As a management researcher, I’ve had the opportunity to peer inside a lot of organizations. In doing so, I’ve learned that most big companies are pretty much the same, at least when it comes to the way they’re managed. The rituals of goal-setting, planning, budgeting and performance appraisal differ only slightly from firm to firm. There’s even less variety in the architecture of power. Hierarchical authority structures, top-down leadership appointments and order-following employees have come to nearly every organization I’ve studied—nearly. One amazing exception is W.L. Gore & Associates. Known mostly for its Gore-Tex range of high-performance fabrics, the company makes more than 1,000 products and employs 9,000 in 50 locations around the world. Wherever it operates, Gore is frequently ranked as one of the best possible places to work.
I first visited Gore when I was doing research for “The Future of Management.” My friends at Fast Company had labeled it as the world’s most innovative company, so I thought I should learn more. That first visit was weird, even disconcerting. I found virtually nothing at Gore that matched up with the management practices I had observed in hundreds of other companies—no titles, no bosses and no formal hierarchy. I felt like a surgeon who had opened up a patient who looked human, but turned out to be filled with wires and circuits. Yet as I got to know Gore, I realized I had this analogy was backwards. Gore was deeply human and by contrast, all those other companies I had studied were cyborgs. Gore’s management model seemed wacky only because I had grown accustomed to the inhuman practices that predominated in most other companies.
Fact is, Gore’s progressive management model has been ahead of its time for more than half a century, ever since the company was founded in 1958 by Wilbert (Bill) L. Gore, a chemical engineer who left DuPont with the goal of building a company where innovation was the main show rather than a sideshow. One measure of Gore’s innovation-fueled resilience: in 50 years it has never made a loss.
Despite having no EVPs, SVPs or even plain ol’ VPs, Gore does have a CEO. Terri Kelly got the job in 2005 in a peer-driven process. She joined Gore in 1983, after graduating summa cum laude from the University of Delaware with a bachelor’s degree in mechanical engineering. During her career at Gore she has exercised her considerable leadership gifts in a broad array of critical roles.
Recently, I met up with Terri in Northern California, and asked her to take me—and you—on a deep dive into Gore’s wonderfully strange (and strangely wonderful) management practices. This week: Part I of that interview.
Gary: What would be the most distinctive elements of Gore’s management model to an outsider?
Terri: First, we don’t want to operate in a hierarchy, where decisions have to make their way up to the top and then back down. We’re a lattice or a network, not a hierarchy, and associates can go directly to anyone in the organization to get what they need to be successful.
Second, we try to resist titles. We have a lot of people in responsible positions in the organization, but the whole notion of a title puts you in a box, and worse, it puts you in a position where you can assume you have authority to command others in the organization. So we resist this.
Third, our associates, who are all owners in the company, self-commit to what they want to work on. We believe that rather than having a boss or leader tell people what to do, it’s more powerful to have each person decide what they want to work on and where they can make the greatest contribution. But once you’ve made your commitment as an associate, there’s an expectation that you’ll deliver. So there are two sides to the coin: freedom to decide and a commitment to deliver on your promises.
And fourth: Our leaders have positions of authority because they have followers. Rather than relying on a top-down appointment process, where you often get promoted because you have seniority, or are the best friend of a senior executive, we allow the voice of the organization to determine who’s really qualified to be a leader, based on the willingness of others to follow.
Gary: Bill Gore founded your company more than 50 years ago. What was his vision? Where did these radical management ideas come from?
Terri: Bill was very passionate about new materials, and saw a lot of promise for fluoropolymers. When he started Gore, his business plan was not all that developed, but what was developed was a set of deeply-held beliefs about how you lead people and build an organization. What motivated Bill was an understanding that as a company we had to innovate. We wouldn’t be successful unless we could bring innovative products to the market.
Bill spent a lot of time thinking about the human element in this. He was influenced by Douglas McGregor’s book, “The Human Side of Enterprise” [published in 1960]. He was influenced by Abraham Maslow and his views on how people react when they’re not feeling safe and secure. These philosophies set the foundation for our company’s values. He knew that if you can’t engage your associates, if they don’t feel they can make a difference, if they don’t feel valued for what they bring to the business, and if they aren’t encouraged to collaborate and share their knowledge, you won’t get innovation. But there was a clear business purpose to all of this; the goal wasn’t simply to create a happy work environment.
