Case Study – SAS Institute

1 Mar

The anti-Nordstrom

Case Study HR6 from the Graduate School of Business at Stanford University asks us to review SAS Institute’s need to recruit a talented work force in order to build and maintain intellectual capital.

Could it, and should it, maintain its unique approach to pay and practices, and could it reasonably expect to thrive?

To answer that question, we need to determine if SAS succeeded because of its management practices. Or is its success simply due to being in the right place at the right time?

While the former certainly plays a role, I think there’s a bigger reason for the company’s success, and the reason WHY its management practices exist in the first place: It’s privately held.

Its need to please no one but its relatively few owners meant it could create a “benevolent dictator” such as Jim Goodnight who then creates benevolent employee policies and practices. With an internal locus of control, the company can eschew long-term planning and create a truly customer-driven development process. Its licensing structure, which forces the company to work to KEEP customers yet trades off margins in the short term for greater market penetration, would be less successful in a company focused on the drive for quarterly earnings. Although SAS doesn’t have a long-term planning function — wisely, since its industry changes so rapidly — the company certainly takes a long-term view in how it treats employees and their contributions to its success.

SAS has no grand policies about how to treat employees, just four basis principles, one of which emphasizes intrinsic motivation. The company aims to “deemphasize financial incentives as source of motivation.”

It’s really the anti-Nordstrom: even its salespeople are not commissioned. According to SAS leadership, sales commissions do not encourage an orientation toward taking care of the customer or building long-term relationships. Its HR leader commented “People are constantly finding holes in incentive plans.” Yes, no kidding. Just look at Nordstrom!

Does this kind of compensation system make it difficult to attract and retain talent? No – it eliminates the “sharks” and encourages people who really want to serve the company and its customers. A commission-oriented, extrinsic motivation structure means employees will move as soon as that motivation looks better somewhere else.

Can SAS succeed without the stock options common in Silicon Valley? Resoundingly yes. Everyone wants off the treadmill, to some degree. SAS counts on the “value of a return compounded annually” – getting its employees to stay for the long term. It’s a better guarantee for the employee than stock options, which are inherently risky. Yeah, you might get rich – but then again, you might not. Best of all, when SAS employees develop new ideas they will probably stay rather than forming their own startup, keeping intellectual capital within the company.

There’s no question that SAS will continue to thrive with these practices. In fact, they are thriving. In 2010, 12 years after the case study was published, SAS was named the No.-1 company on the Fortune 100 Best Companies to Work For 2010 list – after appearing on the list every year since its inception.

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2 Responses to “Case Study – SAS Institute”

  1. Ashley Jennings March 8, 2010 at 1:41 pm #

    Good article, Kate.

    • Kate Grey March 8, 2010 at 2:09 pm #

      Thanks Ashley. Your judgment means a lot. I appreciate it!

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