GORE CASE - CASE ON THE GORE TEX COMPANY PDF

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INTERESTING CASE ON THE GORE TEX COMPANY AND HIS CULTURE. ORGANIZATIONAL MANAGEMENT. CLASS TEACHED AT ESCP BUSINESS SCHOOL...

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GORE & ASSOCIATES, INC. Frank Shipper Salisbury State University Charles C. Manz Arizona State University

To make money and have fun. W. L. Gore On July 26, 1976, Jack Dougherty, a newly minted MBA from the College of William and Mary, dressed in a dark blue suit and bursting with resolve, reported for his first day at W. L. Gore & Associates. He presented himself to Bill Gore, shook hands firmly, looked him in the eye, and said he was ready for anything. What happened next was one thing for which Jack was not ready. Gore replied, “That’s fine, Jack, fine. Why don’t you look around and find something you’d like to do.” Three frustrating weeks later he found that something, dressed in jeans, loading fabric into the mouth of a machine that laminated the company’s patented Gore-Tex membrane to fabric. By 1982, Jack had become responsible for all advertising and marketing in the fabrics group. This story was part of the folklore that was heard over and over about W. L. Gore. By 1991, the process was slightly more structured. New associates took a journey through the business before settling into their own positions, regardless of the position for which they were hired. A new sales associate in the Fabric Division might spend six weeks rotating through different areas before concentrating on sales and marketing. Among other things, he or she might learn how Gore-Tex fabric was made, what it could and could not do, how Gore handled customer complaints, and how it made investment decisions. Anita McBride related her early experience at W. L. Gore & Associates this way: Before I came to Gore, I had worked for a structured organization. I came here, and for the first month it was fairly structured because I was going through training and this is what we do and this is how Gore is and all of that, and I went to Flagstaff for that training. After month I came down to Phoenix, and my sponsor said, “Well, here’s your office, and here’s your desk,” and walked away. And I thought, “Now what do I do,” you know? I was waiting for a memo or something, or a job description. Finally after another month I was so frustrated, I felt, “What have I gotten myself into?” And so I went to my sponsor and I said, «What the heck do you want from me? I need something from you.” And he said, “If you don’t know what you’re supposed to do, examine your commitment, and opportunities.”

Background W. L. Gore & Associates evolved from the late Wilbert L. Gore’s experiences personally, organizationally, and technically. He was born in Meridian, Idaho, near Boise in 1912. By age six, he claimed he had become an avid hiker in the Wasatch Mountain Range in Utah. In

those mountains, at a church camp, he met Geneviève (called Vieve by everyone), his future wife. In 1935, they got married, which was, in their eyes, a partnership—a partnership that lasted a lifetime. He received both a bachelor of science degree in chemical engineering in 1933 and a master of science in physical chemistry in 1935 from the University of Utah. He began his professional career at American Smelting and Refining in 1936; moved to Remington Arms Company in 1941; and moved once again to E. I. du Pont de Nemours in 1945 where he held positions of research supervisor and head of operations research. While at Du Pont, he worked on a team to develop applications for polytetraflurothylene, frequently referred to as PTFE in the scientific community and known as Teflon by consumers. On this team, Wilbert Gore, called Bill by everyone, felt a sense of excited commitment, personal fulfillment, and self-direction. He followed the development of computers and transistors and believed that PTFE had the ideal insulating characteristics for use with such equipment. He tried a number of ways to make a PTFE-coated ribbon cable without success. A breakthrough came in his home basement laboratory. He was explaining the problem to his son, Bob. Bob saw some PTFE sealant tape made by 3M and asked his father, “Why don’t you try this tape?” His father then explained to his son, “Everyone knows you can not bond PTFE to itself.” So, Bob went on to bed. Bill Gore remained in his basement lab and proceeded to try what everyone knew would not work. About 4 AM, he woke his son waving a small piece of cable around, saying excitedly, “It works, it works.” The following night father and son returned to the basement lab to make ribbon cable coated with PTFE. For the next four months, Bill Gore tried to persuade Du Pont to make a new product—PTFEcoated ribbon cable. By this time in his career, Bill Gore knew some of the decision makers at Du Pont. After talking to a number of decision makers, it became clear that Du Pont wanted to remain a supplier of raw materials and nota fabricator. Bill began to discuss with his wife the possibility of starting their own insulated wire and cable business. On January 1, 1958, their wedding anniversary, they founded W. L. Gore & Associates, which they viewed as another partnership. The basement of their home served as their first facility. After finishing dinner on their anniversary, Vieve turned to her husband of 23 years and said, “Well, let’s clear up the dishes, go downstairs, and get to work.” Bill Gore was 45 years old with five children to support when he left Du Pont. He left behind a career of 17years and a good and secure salary. To finance the first two years of the business, they mortgaged their house and took $4,000 from savings. All of their friends cautioned them against taking the risk.

