more natural way to organize. He observed that in

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most formal organizations it was through informal connections that things actually got done: “Most of us delight in going around the formal procedures and doing things the straightforward and easy way.”4

New associates are assigned to a “sponsor” whose job is to introduce the new hire to the company and guide him or her through the lattice. The new hire is likely to spend time with several teams during the first few months of employment. It is up to the new associate and a team to find a good match. An associate is free to find

EXHIBIT 1

What we believe

Founder Bill Gore built the company on a set of beliefs

and principles that guide us in the decisions we make,

in the work we do, and in our behavior toward others.

What we believe is the basis for our strong culture, which

connects Gore associates worldwide in a common bond.

FUNDAMENTAL BELIEFS

Belief in the individual: If you trust individuals and believe

in them, they will be motivated to do what’s right for

the company.

Power of small teams: Our lattice organization harnesses

the fast decision-making, diverse perspectives, and col-

laboration of small teams.

All in the same boat: All Gore associates are part owners of

the company through the associate stock plan. Not only

does this allow us to share in the risks and rewards of the

company, it gives us an added incentive to stay com-

mitted to its long-term success. As a result, we feel that

we are all in this effort together and believe we should

always consider what’s best for the company as a whole

when making decisions.

Long-term view: Our investment decisions are based on

long-term payoff and our fundamental beliefs are not

sacrificed for short-term gain.

GUIDING PRINCIPLES

◆ Freedom: the company was designed to be an orga-

nization in which associates can achieve their own

goals best by directing their efforts toward the suc-

cess of the corporation; action is prized; ideas are

encouraged; and making mistakes is viewed as part

of the creative process. We define freedom as being

empowered to encourage each other to grow in

knowledge, skill, scope of responsibility, and range

of activities. We believe that associates will exceed

expectations when given the freedom to do so.

◆ Fairness: everyone at Gore sincerely tries to be fair

with each other, our suppliers, our customers, and

anyone else with whom we do business.

◆ Commitment: we are not assigned tasks; rather, we

each make our own commitments and keep them.

◆ Waterline: everyone at Gore consults with other

associates before taking actions that might be

“below the waterline”—causing serious damage

to the company.

Working in Our Unique Culture

Our founder Bill Gore once said, “The objective of the

Enterprise is to make money and have fun doing so.” And

we still believe that, more than 50 years later.

Because we are all part owners of the company

through the associate stock plan, Gore associates expect

a lot from each other. Innovation and creativity; high

ethics and integrity; making commitments and standing

behind them. We work hard at living up to these expec-

tations as we strive for business success. But we also trust

CASE 22 W. L. GORE & ASSOCIATES: REThINkING MANAGEMENT 633

a new sponsor if desired. Typically, each associate works on two or three different project teams.

Annual reviews are peer based. Information is collected from at least 20 other asso- ciates. Each associate is then ranked against every other associate within the unit in terms of overall contribution. This ranking determines compensation.

The company’s beliefs, management principles, and work culture are articulated on its website (Exhibit 1).

and respect each other and believe it’s important to cele-

brate success.

Gore is much less formal than most workplaces. Our

relationships with other associates are open and informal

and we strive to treat everyone respectfully and fairly. This

type of environment naturally promotes social interac-

tion and many associates have made lifelong friends with

those they met working at Gore.

Do Something You’re Passionate About

At Gore, we believe it’s important to have passion for what

you do. If you’re passionate about your work, you are natu-

rally going to be highly self-motivated and focused. If you

feel pride and ownership, you will want to do whatever it

takes to be successful and have an impact. So when you

apply for an opportunity at Gore, be sure you’re going to

be passionate about the work you’ll be doing.

The Lattice Structure and Individual Accountability

Gore’s unique “lattice” management structure, which illus-

trates a nonhierarchical system based on interconnec-

tion among associates, is free from traditional bosses and

managers. There is no assigned authority, and we become

leaders based on our ability to gain the respect of our

peers and to attract followers.

You will be responsible for managing your own work-

load and will be accountable to others on your team.

More importantly, only you can make a commitment to

do something (e.g., a task, a project, or a new role)—but

once you make a commitment, you will be expected

to meet it. A “core commitment” is your primary area of

concentration. You may take on additional commitments

depending on your interests, the company’s needs, and

your availability.

Relationships and Direct Communication

Relationships are everything at Gore—relationships with

each other, with customers, with vendors and suppliers,

and with our surrounding communities. We encourage

people to build and maintain long-term relationships by

communicating directly. Of course, we all use e-mail, but

we find that face-to-face meetings and phone calls work

best when collaborating with others.

Sponsors

Everyone at Gore has a sponsor, who is committed to

helping you succeed. Sponsors are responsible for sup-

porting your growth, for providing good feedback on

your strengths and areas that offer opportunities for

development and for helping you connect with others in

the organization.

Source: www.gore.com/en_xx/careers/whoweare/about-gore. html, W. L. Gore & Associates: Beliefs, Principles and Culture. Reproduced by permission of W. L. Gore & Associates.

