Individual Written Case Analysis Report

Case 24 W. L. Gore & Associates: Rethinking Management?

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

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 $2.5 billion company with 8500 employees (“associates”) in facilities located in 24 countries of the world, its organizational structure and man- agement 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 scien- tist. At DuPont, Gore had been working on a new synthetic material called

This case was prepared by Robert M. Grant. ©2015 Robert M. Grant.

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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CASE 24 W. L. GORE & ASSOCIATES: RETHINKING MANAGEMENT? 719

polytetrafluoroethylene (PTFE), which it had branded “Teflon.” Gore was convinced that DuPont’s commitment to a business model based on large industrial markets for basic chemical products had caused it to overlook a whole range of innovative applications for PTFE. In forming a business together with his wife, Vieve, Gore was also motivated by the desire to create the energy and passion that he had experi- enced when working in small research teams at DuPont on those occasions when they were given the freedom to pursue innovation.

Working out of their own home in Newark, Delaware, and with the help of their son, Bob, the Gore, first product was Teflon-insulated cable (which was used for the Apollo space program among other applications).

The company’s biggest breakthrough was the result of Bob Gore’s discovery of the potential of Teflon to be stretched and laced with microscopic holes. The result- ing fabric had several desirable properties; in particular, it 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 chemi- cally inert and resistant to infection made it an excellent material for medical appli- cations such as artificial arteries and intravenous bags. The potential to vary the size of the microscopic holes in Gore-Tex made it ideal for a wide range of filtration applications.

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 facil- ity in their hometown of Newark, Delaware. Sales were brisk after initial product introductions. 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 com- pany 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 devel- oped 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, and commands were replaced by personal commitments.

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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720 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS

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 respon- sibility, 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 tre- mendous 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, which was published as Gore’s own company was in its start-up phase. In it, McGregor identifies two models of management: the conven- tional model of management, rooted in Taylor’s scientific management, and Weber’s principles of bureaucracy, which he terms “Theory X.” At its core is the assumption that work is unpleasant, that employees are motivated only by money, and that man- agement’s principal role is to prevent shirking. “Theory Y” is 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.

A key element in Bill Gore’s management thinking related to the limits of organi- zational size. He believed that the need for interpersonal trust would result in orga- nizations declining in effectiveness 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 correlated with the size of the neocortex of that species’ brain. For humans, Dunbar estimates that 148 is the maximum number of individuals that a person can comfortably have social relations with. Across a range of different societ- ies, 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 cor- poration, 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 divi- sions (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 organiza- tional units are small, self-managing teams.

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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CASE 24 W. L. GORE & ASSOCIATES: RETHINKING MANAGEMENT? 721

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 organizational member is connected to every other organizational member within the particular facility. In the lattice, communication is peer to peer, not superior to subordinate. For Bill Gore, this was a more natural way to organize. He observed that in 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 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 associates. 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).

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, articulate 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 con- trol mechanisms 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 ownership for the overall success of the organization. And as organiza- tions 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 competent 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 recognize 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

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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722 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS

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 con-

nects 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 har-

nesses the fast decision-making, diverse perspectives,

and collaboration 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 committed to its long-term success.

As a result, we feel 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 creativ-

ity; high ethics and integrity; making commitments

and standing behind them. We work hard at living up

to these expectations as we strive for business success.

a challenge to top management that 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.

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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CASE 24 W. L. GORE & ASSOCIATES: RETHINKING MANAGEMENT? 723

But we also trust and respect each other and

believe it’s important to celebrate success.

Gore is much less formal than most work-

places. 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 interaction 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 pas-

sion for what you do. If you’re passionate about

your work, you are naturally 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 illustrates a nonhierarchical system based

on interconnection 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

workload and will be accountable to others on

your team. More importantly, only you can make

a commitment to do something (for example, 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 concen-

tration. 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—relation-

ships with each other, with customers, with

vendors and suppliers and with our surround-

ing communities. We encourage people to build

and maintain long-term relationships by com-

municating 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 supporting 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.

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.

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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724 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS

Those who know their leaders best are typically the individuals they lead. If you want individuals to have a voice in the organization, they must also have a voice in selecting and evaluating their leaders.

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

EXHIBIT 2

Examples of Innovation at W. L. Gore & Associates

Change Music

How did the creators of GORE-TEX® products—worn

by outdoor enthusiasts and people with active life-

styles all over the world—invent a new kind of guitar

string?

Although manufacturers have coated their guitar

strings for many years to make them last longer by pro-

tecting them from perspiration, oil, and dirt the coating

severely compromised the quality of the sound.