The first few years were rough. In lieu of salary, some of their employees accepted room and board in the Gore home. At one point, 11 employees were living and working under one roof. Then came the order from the City of Denver’s water department that put the company on a profitable footing. One afternoon, Vieve answered a phone call while sifting PTFE powder. The caller indicated he was interested in the ribbon cable, but wanted to ask some technical questions and asked for the product manager. But Bill was out running some errands, so Vieve explained that he was out at the moment. Next he asked for the sales manager and, finally, the president. Vieve explained that they were also out. The caller became outraged and hollered, “What kind of company is this anyway?” With a little diplomacy, the Gores eventually secured an order for $100,000.This order put the company over the hump and it began to take off. W. L. Gore & Associates continued to grow and develop new products primarily derived from PTFE, including its best-known product, Gore-Tex. In 1986, Bill Gore died while backpacking in the Wind River Mountains of Wyoming. Before he died, however, he had become chairman and his son, Bob, president. Vieve remained as the only other officer, secretarytreasurer.

The Operating Company W. L. Gore & Associates was a company without titles, hierarchy, or any of the conventional structures associated with enterprises of its size. The titles of president and secretarytreasurer were used only because they were required by the laws of incorporation. In addition, Gore did not have a corporate-wide mission or code of ethics statement, neither did Gore require nor prohibit business units from developing such statements for themselves. Thus, the associates of some business units who felt a need for such statements had developed them. The majority of business units within Gore did not have such statements. When questioned about this issue, one associate stated, “The company belief is that (1) its four basic operating principles cover ethical practices required of people in business and (2) it will not tolerate illegal practices.” Gore’s management style was often referred to as unmanagement. The organization had been guided by Bill’s experiences on teams at Du Pont and has evolved as needed. For example, in 1965, W. L. Gore & Associates was a thriving and growing company with a facility on Paper Mill Road in Newark, Delaware, with about 200 employees. One warm Monday morning in the summer, Bill Gore was taking his usual walk through the plant. All of a sudden he realized he did not know everyone in the plant. The team had become too big. As a result, the company established a policy that no facility would have over 150 to 200 employees. Thus was born the expansion policy of “Get big by staying small.” The purpose of maintaining small plants was to accentuate a close-knit and interpersonal atmosphere.

By 1991, W. L. Gore & Associates consisted of 44 plants worldwide with over 5,300 associates. In some cases, the plants were clustered together on the same site as in Flagstaff, Arizona, with four plants on the same site. Twenty-seven of those plants were in the United States and 17 were overseas. Gore’s overseas plants were located in Scotland, Germany, France, Japan, and India.

