Self-management and the flattened hierarchy may be today's buzz words but WL Gore has been using such precepts for 30 years.
Associates at WL Gore in Scotland's "Silicon Glen" note with wry satisfaction the number of big companies that are now talking about self-management, empowerment, the flattened hierarchy and so on. Their company was founded on those principles more than 30 years ago, and they believe they know a thing or two about them. As "associates" rather than managers, employees, staff, or simply workers, they enjoy a freedom of action which would arouse envy in some, concern in others.
"People think we're a philanthropic organisation," says one associate, "but in fact, we're very profit-oriented." The five Scottish plants, like the US ones, are managing pretty well to follow founder Bill Gore's precepts for self-realisation, avoidance of hierarchy, as well as to "make money and have fun". Exactly how much money the company prefers not to disclose, and, since it is private and registered in Delaware, is not easy for outsiders to discover. But worldwide sales are around $950 million, derived from four main divisions - the well-known Gore-Tex fabrics, electronic connectors, medical patches and implants, industrial filters and other specialised products. The company claims that it would rank 75th in the Fortune 500 league based on a 10-year rate of return to investors. Innovation is its strong point, and its ample cash resources empower the associates in a practical way ignored by most of the textbooks.
The freedom that Gore offers its associates is not an unmixed blessing. Associates are always encouraged to join a team with particular responsibilities, but they also have the opportunity - and encouragement - to pursue ideas and projects of their own choosing, particularly those which might lead to new applications and markets for the product. Much of the company's growth has come from finding new uses for their applications.
PTFE (see box)is a good electrical insulator, which provided the basis for Bill Gore's original business. His son Bob, now president of the company, discovered how to expand PTFE film so that it "breathes" - ie allows vapour to pass through it, but not liquids. Bonded to a fabric, expanded PTFE is used in rainwear, sportswear and other forms of clothing, also in medical patches and filters.
Many of the company's most successful ideas are attributable to individuals. "If you demonstrate ability, others give you the opportunity to expand, and you can change roles quite dramatically across disciplines," says Arthur Punchard, the UK fabric plant's leader. "But there's almost an equal amount of freedom to do nothing, if there's no clear statement of intent from the organisation. You either thrive on it or you don't."
Most associates encounter difficulties when they first join because of the unaccustomed freedom, because they are uncertain about who does what in the organisation, and how to get things done. They wonder, "should I ask, or should I just do it?" The answers require "networking in a real, personal sense," says John Kennedy, responsible for UK fabric marketing, and for the consumer fabrics business across Europe. "Finding the people who really matter is the most difficult bit, but you eventually learn who they are." Kennedy, like Punchard, is more closely associated than most, and would therefore figure on most associates' list of those who matter.
The waterline principle too, presents more difficulties in practice than in theory. "We have to explain to newcomers that the waterline is not just about the big decisions, but anything that affects everyone," says Anne Gillies who deals with personnel matters. Experience and knowledge are obviously required to foresee the outcome of actions, and they are sometimes lacking. "We can and do shoot ourselves in the foot," admits Punchard.
Among newcomers, the company finds, doubts and depression commonly begin to set in about a year after they first join. The advice and support of sponsors can then be invaluable. If they survive that period they usually stay a long time. But not always. Gore has recently been tightening up its selection process to reduce the drop-out rate.
During the 1980s, when numbers employed in Scotland doubled in just a few years, the Gore principles slipped somewhat. Several new associates arrived from nearby Bathgate, the British Leyland plant then in the process of closure, where management attitudes were, to say the least, different. "Some of them didn't want to change their attitude, and the rest of the team wouldn't have any of it," recalls Robert Davison, who was brought in shortly afterwards - partly to set up training courses to reaffirm the principles. Now, as well as being trained on subjects like personal effectiveness, leadership and teamwork a la Gore, associates can attend courses to help them get the most out of sponsorship. "It's a one-to-one relationship about the development and marketing of the person," says Gillies. "If you're interested in growing and developing, there's a heavy need of sponsorship."
The system is therefore probably more valuable to the younger associates, but the company claims that it can be rewarding to both sides. The proviso is that individuals are prepared to make it work, and give it the time that is needed. "If it's a chore, you shouldn't be doing it," thinks Andrew Philip, a leader on product planning and logistics. He is sponsor to four associates - six being the practical maximum. "The sponsor is looking for input on what an associate is good at, and what he's not so good at, and therefore where training is required. Salary doesn't figure in the relationship, so that makes life better."
After the first six months, associates are free to select their own sponsors. While a leader is often chosen, the choice might easily fall on someone else in the team, even someone on a lower salary, or in another division. Even the senior associates all have sponsors: Kennedy is sponsored by Heinrich Flick, a German associate based at Putzbrunn, near Munich, and a main board director. "I see him as my sponsor. He tends to be the focal point for Europe, which is 45% of the group business."