At DuPont, Bill had had the opportunity to work in one of these task forces, and he was struck by the fact that the people on the team behaved so differently from what he observed elsewhere. They’d drive to work together, they’d work around the clock to get something done, they’d get to know one another. So he wondered, why couldn’t a whole company work this way?
Gary: Gore doesn’t have a formal hierarchy, or titles, but obviously it has leaders, individuals whose leadership abilities give them more influence and authority. How does someone become a leader at Gore?
Terri: One of my associates said, ‘If you call a meeting, and no one shows up, you’re probably not a leader, because no one is willing to follow you.’ At Gore, the test of leadership is that simple: are others willing to follow you? We use a peer review process to identify the individuals who are growing into leadership roles. Who are our associates listening to? Who do they want on their leadership team? At Gore, leaders emerge, and once they’re in a leadership role, they understand their job is to bring out the strengths of their teams, to make their colleagues successful. Our model also flips the role of the leader—the way you use your power is quite different from what you’d find in most other organizations. At the end of the day, our leaders know their ‘followership’ comes from their peers, and that they can easily lose this if they don’t live up to the company’s values.
Gary: At Gore, it sounds like people earn their power by supporting others, and if they stop doing this, their power starts to erode. So how does this reality shape leadership behaviors and drive business results?
Terri: The challenge in this distributed leadership model is to make sure it’s not just chaos. First of all, there are norms of behavior and guidelines we follow. These are our ‘rules of engagement.’ Every associate understands how critical these values are, so when leaders make decisions, people want to understand the “why.” They know they have the right to challenge, they have the right to know why this decision is the right one for the company. This puts a tremendous burden on the leader to explain the rationale behind the decision, and to put it in the context of our culture: Why is this fair? Why is it consistent with our beliefs and principles? So again, the burden on leaders is different from what you’d find in many other companies, because our leaders have to do an incredible job of internal selling to get the organization to move.
Gary: I can understand how this painstaking consultation produces buy-in, but doesn’t it slow things down?
Terri: The process is sometimes frustrating, but we believe that if you spend more time up front, you’ll have associates who are not only fully bought-in, but committed to achieving the outcome. Along the way, they’ll also help to refine the idea and make the decision even better. So yes, it takes more time, but we find that once the decision is made, you’d better get out of the way because you now have the whole organization eager to accelerate and execute. In many organizations, leaders make quick decisions, but don’t understand that the organization isn’t behind the decision—half the people don’t know why the company is moving in this direction, and the other half is pulling in the opposite direction—either intentionally or unintentionally. So if you think about the entire process of decision-making and implementation, our approach is faster, because by the time you get to the decision, the whole organization is behind it, rather than just a few leaders.
Gary: Executives often try to get alignment by selling a decision once it’s been made. For them, alignment is a communication exercise. Or they think they can get alignment through a consistent set of financial incentives—a shared scorecard. By contrast, it seems as if Gore sees the problem of alignment as one of involvement.
Terri: Absolutely. All of our associates are owners and they feel an incredible degree of responsibility for business outcomes. If they think we’re going in the wrong direction, or believe a decision is wrong, they feel compelled to speak up, and they know our values give them the right to have a voice. For leaders, this can be troublesome at times, because you’re not only evaluated by the outcomes you achieve, but by how you get the job done. One of the hardest jobs is to be a leader at Gore, because we expect so much of them.
Gary: I know that Gore puts much emphasis on building great teams as it does on developing great leaders. Can you explain the thinking behind this?
Terri: I think it’s wrong to believe that the most important decisions in an enterprise are made by senior leaders. Some of the most impactful decisions at Gore are made by small teams. Within any team you’ll find people with very different perspectives; they don’t all think alike—and we encourage this. We encourage teams to take a lot of time to come together, to build trust, to build relationships, because we know that if you throw them in a room and they don’t have a foundation of trust, it will be chaotic, it will be political, and people will feel as if they’re being personally attacked. We invest a lot in making our teams effective, so when they have those great debates—where a scientist doesn’t agree with a sales associate, or manufacturing doesn’t agree with a product specialist—the debate happens in an environment where everyone is looking for a better solution, versus “you win, I lose.”
