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Sas Institute’s “Best Employer Award” Essay

SAS Institute’s “Best Employer Award” is based largely on its financial success and the overwhelming job satisfaction its employees report. From free health care to copious amounts of M&Ms, SAS spares no cost to keep their “chief assets” happy, for, as their CEO / majority owner says “Contented cows give more milk”. Still, today’s talented workers are not apt to spend the majority of their careers at one company because of luxurious perks. The truth is that what seems like random and excessive, is actually a well-crafted and impeccably executed strategy to create an unparalleled work and life environment. SAS is successful in applying the principles of Cognitive Evaluation Theory that emphasize keeping employees’ cognitive attention on intrinsic rewards rather than extrinsic ones. SAS steers clear of Insufficient Justification or Insufficient Punishment by deemphasizing such extrinsic rewards as pay and promotion, and instead emphasizing intrinsic controllable rewards as membership within a community and a way of life.

For example, SAS’s unique sick-day policy which, in contrast to industry standards, does not have a set number of allowable sick-days. David Russo states, “If you’re out sick for six months, you’ll get cards and flowers…”, and “We expect adult behavior”. The result is that SAS employees average only two sick days annually. The focus on “Adult behavior” makes employees feel responsible for their obligation to the company as part of their overall reciprocity for all that the company has done for them. The lack of any real explicit punishment actually creates intrinsic pressure on the individual employee to not to take advantage of the policy in order to keep his self-perception in line with beliefs about being a good and accountable employee. By downplaying pay as an extrinsic reward and gauge of performance, SAS successfully uses Insufficient Justification to help in sidestepping the usual salary comparisons issues.

The informational aspect of Cognitive Evaluation Theory is crucial to the understanding of SAS’s unique structure and policies. SAS avoids assigning tasks that have high probability of failure. Also it allows its employees freedom in choosing what to work on. As Goodnight states, “If they’ve grown bored with their job, they have great freedom to move horizontally instead of having to hunt for another employer.” Jenn Mann echoes Goodnight when she states, “nobody much cares whether you show up at 9 or 11.” Taking the focus off such trivial extrinsic matters frees up employees to focus their attention on intrinsic motivations such as having fun. Self-concordance suggests that these intrinsic motivations are stronger, more internally justifiable and therefore much more likely to make the individual work harder to achieve his goal.

SAS uses Needs Theory to focus its recruiting on people who exhibit a high need for affiliation and achievement, while paying close attention to those with an overtly high need for power. To cater to high achievers’ needs managers make sure to assign tasks that are realistically achievable within the prescribed timeframe and the individual’s competencies. Managers provide subordinates with rapid feedback through everyday walking and talking techniques. Praise and recognition are also provided through increasing responsibilities and tasking employees with full ownership of their products including placing their names on the finished product. Knowing that high achievers generally do not possess the gamblers mentality, SAS tailors its incentive package around security and predictability. Bonuses are not emphasized and stock options are not granted. Instead, employees are offered a competitive salary, full 401K contribution and a myriad of non-merit based benefits for themselves and their families.

For those with a high need for power, SAS provides autonomy, a collaborative environment and control over the life-cycle of a product. For example, each employee gets to plan his own schedule. SAS’s thinly staffed management ranks are designed to boost reliance on an honor code that emphasizes, above all else, adult behavior. This produces ample opportunities for employees to take on additional responsibilities. As a result, employees feel a sense of power and control over their work. SAS does differentiate those individuals whose need for control extends to control over others, or whose need for recognition extends to being treated like superstars. David Russo states, “SAS is not a good place for someone who wants to feel like a star or feel particularly important”. Recruiters reject these want-to-be star applicants because they believe SAS’s structure and environment cannot accommodate their needs.

The need for affiliation is nurtured through a work-life balance that stresses community over personal economic gain. As stated in the article, “The perks are the most obvious manifestation of corporate munificence, but at their core they are only part of a workplace ethos that’s based on a degree of trust.” SAS takes advantage of its relative isolation to reinforce its middle class utopian environment. By design, almost all essential services are provided on campus and by SAS employees. This includes healthcare, education, food services, entertainment, recreation and even subsidized housing (near the campus). The company organizes a plethora of extracurricular group activities that encourage collaboration, provide needed support and connects people on a personal level. Its success in satisfying employees Need for Affiliation manifests itself in SAS’s historical low turnover rate. An unfortunate byproduct of SAS’s homogenous environment is its relative lack of innovation.

