Wharton Worklife Case Sas
Wharton Worklife Case Sas
People find it hard to believe that working at SAS Institute, Inc., a North Carolina-based
software company, is for real. Jim Goodnight, the founder and chief executive officer, has
carefully crafted a community of employees who seem literally to live the good life at work.
From the outset, he envisioned establishing a company that would be a fun place to work, with a
stimulating environment that would encourage creativity and with extensive on-site resources so
people could be productive.
That description, though, could fit any number of companies. The difference at SAS
Institute is that Goodnight saw and went much further. He decided to demonstrate in word
and deed that his company truly cares about its employees. His guiding standard for
decisionmaking is how he himself would like to be treated.
In a quiet corner of North Carolina, theres a place that contradicts most of the
assumptions of modern business. In an era of relentless pressure, this place is an oasis of
calm. In an age of frantic competition, this place is methodical and clearheaded. In a
world of free agency, signing bonuses, and stock options, this is a place where loyalty
matters more than money.
This kingdom, a secluded realm west of Raleigh, is home to an all-but-unknown
group of software wizards whose output touches every aspect of life from what
medicines get developed to who gets a mortgage. Although this company is thoroughly
modern, there is something fairy tale-like about the place. The inhabitants are happy,
productive, well rounded in short, content in a way thats almost unheard-of today.
They are loyal to the kingdom and to its king, who in turn is the model of a benevolent
leader. The king almost unbelievably goes by the name Goodnight.
Fast Company, January 1999
Jim Goodnight emphasizes that, in his view, what he has done at SAS Institute isnt
rocket science. He often expresses amusement at how much attention and raised eyebrows he
gets for something that to him is just common sense. He does not characterize SAS Institute as
a family-friendly employer, and thats not what he set out to create. He wants people to enjoy
being at work, and most of what he does is derived from that simple philosophy. A company fact
sheet explains this employee-friendly approach:
Employee-friendly benefits reflect Dr. James Goodnights philosophy at SAS
Institute: If you treat employees as if they make a difference to the company, they will
make a difference to the company. SAS Institutes founders set out to create the kind of
workplace where employees would enjoy spending time. And even though the workforce
continues to grow year after year, its still the kind of place where people enjoy working.
Excerpt from the SAS Employee-Friendly Benefits Summary
Thats the reason SAS Institute provided childcare in the basement of its first building:
one of the few early employees needed it, and the absence of worrying that came with that
childcare was key to making sure that employee enjoyed being at work.
Messages like this email message to Jim Goodnight are common:
I started three weeks ago in the Publications Department I never imagined that
I would have a job where I look forward to coming to work in the morning and forget to
check the clock in the afternoon to see when it is time to leave. I work with a charismatic
manager and my team is full of creative and hardworking individuals who have done
their utmost to make me feel welcome. As a Liberal Arts Manager (from UNC even), I
didnt envision a software company as the ultimate job but then I guess I didnt know
enough about SAS. You have a wonderful company and I am thrilled to be here. Thank
you.
SAS Institute employee
The company boasts some remarkable financial numbers: 1997 was the twenty-second
consecutive year of double-digit revenue growth. With 31,000 customers in 120 countries, SAS
Institute counts all but two of the largest U.S. companies as users of its products.
The Institutes core product, base SAS software, was originally
developed to analyze agricultural data on IBM mainframes at North Carolina
State University. Over the years, the SAS system became a complete information
delivery system, including more than 25 fully integrated modular applications
that allow an organization complete control over its data from data access, to
data management, to data analysis, and presentation.
Excerpt from SAS Fact Sheet
SAS Institute does business differently than most software companies. Rather than sell its
software, SAS leases to its customers a strategy of immense importance in understanding the
companys relationship to its users. The fact that leases must be renewable annually creates a
tremendous emphasis on customer satisfaction and quality. As SAS Institute sees it, the leasing
strategy helps keep the company sharp by ensuring that technological advances are driven
solely by customer needs.
Our leasing strategy has been a critical piece of the companys success. It
keeps us on our toes and forces us to be tied in very closely to our customers.
Thats not always the case in the software business.
SAS Institute manager
A key is ongoing research and development. SAS Institute reinvests more than 30 percent
of revenue in R&D.
We really focus on what the customer wants, and then we have the
resources to invest in delivering it.
SAS Institute employee
This attention to the customer has paid off: nearly 90 percent of SAS Institute customers
renew their annual leases, and 70 percent of these, on average, increase their business.
In the spring of 1998, William M. Mercer, Incorporated one of the leading U.S. human
resources consulting organizations released a report based on a survey it conducted under cosponsorship with the Pittsburgh High Technology Council, an employers group. The Mercer
survey offered respondents ten reasons from which to select as the most significant reasons for
turnover at their companies. Participants cited the following:
1. aggressive hiring practices of competitors (cited by 54% of participants)
2. dissatisfaction with income (49%)
3. dissatisfaction with career opportunities (46%).
Other often-indicated reasons for turnover include dissatisfaction with
management practices (41%), employees' dissatisfaction with their type of work or
projects (34%), and a feeling that the organization lacks direction (22%).
