SAS Institute Case Analysis
1. Basic Business Model The business model of SAS is such that it in general it offers services coupled with software. Unlike typical firms in the industry it follows an annual software subscription model. Rather than sell its software, SAS leases to its customers – a strategy of immense importance in understanding the company’s relationship to its users. The fact that leases must be renewable annually creates a tremendous emphasis on customer satisfaction and quality in addition to stabilising its revenue.
Furthermore, its products are made based on what customers require and its developmental process is almost wholly customer driven. There is also a strong focus on employee satisfaction leading to customer retention and loyalty which SAS believes is directly linked to customer satisfaction. As seen by the SAS Institute, the leasing strategy helps keep the company sharp by ensuring that technological advances are driven solely by customer needs. 2. Capabilities and Core Competencies to execute its Business Model SAS possesses many capabilities and competencies to help execute its business model effectively.
These include flexibility from being a private company, an effective tacit leadership, unique corporate culture, strong brand, dedicated human capital and a considerable amount of financial resources which they efficiently allocate to certain projects whenever required. Being private, it is able to focus on the long term, continue to implement activities which have a strong focus on employee satisfaction and focus on slower but steady growth, something that would have most likely have not been possible had SAS been a public company.
With a strong leadership spearheaded by CEO Jim Goodnight, coupled with a strong brand, SAS is able to recruit and retain the key talent it requires to execute its business model. Having a corporate culture which is egalitarian and based on mutual trust and respect also plays a significant role in retaining talent and keeping employees loyal and happy. With a dedicated human capital striving to continue the company’s growth, SAS does not only come up with innovative products which increase its revenue, it also saves more than $100million due to its low attrition rate. Key Success Factors The key factors are its unconventional management philosophies, customer driven developmental process and it being a private company. Unlike other software companies that focus on monetary benefits, SAS’s management philosophy is mainly employee centred with the provision of many intangible benefits. It also believes in a long term view of all issues and does not actively strive to reach specified short term financial goals. These have led to a build up of a loyal and talented workforce and sustainable long term growth.
Moreover, its products are built on customer needs and customer feedback is taken very seriously. Using the Voice of the Customer (VOC) approach, customer opinions and suggestions are compiled and used to guide the development process. Being a private company with no debt has allowed Goodnight to have a long term view of issues and also implement the abovementioned policies to provide employee satisfaction and consequently customer satisfaction as well. . Building of Capabilities and Core Competencies via People Management Practices With attraction and retention of talent central to the company’s continuing success, it has developed certain principles in its recruitment, compensation, employee benefits and outsourcing policies. It has a stringent recruitment process to ensure the cultural fit of its new hires and thereafter gives its employees as much autonomy as possible.
It also actively promotes a work life balance and egalitarian culture with a promotion of non financial incentives, unlike other software firms thus creating a unique corporate culture, “One of cooperation, teamwork and mutual respect” . Moreover its flat organization structure, open door policy and informal work environment encourages communication at all levels of the organization.. This has also led to the development of a strong brand and increased employee satisfaction which not only enables the company to attract but also retain talent.
As shown in the diagram above, this leads to increased customer satisfaction and thus increasing revenues. All in all, these practices have helped promote the building of its capabilities and competencies to a large extent ?Is the SAS Model perfectly in balance? With SAS focussed on long term growth and emphasizing non monetary benefits for its employees, this model has been almost perfect for them. It is not fair to say that the model is perfectly in balance as a firm’s model is largely determined by its capabilities and core competencies. A public company for instance would not enjoy the flexibility that SAS enjoys.
It would not be able to provide such extensive employee benefits or focus on long term growth at the expense of short term profitability. No model can fit all organizations and be perfectly in balance and SAS is not different. For example, if its model is in balance, its attrition rate despite being low would be 0 and not 4%. 4. Difficulties in imitating SAS’s approach Being such a differentiated company compared to the rest of the industry in many aspects, it is difficult to duplicate SAS’s approach which is based heavily on intangible assets. “…intangible assets almost never create value by themselves.