Innovation, the better use of a novel idea or method, is a crucial element to the growth of a corporation. SAS has indubitably been successful in reshaping its own software and selling it to additional markets, but has not had the same success in branching out and innovating in other areas. Perhaps SAS, a monopoly in the data software industry, has consciously elected to steer clear of this more risky innovation because of financial and social concerns. Attraction-Selection-Attrition (ASA) model helps explains why today’s SAS, while still being remarkably efficient at providing new or improved software, is not truly a leading innovator. SAS’s pay structure and overall emphasis on a family friendly, low stress environment is a conscious effort to attract the more risk adverse individual. The selection process takes care to repel mavericks who seek power and fame. The problem is that these competitive, challenging personalities are willing to take more chances. SAS is a great example of ASA’s chief assertion that “The People Make the Place”.

But while preaching autonomy and individuality, SAS employees are quietly advocating for conformity, cloaked as corporate citizenship. The resulting atmosphere works, through attrition, to weed out any nonconformist. Pushing out dissident voices makes the remaining collective even more homogenous and less likely to innovate. The fact that SAS’s retention at this point is so low is another indication of the high level of homogeneity. The company’s reliance on a small number of working managers makes self-regulation or as they call it “adult behavior” an essential part of the overall strategy of an employee-regulated firm. Thus, SAS’s focus on attracting and selecting a particular type of risk adverse individual, while allowing attrition to remove dissidence is an effective use of ASA, all be it a rather insensitive one. These polices have essentially forced SAS to outsources the task of innovating to its client base through constant solicitation of feedback and ideas. Another theory that could explain SAS’s relative weakness in innovation is Equity Theory which focuses on perceptions of fairness. SAS does a good job of shaping their employees perceptions of its overall Organizational Justice through such techniques as the allocation of offices for all, having no executive cafeterias and providing identical health plans for all.

The two core principles for SAS are “…that all people at SAS are treated fairly and equally” and “…that the workplace should be fun and people treated with dignity and respect”. The problem is that the two principles are different. The first advocates equality and the latter respect. Treating people with respect and dignity is universally accepted and supports employees’ feelings of Interactional Justice. Equal treatment for all is not universally accepted, and conflicts with the reality of varying levels of individual contributions to a company’s success. Universal equality skews the individual’s perception of Procedural and Distributive Justice. Talented, hardworking employees find it hard to stand out because both the evaluation process and the resulting recognition are purposefully watered down. This lack of strong correlation between risk and reward, input and output makes it less likely that unique innovation will occur because the risk–taking innovator will perceive an inequitable Distributive Justice.

The inequitable feeling is compounded by SAS casually defined performance review process which could leave successful innovators feeling a lack of Procedural Justice. Equity theory states that there are four referent comparisons that an employee can use to gauge equitability of his situation. Even if SAS is successful, through isolationist polices, in sheltering its employees from other-outside comparison, it still needs to contend with employees’ past experiences and internal company comparisons. Admittedly, general perception of equality is a major factor in SAS’s tremendous retention rate, but for those few want-to-be superstars it’s a major deterrent to joining the firm. This is evident in the interviewee who stated “I want to have performance that permits me to do whatever I want.

When I walk down the hall, I want to feel like ‘I’m the man.” Who wouldn’t want their stellar performance to lead to more money, autonomy, recognition and better future opportunities? At SAS this potential innovator was quickly ushered out the door. For good or bad, SAS is built around a sense of equality and homogeneity, even if these terms are relative and somewhat reminiscent of an Orwellian Society, where all are equal, but some are just more equal than others. To protect its successful egalitarian culture, SAS would do better to create (like many other have) a separate off-campus R&D offshoot. With a distinct culture and a more equitable compensation structure, this entity can compete for innovative talent.

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