PR Newswire, May 20, 1998
In the software industry, employee turnover averages as much as 20 percent and some
firms face even higher turnover rates. Many have taken to all sorts of incentives to keep
employees at their jobs.
At a time when annual turnover in some information technology shops is as high
as 30% and filling empty positions can cost anywhere from two to five times an
employees salary, IT managers are discovering that it takes more than just a paycheck to
keep their people happy, according to Brian Anderson, vice president and general
manager of the San Francisco office of Personnel Decisions International, a global
management and human resources consulting firm in Minneapolis. IT managers are also
finding that offering a buffet of softer benefits anything from on-the-job training to
days off to elegant dinners builds loyalty, makes work more enjoyable and nudges
employees to think twice about sending off a resume when a headhunter calls.
Computerworld, June 28, 1999
SAS Institutes unique work environment and family-friendly programs contribute to the
companys astonishingly low 4 percent turnover rate.
A typical software company of SASs size loses 1,000 employees per year. At
SAS, the number lost is about 130 which translates into almost 900 employees per
year whom SAS doesnt have to replace. The result: a huge reduction in expenses for
recruiting candidates, for flying them in for interviews, and for moving new hires across
the country, as well as a reduction in the amount of work time lost while jobs remain
unfilled.
Two independent consulting companies Hewitt Associates and the Saratoga
Institute have estimated that the cost of replacing a worker runs between 1 and 2.5
times the salary of the open job. The more sophisticated the job, the higher the cost. So,
given a factor of 1.5 (which is conservative) and an average SAS salary of $50,000, the
company arguably saves $67.5 million a year, compared with what its competitors shell
out. That comes to an extra $12,500 per year per employee that SAS can spend on
benefits.
Fast Company, January 1999
The company estimates its low turnover rate translates into some $60 to $62 million in
savings.
Asked whether its important to be on the lists, Goodnight responds: Well, Id rather be
on them than not, but Id rather be reading about how great our products are. It is a sentiment
that rings true in light of how Goodnight acts, and its backed up by what the head of corporate
communications remembers: In the early days, we were almost reclusive about touting who we
were or what we did for employees. We wanted to be recognized for our products. It took us a
long time to convince Jim Goodnight that we should be talking about this other stuff.
The SAS Institute reward system encourages interdependence. For instance, everyone in
the sales organization gets a bonus, depending on performance relative to other members of the
salesforce but relative to target.
Theres really not much competition within sales. Were not competing with each
other, but competing with our own target.
SAS Institute employee
I could definitely make a lot more money elsewhere, but I wouldnt have nearly
as much fun.
SAS Institute sales professional
That the SAS Institute work environment is resource-rich also contributes to the unique
culture. Employees are given what they need to do their jobs. Everyone you talk to mentions this.
If you need something here to get your job done well, youll get it without a big
hassle.
SAS Institute employee
Youre given the freedom, the flexibility, and the resources to do your job.
Because youre treated well, you treat the company well.
Fast Company, January 1999 (quote from employee)
The physical surroundings and facilities make a big difference at SAS Institute. Lots of
companies have campuses, but the amenities at the SAS campus are legion. Theres a gym,
healthcare center, and childcare center. Every floor in every building has one or more break
rooms stocked with coffee, tea, cold drinks, cookies, crackers, and other refreshments. Each
Wednesday, the break rooms are stocked with large canisters filled with M&M candies a perk
lots of employees mention, half-jokingly, as their favorite thing about working at SAS Institute.
All of the benefits and perks are available to all employees, and everyone on campus is a
SAS Institute employee: software engineers, salespeople, childcare workers, groundskeepers,
and so on. Goodnight believes strongly that people are much more committed if they are part of
the company. All employees have the same exact bonus plan potential (of course, higher-paid
people are paid out at a higher rate).
There are no designated parking spaces and no executive dining room. Goodnight and
other senior executives eat lunch regularly in one of the two company cafeterias.
One particularly notable thing about the SAS Institute work environment is that the
company sees little need to produce specific documents about the culture precisely because it is
so pervasive. While there are a few, though brief, descriptive pieces about the company in which
the SAS Institute philosophy is clearly articulated, and the philosophy does feature prominently
in some of the companys customer-focused material, theres a sense that the culture is so strong
that it doesnt need to be neatly summarized and put on a plaque.
SAS is just a very pleasant place to be. You dont see plaques on the wall telling
us that because it doesnt need to be said. The niceness surrounds you and, while a lot of
it is visible, there are subtle things done that are important, too.
SAS Institute employee
hears SAS Institute people explain that we hire hard and manage easy, meaning that folks have
a lot of autonomy in their jobs. (Exhibit 3 summarizes the extensive hiring process.) In 1999,
SAS had about 20,000 applicants for roughly 200 posted open positions.
35-hour workweek. SAS Institutes written policy is that the standard workweek is
thirty-five hours.
It used to be that we had to work much longer hours to get the work that needed
to be done completed. With all the advances in technology, we dont need to spend so
much time at work.
