Last updated: April 14, 2019
Topic: ArtDesign
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SAS Institute, an international leader in data warehousing and decision support systems and the world’s largest privately held software company, has received considerable media attention for its “utopian” work environment that it has sustained over time. The compelling case story focuses on capturing the essential elements that define the SAS Institute culture: employee-centered values, employee interdependence, a spirit of risk-taking, freedom, autonomy and richness of resources. Effective Job design has a lot to do with fostering and sustaining motivation amongst SAS employees.SAS has a stringent recruitment process to ensure the cultural fit of its new hires and thereafter gives its employees as much freedom and autonomy as possible. The employees are not micromanaged and are encouraged to try new things and “dig holes” as long as they know when to stop digging.

While there is no formal performance appraisal process, there is significant emphasis on manager-employee communications and feedback cycle. Employees receive feedback on performance multiple times a year and also interact with the client to get direct feedback for product improvements.Also, while there is no formal succession planning, job rotation opportunities abound. The view at SAS is that people change careers three to four times. SAS tries to make sure that those changes occur within the company, so the philosophy is to give people the opportunity to get training and skill development in other areas which allows expansion of their skill variety.

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Employees have the opportunity to move from one project, department or facility to another. They can also move from managerial to individual contributor roles and back again.And, there is typically no reduction in pay for moving to a job without management responsibilities.

There is strong emphasis on task identity. As an employee who was lured away from Texas instruments observed “Here I know that everything I do will have an impact on the final product”. SAS software products manuals include the name of the developers and testers who created the software.

SAS builds its core capabilities and competencies by adopting effective people management practices to produce sustainable competitive advantage.Employment security is valued at SAS where the average tenure of employees is about 10 years, and the company offers opportunities and makes efforts to retain them throughout their careers. SAS displays selectivity in recruiting ‘team players’ who are easy to work with and willing to help others, thereby creating an atmosphere where people are friendly and happy to go to work. The flat organization structure, open door policy and informal work environment encourages communication and information sharing at all levels of the organization.As mentioned earlier Participation and empowerment is advocated, as evident from the freedom and autonomy provided to the employees, and opportunities for cross training and cross utilization abound. Self managed team concept is supported by Goodnight’s philosophy of not running interference and the existence of a fairly informal structure with hands-on managers. Symbolic egalitarianism is valued at SAS, where the philosophy is that everyone is treated equally and fairly. For example, everyone has a private office and there are no reserved parking spaces or an executive dining room.

There is significant emphasis on training and skill development evidenced by 400 technical training seminars (just within 1997) and a 5-6 week sales training program. The flat organization structure means that Promotion from within may not be frequent, but lack of functional silos facilitate significant internal growth opportunities. Detailed sales and performance reports, overseen by Goodnight himself reflect a strong measurement of its practices. SAS has no specific and aggressive short term financial or growth goals, with the focus being on taking the long view.SAS focuses on building a solid and long-term relationship with its clients, and so far it has succeeded. All of the above have led to the development of a strong brand and increased employee satisfaction which enables the company to attract and retain talent.

Research has revealed that sustained innovation is driven by diversity of thought , discovery and implementation of new ideas regardless of where they originate and the existence of formal and structured processes to encourage and test innovation. It says that innovators are also likely to use lliances and partnerships as a means of adapting to market shifts. Referring to the Attraction-Selection-Attrition framework theory (ASA), the company is likely to attract people who prefer its work life balance, non-finance workplace benefits etc. Over time, SAS has identified the type of people that fit in and developed a selection preference, for example preferring team players to stars. The attrition aspect of the model would kick in when the company culture drives out high performers who while attracted to the benefits may find their need for self-aggrandizement not being met.SAS may be forgoing innovation that springs from geniuses who crank out great products by themselves, working all night. It may also be failing to include ambitious stars that are driven to exceed and outshine others. The organization culture at SAS perhaps may also not lend itself to high levels of innovation.

Goodnight’s original vision has spawned a self-perpetuating culture, and “new” decision makers now share his vision, which governs the variety of philosophies, strategies, and practices adopted by the company since its inception. The HR selection process may identify personnel that synchronize their goals with that of the CEO.The innovation-driven action company paradigm which avers that individuals are assumed to be the source of all innovation and must be allowed to think for themselves to do the right thing even it means disobeying the boss or violating company policy, may not completely align with the policies and culture prevalent in SAS, thus potentially suppressing innovation.

With the likelihood of larger competitors catching up in the Business intelligence space, SAS may need to rethink its hiring, compensation and product development strategies with an emphasis on innovation.Companies make or break their futures based on how quickly they can launch their products into the market for e. g. Data General. In such cases people work 24/7 with little regard to work-life balance to beat their competition. SAS will need to hire stars if it has to sustain in a competitive landscape as it plans to go public, and focus on shorter term product development and rollout strategies. It may consider creating a new business unit that would be in charge of idea generation and experimentation with cutting edge technologies, and implementing more formal and structured processes to pursue innovation.

SAS should also consider innovation by acquisition. And possibly consider leveraging low cost and best practice processes and technologies by selective outsourcing to leading vendors. An integral part of SAS Philosophy is its reliance on internal, intrinsic motivation and “de-emphasis of financial incentives as source of motivation”.

SAS compensation systems do not include stock options and SAS follows an anti-Nordstrom like approach of not providing sales commissions.According to SAS leadership, sales commissions do not encourage an orientation toward taking care of the customer or building long-term relationships (consistent with Cognitive evaluation theory which avers that allocation of extrinsic rewards for behavior previously intrinsically driven may reduce motivation to keep up that behavior). However, to remain competitive in the long run and to foster innovation, SAS may need to consider extrinsic motivators such as high wages, incentive pay and employee ownership.In conclusion, the SAS Institute success story does leave some lingering questions: could a similar “utopia” be created at a publicly owned company that is driven by a board and has to answer to shareholders? Or could SAS continue to sustain such an utopian workplace environment if it were to go public? While SAS provides some of the best workplace benefits to employees, these may not be sufficient to stave off competition in the long run. SAS would do well to look ahead and take requisite steps to further enhance innovation to assure itself of a continued leadership position.