Gore-Tex Case Study of W.L. Gore & Associates (PDF)

Case Study US Patent & Trademark office website at www.uspto.gov. Gore-Tex and W.L. Gore & Associates: Introduction An innovative company and a contemporary culture1...

Case Study US Patent & Trademark office website at www.uspto.gov. Gore-Tex and W.L. Gore & Associates: Introduction An innovative company and a contemporary culture1 W.L. Gore & Associates is probably best known in Europe for its Gore-Tex product This case study explores the role of (that piece of material in your coat that organisational management and culture keeps you dry yet allows your body to within a very innovative firm, which is breathe), yet few people know very much responsible for some very well known about this privately owned and relatively products such as the famous Gore-Tex secret company. Fewer still realise the very fabric, and yet few people know very much innovative and contemporary way the about this remarkable organisation. It is organisation is run – it seeks to have an ‘un- operated in a similar way to that of a co- management style’. Annual revenues top $1 operative such as the John Lewis Partnership billion. W.L Gore is a privately held in the United Kingdom, where they company ranking in the top 200 of the employees are also owners. In addition, the Forbes top 500 privately held companies for organisation seeks to minimise management 2002. Indeed, W.L. Gore would rank in the with the emphasis on action and creativity. Fortune 500 companies in terms of profits, Today this enigmatic firm employs market value and equity value. Given that approximately 7,000 people in more than 45 the firm is a privately held corporation many plants and sales locations world-wide. details of the company’s operations and Manufacturing operations are clustered in strategies are not widely known. Unlike the United States, Germany, Scotland, Japan publicly listed firms it does not need to share and China. Proprietary technologies with information on such topics as marketing the versatile polymer strategies, manufacturing processes or polytertrafluoroethylene (PTFE) have technology development. The company is resulted in numerous products for electronic owned primarily by its employees (known as resulted in numerous products for electronic associates) and the Gore family. W.L. Gore signal transmission: fabrics laminates: enterprises is comprised of more than 7,000 medical inplants: as well as membrane, associates at over 45 locations around the filtration, sealant and fibres technologies for world. a range of different industries. Today the organisation divides its products into four W.L Gore & Associates was founded in main groupings: medical products: fabric 1958 in Newark, Delaware, when Bill and products: electronic products: and industrial Vieve Gore set out to explore market products. Gore has approximately 650 US opportunities for fluorobarbon polymers, patents and thousands world-wide. Further especially polytetrafluoroethylene (PTFE). details of these can be found by visiting the First developed by Bill Gore when he worked as a scientist for the Dupont 1 This case has been written as a basis for class Corporation. Gore could not get anyone at discussion rather than to illustrate effective or ineffective managerial or administrative behaviour. It Dupont to invest in his new idea, so he has been prepared from a variety of published bought the patent and went into business on sources, as indicated, and from observation. his own. Within the first decade alone, W.L 1 Gore wire and cables landed on the moon patent for the breathable fabric expired in (the firm supplied cables for the 1969 lunar 1996. However, new patents are still active missions); the company opened divisions in on improved methods of making Gore-Tex Scotland and Germany; and a venture fabric. There are now many generic partnership took root in Japan. versions of breathable fabric on the market. The success of the product has largely been W.L Gore has introduced its unique witnessed in the 1990s as outdoor pursuits technical capabilities into hundreds of grew rapidly in popularity during this diverse products. It has defined new period. This led to an explosion in sales of standards for comfort and protection for Gore-Tex related products, such as coats, work-wear and active-wear (Gore-Tex); back-packs, shoes and trousers. Indeed, advanced the science of regenerating tissues clothing manufacturers who used the Gore- destroyed by disease or traumatic injuries; Tex fabric in their garments, such as developed next-generation materials for Berghaus, Karrimor and North Face, became printed circuit boards and fibre optics; and household names as this once esoteric pioneered new methods to detect and control specialised clothing market became environmental pollution. mainstream. Gore-Tex, a breathable fabric Working within W.L Gore Associates In 1969, Bob Gore discovered that rapidly The very unusual organisational structure stretching PTFE created a very strong, and management sets this firm apart from its microporous material (this became known as competitors. Moreover, there is some expanded PTFE or ePTFE), which offered a evidence to support its claim to be highly range of new, desirable properties. To be creative and innovative as Gore – US has effective a waterproof fabric needs to be made all six annual lists of the ‘100 Best able to prevent moisture getting from the Companies to Work for’ in Fortune outside to the inside. Furthermore, a magazine from 1998 to 2003. Its UK firm waterproof fabric must have the ability to was ranked among the ‘100 Best Places to withstand water entry in active conditions Work in the UK.’ (McCall, 2002). Gore – such as walking in wind-driven rain and Italy ranked amoung the ’35 Best Places to sitting or kneeling on a wet surface. In the Work in Italy’ (2003). Gore – Germany case of garments for wear especially in ranked among the ’50 Best Places to Work active conditions, perspiration is a common in Germany’ (2003). It is often cited as a problem. If perspiration vapour becomes model for effective management of trapped inside our clothing, it can condense innovation, and the firm is proud of its into liquid moisture that causes dampness – heritage and how it works: and wet heat loss is 23 times faster than dry heat loss. A fabric that would enable We encourage hands-on innovation, moisture to escape and at the same time involving those closest to a project in prevent moisture from entering would seem decision-making. Teams organize around unachievable, but that is precisely what the opportunities and leaders emerge. Our Gore-Tex fabric does. Rain coats found, Bill Gore created a flat lattice incorporating the Gore-Tex fabric were first organisation. There are no chains of introduced way back in 1976, hence the command nor pre-determined channels of 2 communication. Instead, we communicate opportunities and leaders emerge based on directly with each other and are accountable the needs an priorities of a particular to fellow members of our multi-disciplined business unit. To avoid the traditional teams. pyramid of bosses and manager, Bill created a flat lattice organisational structure in Associates are hired for general work areas. which there are no chains of command and With the guidance of their sponsors (not no pre-determined channels of bosses) and a growing understanding of communication. Instead, employees opportunities and team objectives, associates communicate directly with each other and commit to projects that match their skills. are accountable to fellow members of multi- Everyone can quickly earn the credibility to disciplinary teams. The company bases its define and drive projects. Sponsors help business philosophy on the belief that given associates chart a course in the organisation the right environment, there is no limit to that will offer a personal contribution to the what people can accomplish. enterprise. Leaders may be appointed, but are defined by ‘followership.’ More often, The formula seems to have worked. In 40 leaders emerge naturally by demonstrating years of business, W.L Gore & Associates special knowledge, skill, or experience that has developed hundreds of unique products advances a business objective. that reflect an underlying commitment to fluoropolymer technologies. The company Associates are committed to four basic is passionate about innovation and has built guiding principles articulated by Bill Gore: a unique work environment to support it based on a corporate culture that encourages Fairness to each other and everyone with creativity, initiative and discovery. whom we come in contact: freedom to According to Gore: encourage, help and allow other associates to grow in knowledge, skill and scope of You won’t find the trappings of a responsibility; the ability to make one’s own traditional corporate structure here: commitments and keep them; and no rigid hierarchy, no bosses, and no consultation with other associates before predictable career ladder. Instead, undertaking actions that could impact the you’ll find direct reputation of the company by hitting it Communication, a team orientated below the waterline. (Gore, 2003) atmosphere, and one title – associate – that’s shared by everyone. It’s an Non-hierarchial corporate culture unusual corporate culture that contributes directly to the business’ The firm’s unique structure was born out of success by encouraging creativity Bill Gore’s frustration with a large corporate and opportunity. bureaucracy; the W.L. Gore culture seeks to avoid taxing creativitiy with conventional (Gore, 2003) hierarchy. The company encourages hands- The last principle is meant to protect the on innovation, involving those closest to a company from inappropriate risk. While project in decision making; hence decision employees are given wide latitude to pursue making is based on knowledge rather than entrepreneurial opportunities, no on can seniorority. Teams organise around initiate projects involving significant 3 corporate financial commitments without full year of employment and qualifies for thorough review and participation by full ownership of their accounts after five qualification associates. years of service, when they are fully vested. Valued quarterly, W.L Gore stock is An individual starting at W.L Gore is privately held and is not traded on public assigned three sponsors. A starting sponsor markets. The ASOP, although it does not helps get the