Case: Communication Competency
SAS Institute38
Jim Goodnight founded the SAS Institute in Cary, North Carolina, in 1976. It is probably the least-well-known, major privately owned software company in the world. In simplest terms, SAS writes software that makes it possible to gather and understand data, to sift through mountains of information in order to find patterns and meaning.
SAS-which stands for "statistical analysis software"- started out as a tool for statisticians. Goodnight originally developed it to analyze agricultural-research data in North Carolina. These days Marriott Hotels uses the software to manage a frequent-visitor program; Merck & Co. and Pfizer Inc. use it to develop new drugs; the U.S. government uses SAS to calculate the Consumer Price Index. The software is not cheap. A charge of $50,000 a year for 50 users is typical. All but 2 of the 100 largest U.S. public companies use it. It sales exceed $2.2 billion annually. The company employs more than 11,000 people worldwide. It has been consistently listed among Fortune magazine's "100 Best Companies to Work for in America." Goodnight believes "If you treat employees as if they make a difference to the company, they will make a difference to the company."
What is unique about SAS is not the software it creates but the unusual way in which it does business. The freedom and exuberance associated with the new economy has a dark side: Work is so demanding, so all-consuming, that is can become unsatisfying. In that context, SAS may be the world's sanest company. Why?
First, there's the mood of the place. SAS operates in a competitive arena full of buzzwords-"data mining," "knowledge management"-and builds cutting-edge products that set the industry standard. Yet the one word that employees universally use to describe the company's work environment is "relaxed."
Second, there's also the stability of the company. It is an article of faith in the software business that the only way to attract and keep talented employees is to offer them stock options, along with extraordinary salaries. SAS, a private company, offers no stock, and its salaries are no better than its competition. But SAS treats its employees so well in other areas-there is no limit on how many sick days they can take; they can even stay home to care of sick family members-that employees remain committed to the company. Its employee turnover rate is low and it has never had a layoff.
Third, there's the sense of balance between work and family life found at SAS. At a time when companies are trying to mix work and family, SAS has the largest on-site day-care operation in North Carolina. To encourage families to eat lunch together, the SAS cafeteria supplies baby seats and high chairs. To encourage families to eat dinner together, the company has adopted a seven-hour workday. Indeed, most people at SAS keep work hours that are far from typical of the new economy. They leave the office by 5 p.m.
The history of the company's benefits is revealing. The story begins when SAS was still a startup in 1976-a startup with a number of women working for it. "Our women employees were two or three years into their careers-at the top of their talent curve-and they started deciding to stay home and have kids," says Jennifer Mann, vice president of human resources. "We knew and they knew that they'd have to start from scratch if they stepped out. Jim said, 'We can't lose those people. We're too small a company.' So we started providing day care in the basement. We began with 4 or 5 kids; now we have 528 (including some who attend a nearby private facility)." SAS was by no means obligated to offer day care. It couldn't, however, afford to lose its female employees. Today 51 percent of SAS managers are women. A group at the company meets monthly to discuss proposed new benefits, evaluating them in the context of a three-part test: Would the benefit accord with SAS's culture? Would it serve a significant number of employees? And would it be cost accountable- that is, would its perceived value be at least as high as it cost? Every benefit has to pass all three tests. Moreover, Goodnight points out that it is not just the benefits that keep employees at SAS, but "it's the challenge of work."
The benefits build a foundation of loyalty that supports the bottom line. The payoff starts with turnover. A typical software company of SAS's size loses 1,000 employees per year. At SAS, the number lost is about 130-which translates into almost 900 employees per year whom SAS doesn't have to replace. The result is a huge reduction in expenses for recruiting candidates, for flying them in for interviews, and for moving new hires across the country, as well as a reduction in the amount of work time lost while jobs remain unfilled. Two consulting companies-Top Gun and Hewitt-have estimated that the cost of replacing a worker runs between 1 and 2.5 times the salary of the open job. The more sophisticated the job, the higher the cost. Given a factor of 1.5 and an average SAS salary of $50,000, the company arguably saves millions a year, compared with what its competitors spend to attract new employees.
The informal environment at SAS can be misleading. This is a company built on accountability. SAS is a decentralized company, but tracks key performance data closely. From his computer, Goodnight can look up detailed sales and performance information; he can track data on technical support calls, which are sorted by product and by timeto-resolution; he can monitor bug reports in new software, noting how quickly testers and developers are eliminating flaws in products headed for release. The sense of accountability also extends to documentation. Every SAS product manual includes the names of the developers and testers who created or updated the software. The sense of accountability is so ingrained and the lines of reporting are so simple that the company needs no formal organization chart. As it grows, SAS tends to get wider-spawning new divisions-rather than adding more layers of management. Indeed, the company is so brutally flat that on the Cary campus, many of the several thousand frontline employees who work there-from housekeepers to coders with Ph.D.s-are just two or three levels in the corporate hierarchy from Jim Goodnight
Larnell Lennon says that what surprised him most when he arrived at SAS-besides getting his own office-was how his manager spent his time. "My manager is doing what I'm doing," says Lennon. "She is in the trenches, writing code. Dr. Goodnight was once in the same group that I'm in. At my last job, my manager was just making sure that everything got done. Here, we all do that." Xan Gregg works in John Sall's group. Sall has plenty to say "about the details of how code is written," says Gregg. "That's unusual for an executive vice president. Usually managers are not very technical." Sall, an almost impossibly shy and unassuming billionaire, says that he sees himself primarily as "a statistician and a software developer-not a businessperson or a manager." Managers who understand the work that they oversee can make sure that details don't slide. At SAS, groups agree on deadlines, and managers understand what their group does. Unrealistically optimistic promises about timetables and completion dates are relatively rare.
Questions
1. Go to Fortune magazine, February 2, 2009, and turn to pages 64-65 or go to www.sas.com and search under the heading "SAS Family." Using the criteria on these pages, evaluate the SAS Institute. Do these criteria reveal why SAS consistently makes the list of "Best Companies to Work for in America"?
2. What is motivating Jim Goodnight?
3. Would you like to work for SAS? Why or why not?