Products The products that W. L. Gore made were organized into eight divisions—electronic, medical, waterproofing fabrics, fibers, industrial filtration, industrial seals, coatings, and microfiltration. The electronic products division produced wire and cable for various demanding applications in aerospace, defense, computers, and telecommunications. The wire and cable products had a reputation for unequaled reliability. Most of the wire and cable was used where conventional cables could not operate. For example, Gore wire and cable assemblies were used in the space shuttle Columbia because they would stand the heat of ignition and the cold of space. Gore wire was used in the moon vehicle shuttle that scooped up samples of moon rocks, and Gore’s microwave coaxial assemblies opened new horizons in microwave technology. On earth, the electrical wire products helped make the world’s fastest computers possible because electrical signals could travel through them at up to 90 percent of the speed of light. Because of the physical properties of the Gore-Tex material used in their construction, the electronic products were used extensively in defense systems, electronic switching for telephone systems, scientific and industrial instrumentation, microwave communications, and industrial robotics. Reliability was a watchword for all Gore products. In medical products, reliability was literally a matter of life and death. Gore-Tex expanded PTFE was an ideal material used to combat cardiovascular disease. When human arteries were seriously damaged or plugged with deposits that interrupt the flow of blood, the diseased portions could often be replaced with Gore-Tex artificial arteries. Gore-Tex arteries and patches were not rejected by the body because the patient’s own tissues grew into the grafts’ open porous spaces. Gore-Tex vascular grafts came in many sizes to restore circulation to all areas of the body. They had saved limbs from amputation and saved lives. Some of the tiniest grafts relieved pulmonary problems in newborns. Gore-Tex was also used to help people with kidney disease. Associates were developing a variety of surgical reinforcing membranes, known as Gore-Tex cardiovascular patches, which could literally mend broken hearts, by patching holes and repairing aneurysms. Through the waterproof fabrics division, Gore technology had traveled to the top of the world on the backs of renowned mountaineers. Gore-Tex fabric was waterproof and windproof, yet breathable. Those features had qualified Gore-Tex fabric as essential gear for

mountaineers and adventurers facing extremely harsh environments. The PTFE membrane blocked wind and water but allowed sweat to escape. That made Gore-Tex fabric ideal for anyone who worked or played hard in foul weather. Backpackers had discovered that a single lightweight Gore-Tex fabric shell would replace a poplin jacket and a rain suit and dramatically outperform both. Skiers, sailors, runners, bicyclists, hunters, fishermen, and other outdoor enthusiasts had also become big customers of garments made of Gore-Tex fabric. General sportswear and women’s fashion footwear and hand wear of Gore-Tex fabric were as functional as they were beautiful. Boots and gloves, both for work and recreation, were waterproof thanks to Gore-Tex liners. Gore-Tex was even becoming government issue for many military personnel. Wet suits, parkas, pants, headgear, gloves, and boots kept the troops warm and dry in foul-weather missions. Other demanding jobs also required the protection of Gore-Tex fabric because of its unique combination of chemical and physical properties. The Gore-Tex fibers products, like the fabrics, ended up in some tough places. The outer protective layer of NASA’s spacesuit was woven from Gore-Tex fibers. Gore-Tex fibers were in many ways the ultimate in synthetic fibers. They were impervious to sunlight, chemicals, heat, and cold. They were strong and uniquely resistant to abrasion. Industrial filtration products, such as Gore-Tex filter bags, reduced air pollution and recovered valuable solids from gases and liquids more completely than alternatives; they also did it more economically. They could make coal-burning plants smoke free, contributing to a cleaner environment. The industrial seals division produced joint sealant, a flexible cord of porous PTFE that could be applied as a gasket to the most complex shapes, sealing them to prevent leakage of corrosive chemicals, even at extreme temperature and pressure. Steam valves packed with Gore-Tex valve stem packing never leaked and never needed to be repacked. The coatings division applied layers of PTFE to steel castings and other metal articles by a patented process. Called Fluoroshield protective coatings, this fluorocarbon polymer protected processing vessels in the production of corrosive chemicals. Gore-Tex microfiltration products were used in medical devices, pharmaceutical manufacturing, and chemical processing. These membranes removed bacteria and other microorganisms from air or liquids, making them sterile.

Financial Information W. L. Gore was a closely held private corporation. Financial information was as closely guarded as proprietary information on products and processes. Eighty percent of the stock

was held by the Gore family and veteran associates, 10 percent by current associates, and 10 percent by others. According to Shanti Mehta, an associate, Gore’s return on assets and equity ranked it among the top 5 percent of major companies. According to another source, W. L. Gore & Associates was working just fine by any financial measure. It had had 27 straight years of profitability and positive return on equity. The compounded growth rate for revenues at W. L. Gore over the past 20 years had been over 18 percent discounted for inflation. In 1969, total sales were $6 million; in 1982, $125 million; in 1983, $160 million; in 1985, $250million; in 1987, $400 million; in 1988, $426 million; and in 1989, $600 million. This growth had largely been financed without debt.

