Sas Institute Research

Executive Summary

This report was prepared by team OroCinco to analyze the success that SAS Institute has attained in the software industry over the last 30 years. We will then make recommendations for change to ensure SAS Institute remains successful over time. The report will analyze the unique business model SAS employs with regards to an organizational behavior perspective. It will also offer insight into the unique work environment at SAS; providing details regarding the high level of employee contribution and the role of management. After thoroughly analyzing these aspects of the company OroCinco will then make recommendations for change at SAS Institute.

Introduction

SAS Institute has remained competitive, from incorporation until present, employing a non-standard business model. Jim Goodnight has built a successful culture and business model but it is important to look forward as his career winds down and the external business environment changes. For this reason we need to analyze SAS to understand what has contributed to its success and what may require change. The following report analyzes the SAS Institute from an organizational behavioral perspective and provides the board with recommendations to keep SAS successful in an ever-changing business environment.

SAS Business Model

The SAS Institutes' unique business model is built around their healthy culture and climate8, and an informal and decentralized structure, where employees at all levels make decisions. The structure focuses on information sharing and high levels of communication. The large span of control8, which refers to the large number of subordinates whom report to the CEO, and autonomous work groups contribute to the small administrative hierarchy which reduces complexity and simplifies coordination8. This structure has evolved to support the business model.

One way SAS remains competitive in the rapidly evolving software business is by investing twice the industry average into R&D. Reinvestment has provided SAS with perhaps its most significant competitive advantage; offering customers a larger variety of software compatible with several platforms. Another competitive advantage for SAS is the unique business model which has led to increased revenue by selling software licenses rather than software with regular upgrades. Focusing on the customer has also set SAS apart from the competition. By surveying customers SAS gains insight to demand leading to innovations that sustains their revenue growth. Finally, SAS culture is one of self-empowered employees, so much so that one cultural legend speaks of an employee who left because she had no direction from above. Such cases, notwithstanding, employee turnover is also very low, less than 4% as compared to 18% in the software industry, reducing recruiting and training costs, saving $70m per year proving the culture has favorable business implications1, 3.

SAS Work Environment

A caring climate is created by offering several useful facilities, like the day care and gym, for all employees to enjoy. Evidence of this successful model can be found in the fact that SAS was rated the #1 best company to work for by Fortune Magazine6.

While the perks of the job create some incentive, management is the largest contributor to the "special feeling". The egalitarian culture at SAS stems from the beliefs and behaviors of Goodnight. He believes in coaching and mentoring over monitoring and controlling and that "if you treat people well, the rest takes care of itself"5. These are not mere gestures but commitments which build trust between executives and employees. His views lend to autonomy and participative management at SAS which is not only moral but conducive to higher performance8. Finally, Goodnight tries to promote organizational citizenship, or the extent to which a person's behavior positively contributes to the organization, through recruitment which helps to weed out bad apples and protect the positive culture8.

Goodnight has created a culture dedicated to employee retention or a type Z firm, and these firms outperform typical U.S. firms8. Performance is measured both qualitative and quantitatively. Although the management is present, it is through more informal means. The additional benefits and favorable hours reflect a concern for people. Decisions are made by groups based on overall company philosophy9. While Goodnight is against regular evaluations, he rewards outstanding performance with the annual bonus award. This type-z firm focuses on a long term perspective, aligning with one of SAS's four principals9.

Meeting Employee's Needs

The special feeling leads employees to perform and contribute at a high level for years. One way SAS accomplishes this is by ensuring that employee's existence, relatedness, and growth needs are met according to ERG theory, which states such needs must be satisfied for optimal motivation8. Employee's existence needs are met through competitive compensation, including bonuses, retirement, and other assorted benefits. The relatedness needs are met by building a community around SAS, offering a wide array of amenities for workers and families which instill a sense of belonging to the culture. Employee's growth needs are met through extensive internal training and mentoring and a significant amount of internal promotions and job changing.

The equity theory of motivation has also enabled SAS to maintain a high level of performance. This theory suggests that if employees perceive that they are being treated fairly, they will be motivated to maintain their performance8. The company's first principle is to treat "everyone fairly and equally"9. This is evident by SAS providing the same benefits and perquisites received at corporate to all employees around the world. Everyone receives "Cary-level care"9 motivating employees to perform and contribute at high levels.

Other important motivation methods that Goodnight employs to ensure high levels of performance are rewards, job flexibility, and internal career changes. By giving bonuses to high performers in the company, employees feel valued and are motivated to improve their performance. Job flexibility allows workers to change their schedule in order to accommodate their personal lives and encourages a healthy, work-life balance8. Furthermore, employees are allowed to change careers inside the company. These internal movements are encouraged as a way to keep employees from feeling stuck in their careers, and to provide opportunities for them to find more interesting jobs. As a result, motivation