They need to be combined with other assets. ” Hence, not only do these intangible assets such as SAS’s unique corporate culture take years to implement, it is also hard to imitate as the social complexity of a company’s culture is so ambiguous that it is almost impossible to find out how it works and combines with each other. ?Why few firms have tried to implement many of its People Management Practices Big companies with strong brands such as IBM could follow its stringent recruitment process but would not be able to imitate its unique culture as easily.
With most companies providing incentive compensations and stock options, it would not be easy to eliminate that and emphasize non-monetary incentives. This is especially so when public companies would have to go through its board just to provide employee benefits on a similar scale as SAS. It would also be unfeasible to bring outsourced functions back in-house as it would most certainly drive up labour costs and hence be blocked by a hard-nosed board. 5. Extent to which SAS is dependent on continuation of its CEO With a flat organization structure and having 27 direct reports, Goodnight also appears o be very much on top of all the details of the organization. Conversely, he appears to give his direct reports a clear direction of where SAS Institute is going on the product or technology front, and then let them run their own areas. Even though Goodnight is no longer directly involved with most decisions related to SAS’s work culture, his original vision has spawned a self-perpetuating culture, and “new” decision makers now share his vision, which governs the variety of philosophies, strategies, and practices adopted by the company since its inception.
Even though the culture looks so strong that it would survive a change in leadership, the new CEO would not only have to possess business leadership ability but also shares the same values as Goodnight so that SAS does not deviate from its current approach to its business and management. Hence, with no formal succession planning and still being heavily involved in almost all aspects of the organization, the SAS institute approach to its business and management is heavily dependent on Goodnight’s continuation. . Theory of Human Motivation and Behaviour underlying SAS’s Management Approach Maslow’s Needs Hierarchy seems to underlie SAS’s approach to people management. 7. Barriers in implementing knowledge of how SAS manages its people Firstly, a barrier in trying to implement freedom and autonomy coupled with possessing employees with intrinsic motivation is not only the lack of talent but finding talent with the required characteristics.
Secondly, extensive employee benefits such as a gym, day-care and the absence of commission-based pay for its account representatives would most likely not been possible if a company is public. Thirdly, a lack of explicit support and encouragement from top management would be another barrier as this is important for the promotion of an egalitarian culture based on trust and mutual respect on top of a family-friendly atmosphere. 8.
Major Challenges SAS may face in the next 5 years and its Impact Due to the changing dynamics of the software industry and increasing global competition, the company has to expand its talent pool which is already in shortage. Hence, there might be a need for the company to come out with new ways to attract talent. Practices such as providing more career advancement opportunities would be important in retaining them. Another challenge would be to develop current staff to meet future needs whilst nurturing its talent to fulfil their potential.
SAS might have to change its current unstructured approach where employees are free to come up with and develop their own projects and idea. A more structured approach to its job design could be considered to help nurture and develop staff. In general, SAS’s practices have been working for them and look to be able to continue to help them succeed. However, certain aspects could be improved in the future to overcome potential future people management problems such a new generation of workers demanding a different set of benefits than the one SAS currently offers. . Lessons drawn By paying extraordinary attention to its customers and employees, the company has differentiated itself from other companies in the competitive industry, and subsequently has created this “wheel of loyalty” which resulted in both employee and customer retention. For various HRM practices such as recruitment and selection, great care must be taken to ensure all practices are designed to fit the company’s business model and culture and at the same time also highlights its strengths, to promote a competitive advantage.
For instance, during recruitment, SAS took great care to hire people to ensure a cultural fit. In addition, its job design was such to fit into its philosophy of trust and autonomy between its employees. There should also be a strong relationship between management and employees to produce competitive advantage, hence SAS’s promotion of an egalitarian culture. ?Future of HRM in firms like SAS The future of HR should be one that is committed to working with line managers to improve SAS’s bottom line, create service value for customers and create workplace value for employees.
Leadership and management training should be initiated for senior managers while knowledge sharing within the HR function would be vital for SAS to move forward and expand globally. HR should also become a champion for employees while working to increase employee contributions, specifically commitment and ability to deliver results, be an agent for continuous transformation, and cultivating a culture that will improve SAS’s capacity for change.