Case Write Up

“In a world of free agency, signing bonuses and stock options, this a place where loyalty matters more than money.” This is the belief of The SAS Institute, the largest privately owned software company in the world. At the heart of SAS are its people. While some companies drive their employees through commissioned sales and a competitive environment, SAS stands in contrast as a company that takes pride in caring for their employees and giving them a workplace that is more egalitarian than authoritarian. While it can be argued that this structure has been successful at SAS, we believe that the organizational structure is flawed from a long term perspective and creates a climate that inhibits both motivation and innovation.
As a whole, SAS promotes innovation by endorsing different methods to motivate their employees. The core corporate belief is that satisfied employees will create satisfied customers. The company rewards innovation, encourages experimentation, and cares about employees’ personal needs and professional growth. Based on this corporate belief, SAS has created an environment to align employees’ personal needs with company’s business objectives.
SAS Institute’s fundamental desire is to “create a corporation where it is as much fun for the workers as for top management”.(O’Reilly P.106) All employees in the company are treated equally. Many practices are created to support this philosophy such as not having reserved parking spots for executives and offering private offices for every employee. Everyone within SAS is treated as a stakeholder and thus critical and valuable to the overall success of the company. David Russo, former head of HR at SAS believes “the best way to produce the best and get the best result is to behave as if the people who are creating those things for you are important to you individually.” In following this belief, SAS offers family and health-friendly benefits such as a child daycare program, employee fitness center, and on-site corporate health services. This was established based on the belief that the employees can be more productive with some of the normal workday stresses relieved. These examples show that SAS has a strong belief in and reliance on intrinsic and internal motivation. The company encourages employees to focus on what they love doing and doing what they love.
While the SAS Institute creates an environment conducive to intrinsic motivation, in the business world this can be limiting. Extrinsic rewards can also be extremely effective. In the article, Organizational Behavior: Real Research for Real Managers it states, “Money can be a powerful incentive because money can be so many different things to different people.” When rewarding a job well done with a fair monetary reward, a person can then be free to spend in a way that most benefits their life. A music lover may buy a piano whereas a sports lover may purchase season tickets to see their favorite team play. However the reward is spent, the person receiving it is somehow increasing their quality of life, and the company benefits from their increased enthusiasm and eagerness to gain more rewards. A purely intrinsic approach to motivation is not conducive to long-term company growth. As stated in the article, Managing Incentives, “Organizations cannot relay solely on employees’ intrinsic rewards because that would mean relying solely on employees doing whatever they find most enjoyable at that moment.”
In regards to extrinsic rewards, the SAS Institute limits motivation is by not offering any investment in the company to its employees. This alternate type of monetary motivation through stock options, phantom stocks or profit sharing not only gives the illusion of creating future wealth for the employee, but also gives the worker a sense of true ownership in the corporation, thus giving them incentive to work harder and more efficiently.
Another way in which SAS’s procedures limit employee motivation is through its flat design model. Not only can flat organizations create issues in generating boundaries for assignments, but they also offer “fewer opportunities for moving up a career ladder than the old, tall organizational hierarchy,” as stated in the article The New Organization: Taking Action in the Era of Organizational Transformation. This lack of upward mobility can hinder employee motivation. Often a promotion structure can encourage people to work harder, and when a person is promoted, there is a trickle down effect of motivation. One of the strengths of the classic “old” model of organizations is that a formal hierarchy with clear lines of authority can be extremely motivating. With SAS’s flat organization structure, this does not exist, which can be frustrating for a top-performing employee who is striving to reach the next level in their career.
In lieu of upward mobility and monetary motivations, SAS prides itself on meeting all of the needs of its employees as an incentive for motivation. Human Resources manager, Dan Russo concludes “The point of the strategy is to make it impossible for people not to do their work.” In contrast to this, Abraham Maslow’s theory of need hierarchy hypothesizes that as soon as one type of need is satisfied, the one just above it in the hierarchy is activated. We believe that the company will not be able to continue meeting all of the changing needs of its employees on a long-term basis since meeting ones needs offers motivation only on a short term basis before another need arises. A company like the SAS Institute focuses so much on fulfilling needs and promoting intrinsic motivation that their business model cannot be sustainable. As mentioned in the case study, SAS “reeks of paternalism” and that the only reason that the model is still working is because it is run privately by two billionaires. This leads us to question whether the business model is sustainable long-term, past the tenure of James Goodnight.
We also determined that the business model of the company, though somewhat effective, is not conducive to innovation and motivation. SAS admittedly does not have a focused product strategy or engage in long-rang planning. This approach can lead to a confusing company culture and can also cause serious inefficiencies. Allocating too many resources to an idea that will ultimately never fit into its existing product line can waste substantial resources. We suggest that once someone creates an innovative idea, they should submit a proposal and present to a group that would decide on its merits and approve whether it moves forward. The lack of a competitive environment, such as commissions and performance recognition, can hinder motivation. Once SAS hires and trains the right employees, and those employees become accustomed to the generous benefits, how will the company keep them motivated, if not by monetary means? Creating opportunities to earn commissions and bonuses would be an effective way to foster and maintain productivity in departments ranging from sales to customer service, and would be consistent with its business strategy of high market share and revenue growth. For example, having a quarterly bonus for exemplary feedback on customer satisfaction surveys would be an effective way to continually motivate employees to perform at the highest level. SAS should also consider implementing a profit sharing program that would link employees’ financial interest to the company’s long-term success. This would be consistent with the company’s current “family” culture and encourage workers to go above the call of duty for the good of the company. Adding this to the current benefit package can be a way to satisfy employees who desire higher compensation. The company prides itself on treating all people fairly and equally. Having such a strong focus on a “we are all the same” mentality is consistent with the flawed Discrimination-and-Fairness paradigm – any diversity that may exist will get diluted and assimilated into the existing corporate culture. For example, at SAS in-house education courses are offered, but outside education is not encouraged or sponsored. Any diversification of the workforce will not be allowed to influence the work, either positively or negatively, which will eventually inhibit innovation. Operating in the competitive and complex environment of high technology and software development, companies need to be flexible and able to adjust quickly to changing market demands. The non-diversified infrastructure that SAS has created can hamper its ability to do so. SAS should adopt a philosophy geared toward integration. They already promote fairness, so they should assess their level of diversity, increase it if needed, and then internalize and capitalize on different perspectives. Based upon these observations of The SAS Institute, we believe that by implementing certain changes to the organization additional motivation would lead to increased innovation. We believe that SAS should bring about gradual changes to their company that should include opportunities for profit sharing, a more competitive compensation system that rewards top performers, and additional opportunities for career development. Furthermore, we suggest that SAS expands the diversity of it’s workforce to fuel additional innovation as a long term strategy for continued success in the software industry.