The Right Chemistry

Dec. 21, 2004
Versatile products and a unique management style provide the formula for W.L. Gore & Associates' success.

Few companies can claim that their products have orbited the earth, been on top of Mt. Everest, appeared on "Seinfeld," and even helped mend some broken hearts. Even fewer, if any, can say they have surpassed $1.3 billion in sales while operating a company that has no managers or employees. W.L. Gore & Associates, a privately held firm headquartered in Newark, Del., has accomplished all of these things. Gore-Tex, the company's best-known product, is found in the lining of space suits and has been used in clothing worn by trekkers who have climbed the world's highest peak, as well as by adventurers who have reached the South Pole. Actor Jason Alexander (a k a George Costanza) wore a Gore-Tex-lined coat during one "Seinfeld" episode, and the company's Glide dental floss appeared in another. And, Gore's medical products division manufactures material used to repair damaged hearts. Gore attributes its steady growth to these and other products made from polytetrafluoroethylene (PTFE, better known as Teflon), as well as its lattice system of management, first introduced by its founder, Bill Gore. When Gore first started the company in 1958 after leaving his job as a scientist at Du Pont & Co., he became interested in Douglas McGregor's management book The Human Side of Enterprise (1960, McGraw-Hill), which espoused Theory Y management, a practice similar to what is now known as empowerment, and the lattice organization, which is characterized by an absence of assigned or assumed authority. The lattice organization has sponsors rather than bosses or managers; associates rather than employees; natural leadership defined by followership; person-to-person communication; objectives set by those who must make them happen; and tasks and functions organized through commitments. A lattice organization operates most effectively, Gore said, when plants are kept to a size of no more than 150 or 200 associates. The firm's founder, who died in 1986, believed that people who know one another work better together. After starting his company in his home with his wife, Vieve, Gore set out to apply his management model. The company's first patent resulted from an idea conceived by Bill's son, Bob, who suggested a PTFE-insulated wire and cable product. A watershed event in the company's history was Bob's discovery in 1969 of expanded PTFE, a strong and microporous material that the company since has developed into thousands of products. The firm now consists of four divisions -- medical products, Gore-Tex fabrics, electronic products, and industrial products -- and has approximately 45 manufacturing and sales offices around the world. Bob Gore, who has been president and CEO of the company since 1976, says his father was the epitome of the entrepreneur. The atmosphere of the company under his watch was "very much free flowing and innovative." In the firm's early days, Bill Gore gave speeches to employees to promote the lattice structure. By the 1980s the company had grown significantly and a human resource group was put in place to help teach the philosophy. Today W.L. Gore has more than 6,200 associates, and its emphasis on innovation is inextricably linked both to its management style and a commitment to R&D. "Any highly innovative company needs to have a free flow of knowledge," says John E. Sawyer, associate professor in the University of Delaware's Dept. of Business Administration. "The structure [at] W.L. Gore stimulates that form of communication." Team-Based Hiring Like many decisions at W.L. Gore, the hiring of an associate is a team-based process. That process begins when a team agrees that it needs a person to fill a certain role. Candidates are interviewed and hired by the team. "We don't hire quickly, and we have several interviews," says Sally Gore, global leader of the human resources group, who is married to Bob Gore. The company also conducts in-depth reference checks. "If a person leaves, we do not automatically rehire," she adds. "Automatically rehiring is one way to expand a workforce without expanding your sales. Pretty soon you end up with a huge middle management plateau of people who really are not necessary." Once an associate is hired, it is up to the hiring team to ensure that the person is successful. Each person hired by the company is assigned a sponsor who acts as a mentor. Twenty percent of associates are sponsors. "Usually we choose the person who has the most invested in making the new person successful," says Sally Gore. "If you sponsor someone, you want them to be successful. You will offer them appropriate opportunities to sit in on meetings and seminars, and do things so that they will be successful. If you are someone who is growing people on your team, it adds to your value." "I'm passionate about the sponsor-sponsoree relationship," says Steven Sundberg, global leader in charge of worldwide sales for the firm's electronic products division. "I've been the benefactor of good mentoring. As the company grows it will be important not to have too few sponsors mentoring too many people." The company's hiring strategy has resulted in a group of associates who are entrepreneurial, creative self-starters. "There is not a lot of direction here [and there is] much less direction than in many companies," says Sally