Strategic design is a fundamental task of organizational life. Jim Goodnight, the co-founder of SAS designed his organizational structure in a unique way that made his company stand apart from the rest. Since founded in 1976, they had been using the same organizational design. But with such an organizational structure, the big question lies whether SAS can retain its employees and customers forever.
One of the key systemic factors in SAS institute’s success was that they valued “Customer Satisfaction and Feedback” more. The use of “ballots” and frequently organizing user group conferences to gather customer feedback made them actually upgrade their products to meet customer needs. They actually gave customers what they need.
“Goodnight noted that the company would not turn down a product idea if it seemed to be a good one, even if it didn’t tightly fit the existing product line” (The SAS Institute, 1998: HR-6, pg. 3) One good example of this was the development of video games, which was totally different from their major product line” statistical data analysis “. SAS was also into publishing and selling manuals and books, which was quite unique for a software firm.
David Russo, Vice President of HR at SAS commented about Jim Goodnight
“If it’s a choice between making X dollars per sale and having more people have the software, he would rather have the software everywhere. “(The SAS Institute, 1998: HR-6, pg. 4).He obviously made it clear that company did not care about the amount of revenue gained by selling products, but wanted recognition and customer satisfaction.
Every company runs on certain principles. SAS too had a few but certain set of unique principles. The first principle was “treating everyone fairly and equally”. Goodnight quoted “We wanted nice offices and an attractive place to work. So we tried to provide that for everyone. The company is characterized by an egalitarian approach.” This basically removes the borderline that higher officials have on their employees but can also lead to internal conflicts in the organization.
The second principle emphasized on “coaching and mentoring rather than monitoring and controlling” and the third principle ”made believe that all decisions at SAS Institute is to think long-term” (The SAS Institute, 1998: HR-6, pg. 5) This creates a stress free mindset for the developers to focus on the goal as the project is long term.
SAS was reported to have never outsourced anything. Everyone who worked in various departments like security, day care etc. were all full-time SAS Institute employees.
People Management Practices
SAS institute never offered its employees stock options. Employees were rather rewarded with a bonus based on their part on the company’s financial performance at the end of each year. Barrett Joyner, Vice President of North American Sales and Marketing, said that instead of using incentive schemes to signal what was important “Here, we just tell people what we want them to do and what we expect.” Incentives are very good motivators for people to their job more effectively. Sometimes, it is better to implement incentive schemes rather than telling their employees to go do their job plainly.
Ensuring a comfortable work setting and providing exceptional benefits like 7,500 square foot free medical facility, Montessori day care etc. had made SAS Institute a healthy and fun working environment. People actually prefer working in such conditions and with such benefits.
Betty Fried, Director of Corporate Communications, noted “We just won an award for our employees being involved in the children’s education and education in general. It was called the ‘Apple Pie’ award, so we had free apple pie in the café that day. And we made sure that everyone got apple pie all around the country, too.” (The SAS Institute, 1998: HR-6, pg. 10) Who would not want to work in such a company where there is a lot of freedom and fun work environment? That’s why employee retention rate was very high for SAS Institute.
Just like any other company, Senior Managers gave orientation on the company history and vision to new employees to motivate them. They later received a lot of technical training too. David Russo had an interesting theory of performance management: “give people the tools to do their job and then get out of the way.” (The SAS Institute, 1998: HR-6, pg. 11) The company believed in its employees and went on to develop several new products.
An SAS database was maintained because people changed careers three to four times and SAS made sure that those changes happen within that company. In this way too, they never let go their talented employees.
Power in the System
SAS had a “flat and informal” organizational structure. The company had three or four levels and totally 27 units that reported directly to Jim Goodnight. Goodnight noted” My general management style is to let people manage their own departments and divisions with as little interference from me as possible” (The SAS Institute, 1998: HR-6, pg. 12).
“Bottom-up” decision management philosophy was followed in SAS. Customer and employee feedback lead to many new product innovations. Internal promotion and employee referral were prominent in SAS.
One important policy of the company was the “open door policy “. According to that policy, all managers are “working managers” or they do their jobs as well as manage others. Even Jim Goodnight, did a lot of programming and development. As the founder, Jim could have just relaxed and took care of only the management. But he, just like any other programmer, did programming. He became the role-model for his employees.
The customer driven development process in SAS involved a particular set of practices. Those practices revolved around several internal issues like outsourcing, recruiting, compensation and employee benefits. Originally, SAS ran only on mainframes to support the statistical data processing. Now, it had evolved to run on any midrange computers, workstations, personal computers and on a variety of mainframe platforms. SAS adapted to the changing technology and its culture grew over the years.
SAS was a strong-culture organization. Even in employee hiring and retention process, cultural fit was taken into consideration. John Boling, Director of the Educational Technologies division, defined a bad employee as follows:” A bad employee would be someone not willing to help others—colleagues and customers—and someone who needed a lot of direction.” (The SAS Institute, 1998: HR-6, pg. 12) SAS always maintained friendly working atmosphere and directed everyone to go in the right path.
Cultured was valued highly in SAS. For the success of any organization, culture is very important. SAS always followed its culture and thus why it has been highly successful.
Friendly working environment had brought peers together along with their families. Heritage of the company was maintained and every new employee was given an orientation about their company history, standards and demographics of the customer base.
SAS, as an organization had been highly successful in comparison with its competitors. It valued customer satisfaction and feedback more and made its customers happy. This customer-centric culture is nowadays followed in almost every organization.
Nepotism is however not discouraged in SAS. It’s not a fair practice. If favoritism is shown to family members and close friends with the use of power, then it might lead to internal conflicts. A limit for freedom should be set by SAS for its employees.
All units directly reported to Jim Goodnight. Although, Jim is very capable of handling everything, he should hand over some of his responsibilities to other trustworthy and talented senior managers, which would make administration easier.
Employee benefit system is also employed in all organizations. In order to be more successful, SAS has to come up with a totally unique approach while still maintaining its culture, heritage and standards.
“SAS Institute: A Different Approach to Incentives and People Management Practices in the Software Industry”. Rev.January 1998. HR-6, p 1-16. Graduate School of Business, Stanford University
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