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Leadership

Leadership is important at Gore, but the basic principle is that of natural leadership: “If you call a meeting and people show up—you’re a leader.”5 Teams can appoint team leaders; they can also replace their team leaders. As a result, every team leader’s accountability is to the team. “Someone who is accustomed to snapping their fingers and having people respond will be frustrated,” says John McMillan, a Gore associate. “I snap my fingers and nobody will do anything. My job is to acquire followership, artic- ulate a goal and get there … and hope the rest of the people think that makes sense.”6

CEO Terri Kelly compares the conventional approach to leadership with Gore’s “ distributed leadership model”:

The model of the single powerful leader who operates through command and control is attractive in its simplicity … In reality, it is impractical to expect the single leader to have all the answers, and history has shown that relying upon rigid control mecha- nisms will not prevent catastrophic outcomes. It’s far better to rely upon a broad base of individuals and leaders who share a common set of values and feel personal own- ership for the overall success of the organization. And as organizations grow in size and complexity, it becomes even more critical to distribute the leadership load … The capacity of the organization increases when it distributes the leadership load to com- petent leaders on the ground who can make the best knowledge-based decisions.7

She argues that talented newcomers to the workforce adapt much more easily to the distributed leadership than to traditional modes of management. Young people recog- nize that they have choices, are not wedded to a single organization, and will move to where they perceive the best opportunities. As a result, companies that persevere with traditional management models will find it difficult to retain the best talent. At the same time, warns Kelly, making the shift to a distributed leadership model is a challenge to top management. It requires a fundamental change in the values, attitudes, and reward systems that are deeply embedded in most organizations:

It will require a shift within the organization from valuing a key few to valuing the unique contributions of many. Individuals will need to feel they have a voice and can be heard. Leaders will need to recognize that their primary role is to empower others versus build their own power. They will no longer stand behind a title with assumed authority to tell people what to do.

Leaders’ focus will shift to creating the right environment and instilling the right values that can enable capable leaders to emerge. They will recognize that they are only leaders if they have willing followers, and that this needs to be earned every day. Ultimately, their contributions will be judged by the people they lead.

Most rewards systems depend upon higher level management to assess the effec- tiveness of the leader. This view can be somewhat limited and biased by the fact the managers were often the ones who put the leader in the role in the first place. Those who know their leaders best are typically the individuals they lead. If you want indi- viduals to have a voice in the organization, they must also have a voice in selecting and evaluating their leaders.

CASE 22 W. L. GORE & ASSOCIATES: REThINkING MANAGEMENT 635

In our company, we have found it very useful to adopt a peer ranking system. All associates get the opportunity to rank members of their team, including their leaders. They are asked to create a contribution list in rank order based on who they believe is making the greatest contribution to the success of the enterprise. This approach serves as an excellent form of “checks and balances” when it comes to who is truly recognized for their contributions as well as for overall leadership.8

Innovation

The success of Gore’s unusual management system is its capacity for innovation. Between 1976 and 2017, Gore received 1428 US patents; in each year between 2012 and 2018 it was awarded between 70 and 108 patents. Even more remarkable has been its ability to extend its existing technological breakthroughs to a wide variety of new applications. Central to Gore’s ability to innovate is its willingness to allow individuals the freedom to pursue their own projects: each associate is allowed a half day each week of “dabble time.” New product ideas typically originate with customers or individual employees and are then developed by a self-directed team. Gore’s Elixir guitar strings began when several amateur guitarists in the research department began experimenting with differ- ent coatings for guitar strings, then sent samples to musicians to try.

The source of Gore’s innovations is not so much its brilliant technologists and engi- neers as a management system that attracts top talent and provides an environment that inspires creativity and collaboration. Gary Hamel closes his discussion of Gore with the following challenge:

Bill Gore was a 40-something chemical engineer when he laid the foundations for his innovation democracy. I don’t know about you, but a middle-aged polytetrafluoro- ethylene-loving chemist isn’t my mental image of a wild-eyed management innovator. Yet, think about how radical Gore’s vision must have seemed back in 1958. Fifty years later, postmodern management hipsters throw around terms like complex adaptive systems and self-organizing teams. Well, they’re only a half century behind the curve. So ask yourself, am I dreaming big enough yet? Would my management innovation agenda make Bill Gore proud?9

Notes

1. M. Gladwell, The Tipping Point (Little, Brown & Co., London, 2000).

2. “W. L. Gore & Associates, Inc. History,” http://www.fundin- guniverse.com/company-histories/WL-Gore-amp;-Associ- ates-Inc-Company-History.html, accessed July 20, 2015.

3. Gladwell, op. cit.: 177–181. 4. Quoted by G. Hamel with B. Breen, The Future of

Management (Harvard Business School Press, Boston, MA, 2007, p. 87).

5. Reprinted by permission of Harvard Business School Press from The Future of Management by Gary Hamel. Boston, MA, 2007, p. 100 Copyright © 2007 by the Harvard Business School Publishing Corporation; all rights reserved.

6. “W. L. Gore & Associates, Inc.: Quality’s Different Drum- mer,” IMPO Magazine, January 14, 2002, http://www. impomag.com/articles/2002/01/wl-gore-associates-inc- qualitys-different-drummer, accessed July 20, 2015.

7. Terri Kelly, “No More Heroes: Distributed Leadership,” Management Innovation eXchange (April 8, 2010), http:// www.managementexchange.com/blog/no-more-heroes, accessed July 20, 2015.

8. Ibid. 9. Reprinted by permission of Harvard Business School Press