Gore. "There is nobody responsible for your future except you. How successful you are and what you make of it is up to you." Associates are compensated based on how much they contribute to the firm. Performance is reviewed twice each year. All associates are put on a list with people who do similar tasks; for example, a list might include the names of 10 engineers. Each person is then asked to rank his or her peers based on who is adding the most value to the company. "It has nothing to do with how many degrees you have or how many years you have worked here," says Sally Gore. "Seniority and education are not the criteria. The criterion is contribution, pure and simple." Such a system creates an atmosphere where associates are motivated to innovate, she says. Sales representatives at the firm do not receive commissions. If the company gets a large order, the entire team celebrates. "Everyone's part of the team," she adds. "In truth, the salesman didn't get that order alone. He is of no value here if the team is not making a high-quality product." Investment in employees as team members also is reflected in the company's benefits. The company offers all of its associates a stock option plan as well as profit sharing. "Most companies that have profit-sharing plans or stock-purchase plans only include salaried employees," notes Sally Gore. "We include everyone on the payroll. That comes back to the concept that we are all in this together. We all are a team." New associates at the firm are required to participate in a week-long orientation session emphasizing cultural integration. Three of those days are spent on direct-communication skills, an important element of a lattice environment. E-mail and written memos are strongly discouraged. "E-mail is not direct communication, when you think about it," says Sally Gore. "If you work around the corner from me and send an e-mail, why didn't you walk down the hall and look me in the eye and talk to me?" Transferring the firm's American style of management outside the U.S. has been a challenge, she observes. "In countries like Japan and China, countries that revere . . . tradition, where women have a less dominant role in society, we have more struggles. . . .We're not out to change the world. We're just out to be a very successful corporation." The lattice system presents other challenges, as well. Ironically, the company's openness backfired more than a year ago when it became necessary to trim its workforce in the fabrics and medical-products divisions. Several hundred associates were laid off, primarily in the medical- products division in Flagstaff, Ariz. The company was upfront about the layoffs and informed associates of the cutbacks six months before they occurred. The media in Flagstaff then helped spread the bad news. Even though many associates were reassigned to other of the company's facilities, the firm received bad press. "In the end, I decided we didn't handle that one well," says Sally Gore. Jon Katzenbach, a senior partner with New York-based Katzenbach Partners LLC, which specializes in leadership systems and team and workforce performance, says layoffs in a team-based environment can be devastating. "It is basically counter to that culture," he says. "Only the team can fail, not the individual. If you lay off individuals, you go against the team notion." Because it uses a cluster approach when locating its plants, W.L. Gore & Associates often can avoid downsizing by moving people from one plant to the next when orders and associate numbers are out of balance. There currently are 15 plants in the Delaware/Maryland area where the firm is headquartered. Of W.L. Gore's lattice-style system, Katzenbach says that it is different, extreme, and would not work in most companies. "Is the company's approach a good one? Yes," he says. "Are there other ways to get there? Yes. I don't think it is a [growing] trend. It is actually a dangerous idea for most companies. It is much better to use teams where appropriate and not use them where appropriate. The fact that they are doing it plant by plant helps them a lot." An Eye For Nature Outside the headquarters of W.L. Gore & Associates, a nature trail leads to the home of Vieve Gore. To those familiar with the company, [the nature trail] is not surprising. As the company has grown, Bill Gore's wife has advocated locating facilities in natural environments. Plant cafeterias, for example, are located to take advantage of the midday sunshine. Late last year the company announced that it had acquired 150 acres of land for future development in Glasgow, Del. As part of that deal, the State of Delaware also purchased 300 acres of adjacent industrial-zoned property. Two hundred of the 300 acres will be set aside as protected woods and wetlands, and 100 acres will become a regional park. The purchases by the state and by W.L. Gore are part of a private-public partnership known as the 21st Century State Enhancement Strategy, a program geared to achieving sustainable economic development while protecting natural resources and providing recreational opportunities. Looking ahead, Sally Gore observes that maintaining the company's unique culture will remain an important corporate goal. And if the company continues on its current path of innovation, it just might find its products once again popping up unexpectedly on network television.

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