We want to avoid a situation where decisions have to bubble to the center, because this undermines our goal of driving decisions through the most knowledgeable Associates. We want to make sure that people know they have the authority to make decisions and are responsible for the outcomes.
Gary: I can understand why being a leader at Gore is a challenge. In most organizations, leaders have positional power—someone has made them head of a business or a function—so they can assume others will follow them, because they must. And they have sanctions—they can fire or demote subordinates who don’t get in the boat. But this isn’t true at Gore. When you bring in leaders from the outside, do they have difficulty adapting to your model? Do they struggle to figure out how to get things done?
Terri: We sometimes bring outside talent in, but we’re very careful before putting them into a leadership role, because even though they may have great capabilities and experience, they don’t know how to navigate our culture—so it’s very dangerous to put them straight into a leadership role. Typically, we’ll put them in a functional role to start with, or in some other role where they can demonstrate their capabilities and expertise. We help them learn how to lead in a way that is consistent with our culture. We’ve had some success here, but it’s not easy. When we hire outside people and get them to talk about their values, they’ll say, “I’m a people person. I believe in teamwork.” But when we put them into our environment and strip away their positional power, it can bring them to their knees—because they hadn’t realized how much of their success was a function of their position and power and their ability to command and control. So we’re very careful in terms of bringing leaders in and helping them learn to succeed at Gore.
In other companies, the leader is often expected to be the most knowledgeable person on the team, the voice of the company—all-wise and all-knowing. We have a different view. If you want to tap into the whole organization, you have to distribute the responsibility for leadership to the associates who have the relevant knowledge. The Gore model changes the traditional role of the leader. The leader’s job is to make sure the culture is healthy: Is it working as a system? Are teams coming together? Are we getting diverse points of view? Are the best ideas rising to the surface? Our leaders have to be comfortable with not being at the center of all the action, with not trying to drive every decision, with not being the most strategic person on the team or the one with the most thoughtful ideas. Their contribution is to help the organization scale and be effective.
In my next post, Terri will talk about how Gore mentors new employees, stays disciplined and makes tough tradeoffs. For now, though, a few questions, dear reader…
Do you think Gore’s leadership model would ever work in your organization? Are there baby steps your company could take to de-emphasize the role of formal hierarchy? And how would you get things done if you were robbed of your title, had no “subordinates,” and couldn’t give a direct order to anyone?
W.L. Gore: Lessons From a Management Revolutionary, Part 2
By GARY HAMEL
Apr 2, 2010 4:02 pm ET
0 COMMENTS
W.L. Gore & Associates has been called the world’s most innovative company. For an introduction to Gore, and its weird but effective leadership model, see my previous post. Below, the second half of my recent interview with Gore’s CEO, Terri Kelly.
Gary: What does it feel like when a new associate joins Gore? They aren’t assigned to a boss, so how do you bring them on board? How do they learn about the culture?
Terri: On day one, they won’t know what to work on, so we work with each associate to develop their starting commitments. They’ll also get a sponsor, which is a very unique role within Gore and different than a leader. A sponsor makes a personal commitment to an associate’s success and development. A leader can also be a sponsor, but needs to be very clear about what hat he or she is wearing. If you’re the leader of a business, you can be conflicted, since your success is around driving business results; but one of your valued team members might need to leave your business to develop and grow. That’s a tension, but your responsibility as a sponsor is help the associate reach their full potential.
New associates rely on their sponsors since they don’t know how to get things done; they don’t know our language. A new associate will probably experience a lot of freedom they didn’t have in their last job, but also a lot more responsibility in terms of having to be self-driven and self-initiated. Even though the sponsor is there for you, you need to set your own career goals, and determine for yourself where you can make the biggest contribution. For a lot of people, this is very different from what they would have experienced in a more structured environment.
Gary: Another unique thing about Gore is your approach to locating factories. For the most part, you’ve avoided building large, focused factories in low-cost labor locations. Factories are clustered together. Gore also splits a business in two when it reaches a certain size. None of this sounds very efficient. What’s the logic?
Terri: There are a couple of practices that have served us well. First is the three-legged stool. We like to have the functions co-located because innovation depends on having research, manufacturing and sales all in the same place, where they can build off each other. This also helps us develop leaders. Our campuses are all cross-business, whether in the U.S. or Germany or China.
