Kyle Roberts – Sam Wang – Christina Kao – Meghana Gaikwad – Joon Chang (13B)

SAS Case Study

In 1976, James Goodnight, John Sall, Anthony Barr, and Jane Helwig established SAS

Institute, a privately owned software company headquartered in Detroit, Michigan. SAS

prides itself in creating a utopian environment for its employees by offering unique

benefits such as an on site gym, cafeteria, preschool, medical care, casual dress code,

private offices, and flexible work hours. These benefits have led to a less than 4% turnover

rate for employees, which is well below the average for the competitive software industry.

SAS believes it is providing an environment that frees its employees from outside

distractions and will allow them to be as efficient and creative as possible. The focus is on

teamwork where everybody is an equal and nobody is a stand out. Individuals who desire

praise, promotion and status need not apply. However, when we take a closer look at the

culture being generated, concerns begin to surface. The environment SAS is creating could

actually be detrimental and less innovative without additional intrinsic and extrinsic

motivation and by changing the egalitarian workplace.

Intrinsic motivation is based solely on the interest or enjoyment of the task itself,

apart from any external incentives or forces. While the current environment at SAS is

designed to eliminate outside forces and allow the employee to focus on his work, this does

not meet the true definition of intrinsic motivation. We learn from the article “Motivating

Creativity in Organizations,” that intrinsic motivation is maximized when an employee

matches skills and experience with something they truly love to do. The article suggests

that managers need to hire people that have a spark or passion for their work to take full
 Kyle Roberts – Sam Wang – Christina Kao – Meghana Gaikwad – Joon Chang (13B)

advantage of the creative process. SAS recruits employees that have the skills and

experience, but it can be argued that the spark could be missing. A spark is something

usually found in top performers that excel and like to be awarded for excelling. We will

emphasize later in our analysis on how SAS actively discourages this type of behavior in

their organization to create a culture that is free of super stars. This is amplified when you

look at the balance of power in the corporation, which tends to stay with Mr. Goodnight

himself. Managers have very little power in this organization and this could effect how they

see value in their contributions. If they have very little input and their ideas are not

realized, the passion for their work will most definitely suffer.

In a research study involving college students and the art of making a collage, the

results determined that there was noticeable difference in the amount of creativity exuded

from individuals that perceived that an award was attainable upon completion of the

assignment versus those individuals who were simply paid to complete the job. By

completing a task as a means to an end creativity suffered, whereas creativity flourished

where interest was highest. There is a lack of this perceived award within SAS, which could

stifle the intrinsic motivation amongst its employees. Without performance reviews,

individual bonuses, or praise, the intrinsic motivation naturally found in its workers will

begin to diminish.

Extrinsic motivation is generated by receiving rewards such as money, fame,

recognition, status, and other privileges based on employee performance. SAS is flawed

because their philosophy lacks extrinsic motivation, which can negatively affect high

performers and innovative thinkers. SAS typically pays out a 5.5% to 8% bonus to all
 Kyle Roberts – Sam Wang – Christina Kao – Meghana Gaikwad – Joon Chang (13B)

employees based on company performance and not individual performance. Furthermore,

the sales staff’s compensation is 100% salary with no commission plan. No matter how well

or poorly they do their job, their extrinsic benefit remains the same. Is SAS really creating

the best environment for individuals to excel and innovate, or are they just creating a

complacent workplace with average workers?

SAS does offer several extrinsic benefits such as the 5-8% bonus, 15% 401K

contribution, on site gym, medical care, daycare and more. The issue here is that all these

benefits are offered upfront with no performance needed to attain them. These benefits are

an attractive perk at first, but after time they become expected. Instead of being a

motivator, they become part of the perceived base compensation for just showing up and

doing average work. SAS is incurring extra cost for what may be marginal production

increases compared to a more traditional incentive program. Furthermore, the company

bonus program is based on a shared sales target, which only rewards the performance of

the entire organization. With a shared goal there it is likely that people will underperform

and shirk responsibilities under the assumption the slack will be picked up elsewhere.

They will not work to their full potential costing SAS innovation, efficiency, and profits. SAS

Institute’s objective of providing workers the tools to do their job and then giving them the

freedom to accomplish it lacks the use of effective managerial tools like perceived external

incentives. Attainable extrinsic rewards play a valuable role in providing an employee

motivation in a task that they either do not enjoy, or their intrinsic motivation for the task

is not sufficient to meet the company goals.

Status plays an important role in motivating employees and encouraging a healthy

work environment. SAS operates on a theory of equality where everybody is considered

equal and achievement goes somewhat unnoticed. Goodnight himself is quoted as saying,

“All people are treated fairly and equally.” While the concept of an egalitarian culture may

seem favorable, the issue of fairness creates a motivational problem. Over performers or

super stars have no advantage in a company like this. The harder they work and the more

successful they are, the more they will feel under appreciated and ultimately their work

will begin to decline. In addition, SAS does not disclose and salary data in an effort to keep

the motivation away from money and status and more on team and equality. If everybody

is entitled to the same benefits, there will be no motivation to work beyond their own

intrinsic motivation, which is variable from employee to employee.

Lastly, the egalitarian culture at SAS inhibits career growth with its flat

organizational structure and lack of performance reviews. There is no motivation to

perform in hopes of achieving promotion or a raise. SAS states that most workers will have

3-4 careers in their lifetime and they would like all of them to be at SAS. They promote this

through lateral movement in the company, which limits the opportunity for advancement.

According to Glassdoor.com, a website where employees review and rate their current

employers, one of the repeated concerns is the inability to be promoted. As we know from

Maslow’s hierarchy of needs, people’s motivation will change through time based on a

change in needs. The longer they stay at SAS the more important their physiological needs

(money and security) will become. The lost opportunity to fulfill these needs will continue

to hamper motivation and results.

In conclusion, it is evident that SAS Institute will most likely, if not already have

some motivation issues, which will effect innovation and creativity. They do a solid job of

removing external obstacles with the benefits they provide employees, which allows

intrinsic motivation to occur effectively. What is lacking is an additional incentive plan

focused on external awards that are attainable based on individual performance. Combined

with the perks offered to all employees, an attractive bonus paid to those that perform

above and beyond will promote innovative behavior that will keep SAS competitive for the

future. The bonus needs to be structured in a way that assures that the behavior rewarded

is the behavior targeted by the company. Furthermore, SAS needs to provide recognition to

its employees in the form of status. This can be done as simply as recognizing a job well

done at company meetings or in a newsletter. These recommendations do not solve the

motivational issues stemming from lack of promotion in a flat organization, but it is a step

towards providing both financial and status oriented incentives in a company that is

burdened with complacency. In a competitive market like software, SAS can use these tools

more effectively to keep talented workers who want to perform and utilize the innovation

produced to remain a market leader.