Jim Goodnight
While most employees dont actually work thirty-five hours on a regular basis, people
talk about how the choice is there and that such a choice makes all the difference. Among
those who choose to work longer hours, theres a strong sense that they do so by choice and out
of a love for their work, as opposed to a lack of productivity or because of unreasonable
workloads. According to the 1997 Business Week data, 66 percent of SAS Institute respondents
strongly disagreed with the question: Are you expected to work long hours no matter what it
means for your personal or family life. This compares with 29 percent of all respondents.
Employee and manager surveys. SAS Institute relies heavily on employee input
through its annual employee satisfaction survey. Most of the questions seek to gauge the overall
work environment at SAS Institute, and only a few are work-life specific. Results of the survey
are posted for several weeks on the companys intranet, and each year key areas are identified for
improvement.
In 1996, SAS Institute introduced its first management feedback survey, through which
all managers are rated by their direct reports. The results, which are widely discussed within the
company, are also posted on the SAS Institute intranet. Top-rated managers receive individual
recognition.
Compensation system. So many benefits set SAS Institute apart from its competitors.
When it comes to pay, though, SAS employees get the average (or in some cases below the
average) for the software industry. In addition, unlike at most other software companies, there
are no stock options. Every SAS Institute employee does participate in profit sharing and is
eligible for a bonus, and the company has paid a bonus each year since its founding. Each
manager is given a pool of bonus money to divide as he or she chooses.
Goodnights view has always been that SAS Institute doesnt have to offer high salaries
to get people either to come or stay, given everything else the company provides to its
employees. He has always wanted people to come to work at SAS Institute for the work itself,
and stay with the company for the work. In the SAS Institute view, money should not be the key
motivator. People that care primarily about the money can easily be bought, the reasoning goes.
Money is not talked about, though. The companys compensation system is a somewhat
taboo subject among SAS Institute employees. Salary levels are not posted within the company,
so an employee looking to move within SAS Institute has no access to pay information. Just as
he doesnt want new hires coming for the money, Goodnight doesnt want people moving around
the company just for pay.
Dr. Goodnight spends a lot of his time programming, which is very cool.
SAS Institute employee
Asked how he can afford to spend so much time on programming, and told that most
other CEOs wouldnt do the same, he responds: I dont know what they do all day. Probably
poking their noses in where it doesnt belong.
Goodnight appears to be a leader who gathers the input of his direct reports, but not in a
typical team fashion.
Recently, SAS was considering a substantial investment opportunity. Jim asked
many of his direct reports for their input, and he listens well. Hes not looking for
consensus, though. He takes it all in and then makes a decision fairly quickly. In this
case, he decided not to go with it.
SAS Institute manager
Goodnights business for growing the business is to look out over only a short two- to
three-year horizon, given how rapidly technology changes. He assesses developing technologies,
invests in some heavily, and give people the latitude to make them work.
Jims approach is to place some bets on multiple technologies in the hopes that
one will prove right. Since he started the company, his vision has been incredibly
accurate.
SAS Institute R&D manager
All the evidence points to the fact that SAS Institute is doing things right. The company
continues to grow, and employees are thrilled to have their jobs. SAS Institute has made the top
of most of the lists various business magazines publish about the best places to work. In both
years of the Fortune Best Places to Work survey, SAS Institute finished third. In the 1997
Business Week survey, SAS Institute ranked fourth within its comparison group overall, and at
the very top of the list if you take only employee opinion into account (that is, rather than
including the employer survey on programs and policies). And SAS Institute has been on the
Working Mother Best 100 list ten times since 1989, and has been recognized as a Top 10
company six of those times.
Of course, the entire SAS Institute story does leave a lingering question: could a similar utopia
be created at a company that has to answer to shareholders?
All U.S. employees also get to take advantage of these other employee-friendly benefits:
On-site healthcare center (no cost to employees and their covered dependents)
On-site recreation and fitness center (no cost to employees, family, domestic partners)
Extensive wellness program
On-site childcare
Company subsidized caf award-winning gourmet cuisine and a piano player to help
create a relaxed atmosphere; breakfast and lunch available
Elder Care program
Flexible work environment and 35-hour workweek
Annual bonuses
Other fun perks include free fresh fruit every Monday; M&Ms on Wednesday, and breakfast
goodies every Friday; break rooms stocked with complimentary soft drinks, juices, crackers,
coffee, and tea, as well as first aid supplies; and employee events and celebrations, including
the annual Family Picnic, the elegant Winter Party, and end-of-the-month parties.
The Institutes employee-friendly philosophies are not limited to headquarters and other United
States offices. Because the needs of employees in other countries vary greatly depending on that
countrys culture, each office tailors its benefits to best suit the needs of those employees.
In Heidelberg, Germany, European headquarters, public transportation is the norm for all
citizens, and is a significant expense for commuters. The Institute pays 100 percent of the
public transportation costs for all employees in that office.
In the Madrid, Spain, office, SAS Institute presents a birthday gift to each employee,
provides lunch tickets redeemable at area restaurants, and funds an inter-company football
competition.