Secondly, if a plant gets too big or a business gets too large—more than 250 or 300 people—you start to see a very different dynamic. The sense of ownership, the involvement in decision-making, the feeling that I can make an impact starts to get diluted. So we look for opportunities to divide big business into smaller businesses. Bill Gore said that one of the most important responsibilities of the leader is to figure out how to divide so we can multiply. We look for opportunities where dividing a unit up and replicating some of its activities can accelerate growth.
In Gore, you’ll see a lot of small plants with fewer than 300 associates, because this drives a different level of focus and ownership. Large businesses tend to stifle smaller businesses by hogging critical resources. When you split a business up, the smaller unit gets its own resources and can set its own priorities. Another bonus: new leaders emerge because you no longer have a single leadership team under one big roof, but now have two distinct leadership teams.
The last thing that’s helped us in the current economic environment is that we co-locate different businesses together. If a particular industry has a downturn, you want to be able to move the associates to another opportunity. If our plants were all in isolated locations, this would be much more difficult. So we like the idea of campuses where a number of small factories are co-located within a 25-mile radius. This way, people don’t fear moving on to something else, and are less hesitant to take on a new opportunity. This lessens the risk the associates will try to preserve a business or product area that may no longer be so promising to the company.
Gary: To a typical hard-driving manager, the Gore model probably seems utopian, maybe even naïve. You don’t have a hierarchy. Leaders can’t command. Employees choose their own commitments. It sounds like a slacker’s paradise. No wonder the company is consistently ranked as a great place to work. But where does the discipline come from? Most managers view freedom and discipline as mutually exclusive trade-offs, but that’s clearly not the case at Gore. You sell to demanding customers like Nike and Procter & Gamble, and have made money every year since the company was founded. What drives discipline at Gore?
Terri: Some days things are chaotic. I don’t want to paint a picture of something that’s perfect. You have teams coming together, storming and forming and building relationships. But there are some fundamental things that hold Gore together. One is the values to which we all subscribe, in terms of how we’re going to treat each other—there’s a huge trust element in the Gore culture.
One of the more powerful things that creates discipline is that everyone in the organization knows that they will be ranked by their peers, and that their compensation will depend on this ranking. This peer pressure is much more powerful than top-down pressure.
Our associates get to choose what commitments to make. If they didn’t know they’re going to be evaluated by their peers, they might be tempted to take on an assignment that is personally interesting to them, a hobby, but one that’s not important for the company. But instead, every associate is constantly thinking, ‘I want to be viewed as making a big contribution to the enterprise,’ so they’re constantly looking for opportunities that will leverage their strengths, and that they’re passionate about. So there’s a natural, built-in pressure: every associate wants to work on something impactful.
Every associate knows that they won’t be judged by one boss or superior, but by all their peers, by individuals who know what they’ve done and how they interact with others on daily basis.
Typically, an associate will be evaluated by 20 or 30 peers and will, in turn, evaluate 20-30 colleagues. You rank your peers from top to bottom. It’s a forced ranking. You’re asked to rank only people you know. What we find is that there’s typically a lot of consistency in who people view as the top contributors, and who they view as the bottom of the list. We don’t tell our associates what criteria to use, we simply ask them to base their ranking on who’s making the greatest contribution to the success of the enterprise. You don’t evaluate people solely on the basis of what they’re doing within their team, but in terms of the broader impact they may be having across the company. And then beyond their contributions, are they behaving in ways that are collaborative? Are they living the values? Sometimes someone will get great results but at great expense to the organization. These are the issues associates think about when they’re putting together their rankings.
We have a cross-functional committee of individuals with leadership roles who look at all this input, debate it, and then put together an overall ranking, from 1 to 20, of those particular associates. Then, in setting compensation, they ensure there’s a nice slope to the pay curve so that the folks who are making the biggest contributions are also making the most money.
The process is a bit brutal, but it ensures that real talent gets recognized. This system avoids the problem of paying someone more because of seniority or title. New associates joining the organization, the scientists who don’t want to be people leaders—we want these people to feel highly valued, because the next invention may come from them. No system is perfect, but ours levels the playing field and allows real talent to emerge and get compensated accordingly.