Gore had no presence in the music industry until

one associate envisioned a completely new type of

guitar string that would prevent string contamination,

last longer, and be more comfortable for musicians

to play. Relying on the company’s unique culture and

mentoring system to support his efforts, he formed a

cross-functional team—including Michael and John—

to make it happen.

Each member of the Gore team had the knowledge

and know-how needed to develop this exciting new

product. With the entrepreneurial spirit characteristic

of Gore, they took this innovative concept to the mar-

ketplace in less than two years.

But the team’s commitment to integrity didn’t stop

in the lab. They asked 15,000 musicians to test the new

strings for sound quality before the product was intro-

duced. Since then, revolutionary ELIXIR® Strings have

inspired a generation of musicians all over the world to

pick up their guitars and play. And their ELIXIR® Strings

experience and the challenges they overcame have

changed their lives too.

Change Lives

How did the creators of GORE-TEX® products—worn by

outdoor enthusiasts and people with active lifestyles

all over the world—invent material to patch human

hearts?

For people with a serious heart problem known as

an atrial septal defect, or “hole in the heart,” open heart

surgery was once the only treatment. The surgeon

makes an incision in the chest to expose the heart; a

heart-lung bypass machine pumps blood while the

heart is stopped and the defect is patched. Many

patients with this condition are infants and small chil-

dren, for whom this surgery poses an even greater risk.

A dedicated team of Gore associates—including

Hannah, Nitin, and Sarah—developed a minimally

invasive device that physicians implant through a car-

diac catheter to permanently close the hole without

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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CASE 24 W. L. GORE & ASSOCIATES: RETHINKING MANAGEMENT? 725

major surgery. Driven by Gore’s core values of

integrity, innovation, and quality, the team spent

years perfecting the device before taking it to mar-

ket. Patients treated this way experience much less

pain, recover much more easily and quickly, and

have less scarring.

Since then, the GORE HELEX septal occluder

has changed the way doctors treat patients with

this heart defect and has helped thousands of

patients throughout the world—more than half of

them infants and children—lead normal, healthy

lives. And the team’s experience with the septal

occluder product changed their lives, too.

Change Industries

How did the creators of GORE-TEX® products—

worn by outdoor enthusiasts and people with

active lifestyles all over the world—invent mate-

rial that protects firefighters from heat, flames, and

hazardous chemicals?

Gore makes a line of protective fabrics based

on its patented membrane technologies. These

fabrics are used by Gore’s customers—garment

manufacturers—as one layer of protective cloth-

ing for military and law enforcement uniforms,

medical protective wear, workwear, and turnout

gear for fire and safety personnel.

Firefighters rely on protective gear—includ-

ing boots, pants, jackets, gloves, and headgear—

to keep them safe. While already incorporating

waterproof and breathable GORE-TEX® fabric to

improve the comfort and quality of their gear, the

firefighting industry identified a need for bar-

rier fabrics that also protected firefighters against

bloodborne pathogens and common fire ground

chemicals. Dave, Henri, and Ron were part of a

cross-functional team that set out to engineer

high-performance CROSSTECH® protective barrier

fabric to meet this need.

By building relationships with firefighters,

suppliers, and industry experts, the global Gore

team came to understand the extreme condi-

tions that firefighters are exposed to. Harnessing

deep knowledge of Gore’s membrane technolo-

gies and their passion for making a difference,

they developed Gore protective barrier fabrics

that change the way firefighters respond to

emergencies. And their fire service experience

and the challenges they overcame have changed

their lives, too.

Source: “Associates Stories,” http://www.gore.com/ en_xx/careers/associatestories/1234722965408.html, accessed October 1, 2012. Reproduced by permission of W. L. Gore & Associates.

Innovation

The success of Gore’s unusual management system is its capacity for innovation. Between 1976 and the end of May 2012, Gore received 1026 US 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 willing- ness to allow individuals the freedom to pursue their own projects: each associate is allowed a half day each week of “dabble time.” The company’s website gives examples of the results of these initiatives (Exhibit 2).

Gary Hamel closes his discussion of Gore with the following challenge:

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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726 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS

Notes

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

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

3. Gladwell, op. cit.: 177–81. 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 Drummer,” 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 Inforation 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 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.

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 polytetra- fluoroethylene-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 cen- tury behind the curve. So ask yourself, am I dreaming big enough yet? Would my management innovation agenda make Bill Gore proud?9

Grant, RM 2016, Contemporary Strategy Analysis : Text and Cases Edition, Wiley, Somerset. Available from: ProQuest Ebook Central. [4 March 2018]. Created from northampton on 2018-03-04 22:27:27.

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