In focused, investing in products that the customers

In the fast paced industry of software development SAS Institute has set itself apart by focusing on the future. Co-founder and CEO Jim Goodnight resisted taking the company public, instead spearheading SAS’ consistent growth into one of the largest privately owned companies in the world.1 The SAS Institute’s business model starts with a three-pronged strategy: help employees do their best work, make all managers responsible for sparking creativity, and engage customers as creative partners. These attributes have allowed SAS to achieve 28 straight years of revenue growth1-1, a low employee turnover rate, and high levels of commitment. The employees at SAS know they are valued by management and are given the resources to do their job, therefore they have higher levels of productivity. A study found that valued employees felt motivated and satisfied in their roles2-1. SAS also relies heavily on their customers for feedback. By being customer focused, investing in products that the customers want, and pursuing customer ideas they are able to obtain their 98% renewal rate1-2. Another key component of their business model is that they are a privately-owned company. There are only two people with equity in the company, John Sall and Jim Goodnight, with the latter having a majority two-thirds stake which enables them to dictate their own pursuits and objectives. In addition to that, they are better able to closely guard proprietary information such as new products, trade secrets, and financials.Lastly, SAS’ revenue stream comes from an annual licensing arrangement they have with their customers. For a fee, customers are able to use the software with free upgrades and direct access to customer service, which is typically the developer. SAS has a flat, informal organizational structure that enables them to execute their business model effectively. The top managers encourage an open door policy and bottom-up decision making to help enhance the best products along with providing world-class customer service. This results in employees providing more input and SAS making quicker decisions.One of SAS’s core competencies is to hire and retain top talent. High turnover can cost companies of their size millions of dollars in lost productivity. They retain top talent by emphasizing both intrinsic and extrinsic rewards. Oftentimes, the reward for a job well done is a complex project that they encourage employees to take the lead on. The recruiting process can take months as they ensure each candidate has the technical skills required, demonstrate adaptable behaviors, and are intrinsically motivated, however this rigorous process has long term benefits for the company. As mentioned in the article Managing for Creativity, “A company’s most important asset … is creative capital” 2. The comprehensive employee benefit structure previously resulted in less than 4% annual turnover 1. This saves $85 million a year, or just over 5.5% of their estimated revenue. 3 In an industry where turnover on the low end occurs every 2.02 year 10, it will be difficult to develop… The management at SAS promotes these capabilities and competencies first by removing many of the barriers that occur in everyday life. There is a 7,500 sq ft medical facility, gym, cafe, and child care onsite in addition to several other perks. These amenities are deliberately chosen in order to eliminate as many distractions as possible, saving them about $85 million a year.  This helps employees stay intellectually engaged, reduce stress, and increase their productivity. Management also provides little direction which instills a creative freedom for their employees. Employees are given a lot of autonomy and are held accountable for their individual and team work. What is important is that employees are constantly trying to better themselves and the company. Moving to different teams or departments within the company is also encouraged. This creates very knowledgeable, well-rounded employees who can adapt to many different situations. Furthermore this enhances communication and cross-functionality within the company. Management is expected to stay abreast to the technical nature of their jobs. Jim Goodnight, still writes code and other managers are very “hands-on” in their work. This leading by example approach makes management more respected and motivates employees to do their best. SAS’ style is inimitable because it is a combination of socially complex resources developed over 40 years of strategic decision making, recruitment and retention. SAS has been scaling their operation over years which has allowed them to avoid the overuse of resources and reduce the burden of implementations. Due to their decision to remain private and not be encumbered by  financial burdens or external stakeholders SAS placed themselves in a position that allowed the cultivating of a corporate culture driven by creativity. SAS has the freedom to spend their money as they see fit due to their private designation. Developing, marketing, and selling an initial product requires significant resources4 and SAS was able to do all of these without constraints. SAS re-investments  ?30% of their  annual revenue into R&D 7 which leads to more resources for the employees and opportunities to develop a superior product. The majority of software companies are located in metropolitan areas with high paced lifestyles, such as Silicon Valley, NYC, Washington DC11 while SAS is headquartered in Cary, NC. The southern laid-back culture of North Carolina fits SAS’s long term focus, with the added benefit of less competition for prospective employees due to the relative lack of technology related positions available in the region. At the same time they have made it a point to develop deep ties with the local universities and establish talent pipelines.  SAS demonstrates a high level of employee motivation, as demonstrated by the metrics of employee turnover and satisfaction. According to the equity theory, an employee’s level of exertion matches their perceived level of outcomes matches their inputs(text book reference). SaS has shown a high level of commitment to their employees by demonstrating many benefits that most companies do not offer. When the employees feel over-rewarded they are more likely to exert higher levels of motivation. Moreover, SaS goes above and beyond that of many companies by offering ‘perks’ that many other companies do not offer – such as dry cleaning, on-site daycare, on site medical facilities. The feeling of inequity by the company investing in the well-being of their employees adds to the employees overall positive a feeling towards the company, which in turn motivates the employees to exert more for SaS. The effect of a higher level of motivation results in a stronger positive relationship with job performance and organizational commitment.We recommend the that we incorporate a process of obtaining customer feedback which will make our customers feel more engaged while also  providing guidance on future software products to be developed. We also recommend empower employees to take responsibility on projects, with little direction from management. This will increase job autonomy and foster creativity among employees within the workplace. These foundations of SAS can be implemented by (assumed company name) and will help (assumed company name)’s employees retain high job satisfaction and lead to increased performance, resulting in positive growth for (assumed company name) in the future.


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