associate acquainted with W.L own all of the W.L Gore shares, does own a Gore. An advocate sponsor makes sure the majority of them, with the remainder owned associate receives credit and recognition for by the Gore family. their work and a compensation sponsor makes sure the associate is paid fairly. One Associates also qualify for cash profit- person can fill all three sponsor roles. sharing distributions when corporate profit Compensation is determined by committees goals have been reached. Profit-sharing and relies heavily on evaluations by other distributions typically occur an average of associates as well as the compensation twice a year. In addition, each pay period sponsor. associates are provided with pre-tax benefits, called flex dollars, to use for the purchase of Employee ownership structure ‘flexible benefits’. These include medical plans, dental plans, long-term disability The goal of Gore’s highly flexible and insurance, personal days, supplemental competitive programme is to maximise individual life insurance, family life freedom and fairness for each associate. insurance and health care or dependent care The benefit plans consist of core benefits spending accounts. and flexible benefits. Core benefits are basic plans and services provided by Gore to all Unique characteristics of ownership eligible associates. They include an culture Associate Stock Ownership Plan, vacation holidays, profit sharing, sick pay, basic life W.L Gore believes that given the right insurance, travel accident insurance and environment, there is no limit to what people adoption aid. can accomplish. That is where the W.L Gore lattice system comes into play. It The Associate Stock Ownership Plan gives the associates the opportunity to use (ASOP) is the most valuable financial their own judgement, select their own benefit. Its purpose is to provide equity projects and directly access the resources ownership, and through this ownership, to they need to be successful. Another unique provide financial security for retirement. All aspect of the lattice system is the company’s associates have an opportunity to participate insistence the no single operating division in the growth of the company by acquiring become larger than 200 people in order to ownership in it. Every year W.L Gore preserve the intimacy and ease of contributes up to 15 per cent of pay to an communications among smaller work account that purchases W.L Gore stock for groups. As divisions grow, they are each participating associate. W.L Gore separated into constituent parts to preserve contributes the same percentage of pay for that culture. each associate active in the plan. An associate is eligible for this benefit after one Discussion 4  making sure that the individual work groups This case illustrates some of the do not get too large to be effective is a key organisational characteristics that are element of ‘right-sizing’ for the company necessary for innovation to occur. The culture. This way W.L. Gore maintains a unique organisational model seems to work sense of intimacy and ease of for W.L Gore. It is certainly contemporary communications among its work groups. and does seem to help to unleash creativity and to foster teamwork in an entrepreneurial While the employee share ownership sounds environment that seeks to provide maximum attractive, any decrease in performance and freedom and support for its employees fall in value of the shares can cause (associates). Many of the organisational enormous resentment within the firm as they characteristics can be found, such as 3M, see the value of their savings decrease. And Hewlett Packard, Corning, Dyson, BP and unlike publicly listed firms these Shell. It does reinforce the need for firms shareholders cannot remove the managers. wishing to be innovative to adopt these W.L Gore’s competitors are varied and characteristics (see Table 3.2). diverse; there is no single company which competes with Gore in every product area. There are several key characteristics that Firms such as Bayer, Hoecht, Corning, Dow help make the W.L Gore company and Du-Pont all compete in Gore’s product successful, both financially and as a place to fields: medical, fabric, industrial and work. First, the high-quality technology and electronic applications. heritage of the firm that encourages an emphasis of the firm that encourages an emphasis on developing superior products. Second, the use of small teams encourages direct one-on-one communication, this contributes to the ability to make timely; informed decisions and get products to market very quickly. Third, the channels of communications are very open, the lattice structure allowing all employees the freedom to meet and discuss projects, situations, concerns and share congratulations with everyone. Fourth, W.L Gore believes that providing equity compensation to its employees establishes a sense of ownership and increased commitment among its employees. The ASOP program at W.L. Gore is the majority owner of the company. Fifth, W.L. Gore provides a comprehensive set of employee benefits and is continually looking for ways to improve upon what is currently available. Sometimes that just means re-evaluating what the employees want and need. Finally, 5