Organizational Structure Bill Gore wanted to avoid smothering the company in thick layers of formal “management.” He believed they stifled individual creativity. As the company grew, he knew a way had to be devised to assist new people to get started and to follow their progress. This was seen as particularly important when it came to compensation. W. L. Gore & Associates developed what it called the “sponsor” program to meet these needs. When people applied to W. L. Gore, they were initially screened by personnel specialists as in most companies. For those who met the basic criteria, there were interviews with other associates. Before anyone was hired, an associate must have agreed to be that person’s sponsor. The sponsor was to take a personal interest in the new associate’s contributions, problems, and goals. The sponsor was both a coach and an advocate. The sponsor tracked the new associate’s progress, helping and encouraging, dealing with weaknesses and concentrating on strengths. Sponsoring was not a short-term commitment. All associates had sponsors and many had more than one. When individuals were hired, they had a sponsor in their immediate work area. If they moved to another area, they also had a sponsor in that work area. As associates’ responsibilities grew, they could acquire additional sponsors. Because the sponsoring program looked beyond conventional views of what made a good associate, some anomalies occurred in the hiring practices. Bill Gore proudly told the story of “a very young man” of 84 who walked in, applied, and spent five very good years with the company. The individual had 30 years of experience in the industry before joining Gore. His other associates had no problems accepting him, but the personnel computer did. It insisted his age was 48. __________________________________ 1. In comparison, only 11 of the 200 largest companies in the Fortune 500 have had positive ROE each year from 1970–88 and only two other companies missed only one year. The revenue growth rate for these 13companies was 5.4 percent compared to 2.5 percent for the entire Fortune .

An internal memo by Bill Gore described three kinds of sponsorship and how they might work as follows: 1. The sponsor who helps a new associate get started on the job. Also, the sponsor who helps a present associate get started on a new job (starting sponsor). 2. The sponsor who sees to it the associate being sponsored gets credit and recognition for contributions and accomplishments (advocate sponsor). 3. The sponsor who sees to it that the associate being sponsored is fairly paid for contributions to the success of the enterprise (compensation sponsor). A single sponsor could perform any one or all three kinds of sponsorship. A sponsor was a friend and an associate. All the supportive aspects of the friendship were also present. Often (perhaps usually) two associates sponsored each other as advocates. W. L. Gore & Associates had not only been described as unmanaged, but also as unstructured. Bill Gore referred to the structure as a lattice organization. A lattice structure is portrayed in Exhibit 1. The characteristics of this structure were: 4. Lines of communication are direct—person to person—with no intermediary. 5. No fixed or assigned authority. 6. Sponsors, not bosses. 7. Natural leadership defined by followership. 8. Objectives are set by those who must “make them happen.” 9. Tasks and functions organized through commitments. The structure within the lattice was described by the people at Gore as complex and had evolved from interpersonal interactions, self-commitment to group-known responsibilities, natural leadership, and group-imposed discipline.

EXHIBIT 1 The Lattice Structure Bill Gore once explained this structure by saying. “Every successful organization has an underground lattice. It’s where the news spreads like lightning, where people can go around the organization to get things done.” Another description of what was occurring within the lattice structure was constant cross-area teams—the equivalent of quality circles going on all the time. When a puzzled interviewer told Bill he was having trouble understanding how planning and accountability worked, Bill replied with a grin, “So am I. You ask me how itworks, every which way.”

The lattice structure did have some similarities to traditional management structures. For instance, a group of 30 to 40 associates who made up an advisory group met every six months to review marketing, sales, and production plans. As Bill Gore has conceded, “The abdication of titles and rankings can never be 100 percent.” The lattice structure was not without its critics. As Bill Gore stated, “I’m told from time to time that a lattice organization can’t meet a crisis well because it takes too long to reach a consensus when there are no bosses. But this isn’t true. Actually, a lattice, by its very nature, works particularly well in a crisis. A lot of useless effort is avoided because there is no rigid management hierarchy to conquer before you can attack a problem.” The lattice had been put to the test on a number of occasions. For example, in 1975, Dr. Charles Campbell, University of Pittsburgh’s senior resident, reported a Gore-Tex arterial graft had developed an aneurysm. An aneurysm is a bubble-like protrusion that is life-threatening. If i...