It might be assumed that, in an unstructured company like Gore, the self-confident extroverts would make all the running, pushing aside the quiet, introverted staffmen - perhaps to the detriment of corporate performance. "In practice, it just doesn't happen," says Gillies. "There's a technical specialist in one plant who is very knowledgeable, and very uncommunicative. People accept it takes time to get his contribution because they know it's in their interest." Philip agrees: "If they're too domineering, they find themselves excluded. You need to get consensus, so you need strong motivation and the will to succeed." While much of the driving force comes from within, lack of structure means that associates are exposed to criticism and advice from almost any quarter. "You can be called to explain yourself by anyone," says one associate. "We are accountable - not people simply being supervised." Craig Torrie, responsible for the sales and marketing of fabrics to golf equipment manufacturers, enlarges: "I make the business decisions, using profit as my measure. But I consult with others. My peers judge my plans at the yearly budget and forecast meeting. It would be easier if John Kennedy decided the issues."
Nevertheless, in Torrie's experience, the criticism is constructive: "People don't get their own back." He has just taken on a commitment to open up the general rainwear market, but not because he was appointed to the task: "The opportunity arises ... you can do it, so your peers want you to do it." It is this spirit of committed co-operation which attracts many associates to the company, and makes up for the lack of a formal career ladder with the conventional trappings of power.
The principle that leaders are defined only by the presence of followers is observed wherever possible. "We prefer them to emerge over time," says Davison, "but we have a business to run, so if they don't we appoint someone. In a recent case, the leader of a group got interested in a new product and went over to it, so we had a leaderless group. Over a few months, the group met and I ran workshops with them in conjunction with the overall leader. But no one emerged who could convince the others to support him. It was messy. Strategy wasn't emerging, so someone from another division was invited in. It all took six months." There is a business cost to all this, he admits, "but we think it's healthy, because - as far as possible - leadership is in the hands of the team."
An outstanding feature of the culture is the way that it allows leaders who have not been successful to be re-absorbed into the team with relatively little pain. One example is a technical expert who was hired as a production leader. After six months he decided that he preferred the certainties of science to the uncertainties of running a factory: "He's now more highly respected - and paid." Some prefer to cut their losses and leave, of course. But for those who stay, giving up a leadership role is, as Davison says, "sometimes a relief". It means that the company is relatively immune to the effects of the Peter Principle - according to which people in conventional companies are promoted to the level at which they are incompetent.
Inside the company the salary system seems generally to be regarded as the fairest that can be devised. Multiple judgments are involved, Kennedy points out, and sponsors and inputters take their roles - and the fairness principle - very seriously. Gore reckons to lose very few people for salary reasons, even in times of high employment. The share purchase scheme amounts to around 10% of salary for those with several years' service, and the accumulated value can be transferred to a life policy when they come to leave. This has the effect of focusing associates' attention on group performance. "We keep talking about shareholder value in planning meetings," Kennedy points out. Naturally, status symbols like executive cars don't belong in the corporate culture.
It may be that the real test of the Gore method will only come when the patents run out - at around the turn of the century - so that growth becomes harder to find. If one or other of its developments demanded the creation of large teams, whether for production or sales, the structure would similarly be under strain. But Bill Gore never made any claims for the universality of his system; nor did he claim that faster growth would have been unattainable by more conventional means. What is clear is that his principles do encourage certain qualities: such as innovation, flexibility, commitment, self-development. Perhaps more important, they demonstrate that some of the essential components of conventional management - such as apportionment of responsibility, discipline, clear lines of accountability - may not be quite as vital after all. Or at least that they exact their own price in practice. In modern conditions of hot competition and rapid technical change, that price is rising. It could soon be insupportable.
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Teamwork and natural leadership
Wilbert L Gore, always known as Bill, died in 1986. He based his philosophy on his experience of free-thinking teamwork as a research chemist at Du Pont in the 1950s. Conventional companies stifled creative initiative, he believed, and the company as well as the individual was stunted in consequence. "We, as leaders, can unleash much more of this inherent creativity and productivity by eliminating the authoritarian aspect of our organisations and depend on commitment and natural leadership as the controlling forces."
Gore separates the human elements of management from the business activities. Each associate chooses or is allotted a "sponsor", who advises, oversees and "markets" him or her within the company making sure that his/her contribution is recognised and rewarded. Associates are given great freedom of action, but are expected to be fair in all transactions; tolerant of others' initiatives and mistakes; prepared to make their own commitments to the enterprise; accountable for their actions; and cognisant of "waterline matters" - issues that could threaten the enterprise by making a hole below the waterline, on which consultation is mandatory.
Business activities are in the hands of leaders, who are sometimes appointed but more usually emerge by consensus, and who are therefore defined by the presence of voluntary followers. Relationships between all associates are based on a "lattice" organisation, meaning that all are directly one-to-one. For that reason, there is an upper limit of 150-200 people in a unit. Beyond that parts are set up separately. The nature of the business - applications for expanded polytetrafluoroethylene (PTFE) - makes such parthenogenisis possible.
Remuneration is controlled by a committee of senior leaders. Associates with broadly similar functions are listed together, and a number of "inputters" are asked in confidence to rank them according to their contribution to the firm. Scores on each list are then aggregated, and the committee compares the result with existing salaries. Anomalies are investigated and the overall increase available is then apportioned accordingly. In addition, after a qualifying period each associate is credited every year with a proportion of the value of a share according to salary.