We don’t need a bureaucratic system to hold people accountable. We don’t need time cards, because we don’t care when the person comes or leaves—we just care about their contribution. So you can deconstruct a lot of the typical bureaucratic processes that are typically used to measure and control performance. We’ve also found that by not having hard and fast metrics of performance we can avoid a lot of unintended consequences. You get a lot of negative behavior when you have narrow metrics that really don’t represent the complexity of the business. Instead, we ask our associates to view performance holistically, in terms of someone’s total impact, versus focusing on a few specific variables.
Gary: A lot of companies struggle to balance trade-offs—between growth and earnings, short-term and long-term, and so on. Often these trade-offs are made at the top. A CEO will say, “this year we need to focus on getting our costs under control”—and then next year the company discovers it has missed a big new opportunity while it was obsessed with slashing costs. Or a leader will demand growth and then later discover that this came at the expense of near-term earnings. So you get the pendulum effect. How does Gore avoid this? How do you decentralize the responsibility for managing tough trade-offs?
Terri: We introduce this sort of ambiguity and polarity to our associates early on. We don’t protect them. If you put them in a box and feed them a simplistic model of business, they won’t be able to handle these subtle trade-offs. We want to put these conflicting pressures on all associates and not just on the leaders, who often think they’re supposed to protect the rest of the organization from these tensions. Our associates have a very good understanding of how complex these trade-offs really are. That’s because our leaders take a lot of time to help associates understand the trade-offs. Leaders have to explain all the factors that need to be taken into account in making a decision. Rather than having a small population of individuals who are capable of making these trade-offs, we have a broad base of associates who are capable of making complex decisions.
We sometimes worry about how to scale this model. We asked that question at 50 associates; it was asked again at 500; and we’ll ask it again at 10,000. But what we’ve found is that our management model helps us scale, because we’re not relying on a few centralized, enterprise leaders to make all the key decisions. Instead, we push authority out to operating teams that are much better equipped to make the right decision at the right moment.
Gary: Gore is more than 50 years old and has been the subject of many case studies. Why hasn’t this management model taken root in other companies? Why hasn’t it been emulated more broadly?
Terri: First, I should say that we’re still evolving. We haven’t figured it all out. But what I’d tell another CEO is this. You have to look at the values that are embedded in your company: what behaviors have been rewarded and reinforced over the decades? Is it a culture that really believes in and encourages individuals? Does it foster a collaborative spirit? Does it encourage knowledge sharing? You have to tackle this first. One of the biggest mistakes an organization can make is to articulate all these great values but then not live up to them—then people get cynical, because the values are out of synch with what they experience every day from their leaders.
Second, you have to evaluate your leadership model. It’s incredibly important to look at the motivation of your leaders, how they’re rewarded, what they value. If you don’t tackle this, you’ll be in trouble. Our model requires leaders to look at their roles differently. They’re not commanders; they’re not lynchpins. Their job is to make the rest of the organization successful. They have to give up power and control to allow this chaotic process to happen—so you get diverse perspectives and teams coming together to make decisions.
Third, you have to be clear about the checks and balances. At Gore, it’s the peer review process, but it might be something else in another organization. What is it that will reward and reinforce the values on an ongoing basis? This needs to be embedded in your management practices. This is the sequence I would follow if I were trying to foster Gore’s culture in another organization.
Gary: In the past, someone might have looked at the Gore model and said, “well, that’s interesting, but it’s not essential—there are other ways to manage.” But when I think about the core elements of your model—a collaborative decision-making process, an organization where leaders aren’t appointed but emerge from below, associates that have the knowledge and authority to make the critical real-time trade-offs—it seems to me that these things are becoming competitive imperatives.
Terri: If you think about changing demographics, our young associates expect these things. They expect to have the chance to make an impact. They expect to know why they’re working on something. They expect to work in a collaborative network where information is freely shared. If an organization doesn’t have these things, my suspicion is that it won’t be able to compete. You won’t be able to attract the talent, and you certainly won’t be able to retain it. This is what it’s all about—getting the best brains together.
OK, dear reader, a couple of questions to exercise your considerable intellectual talents. First, why do you think the Gore model is still so rare? If it works, as it seems to, why hasn’t it been more widely emulated? And second, what do you think of Gore’s peer-based salary-setting process? Can you imagine it ever working in your organization? Why or why not?
Shameless Plug Department: If you want to learn how to build a Gore-like management model in your company, see my latest book, The Future of Management.
