The Effect Of Innovative Benefits And Services

On Employee Retention Essay, Research Paper

WEBSTER UNIVERSITY

GRADUATE SCHOOL

THE EFFECT OF INNOVATIVE BENEFITS AND SERVICES ON

EMPLOYEE RETENTION AT SAS INSTITUTE, INC.

A paper presented to the

Graduate School of Webster University

in partial fulfillment of the requirements

for the degree of Master of Arts

July 26, 2000

Pope Airforce Base, NC

Abstract

Employee benefits programs are crucial to the recruitment and retention of employees in any industry. Effective programs enable employees to better cope with the demands of home and the workplace. These same policies can also contribute to lower employee turnover rates, retention of qualified employees, and motivation of workers. The computer industry has become the leader not only in technology and business, but also in the need for technically qualified employees. This personnel demand and the strength of the economy have created a job market in which skilled individuals are difficult to retain. SAS Institute Inc., based in Cary, NC has successfully created a corporate work environment that has significantly benefited the company, and placed SAS as one of the most desirable companies to work for in the US.

Table of Contents

1. Overview??????.?????????????????????.?Page 4, Paragraph 1

2. Demand for competent employees in today?s economy??????????..Page 4, Paragraph 2

3. How benefits and services falls fits in HR model?????????????Page 5, Paragraph 1-2

4. Human Resource department responsibilities

a. Recruitment????????????????????.?.????.Page 5, Paragraph 2

b. Retention????????????????..??Page 5, Paragraph 3-Page 6, Paragraph 3

c. Compensation???????????????????????..?.Page 6, Paragraph 4

d. Corporate Culture???????????????????????..Page 6, Paragraph 5

5. The SAS Institute:

a. Background?????????????????????.????..Page 7, Paragraph 1

b. Comparison of benefits study by Albertson?????????????.Page 7, Paragraph 2

6. SAS Benefits:

a. Child care facility??????????????????????….Page 8, Paragraph 2

b. Medical Clinic????????????????????????.Page 8, Paragraph 3

c. 35-hour work week??????????????????????.Page 9, Paragraph 1

d. Fitness facility????????????????????????Page 9, Paragraph 2

e. Cafeteria??????????????????????????..Page 9, Paragraph 3

f. Ergonomics?????????????????????????.Page 10, Paragraph 1

g. Vacation/sick days??????????????????????..Page 10, Paragraph 2

7. Comparison to similar companies???????????..??????…Page 11, Paragraph 4

8. SAS Awards and other recognition?????????????????…Page 12, Paragraph 2

List of Tables/Appendices

1. Table of company comparison???????????????????…Page 12

2. Data extract: Study of benefits and working conditions among manufacturers?APPENDIX A

In the computer industry, as in any industry, companies are always striving to

attract and retain skilled, loyal employees. In today?s thriving economy, this task has become a challenge for some companies. Skilled workers have become free agents who can invest their human capital in the companies of their choice. The Human Resources department is at the forefront of this challenge, tackling recruitment, retention, compensation, and contributing to corporate culture. SAS Institute Inc. is a software manufacturing company that has recently risen to the top in both business and financial success, and also in employee retention rates. SAS?s innovative approach to treatment of its employees has made the company an example of how an effective employee benefits program can reap rewards in many aspects of the business. The list of employee benefits and new-age perks is striking. A recent survey was conducted (see Appendix A), in which the benefits and working conditions among manufacturers were compared. SAS Institute provides better benefits at a significantly higher percentage than most companies, (Albertson, 2000). Although competitive companies offer similar benefits and services, SAS remains a leader, evidenced by the company?s low turnover rate. When comparing SAS Institute with Nortel Networks, IBM, Cisco, and Intel the SAS benefits are superior. The SAS Institute has received many awards in several areas, and has been named as one of the top companies to work for in the US (Branch, 1999).

The unemployment rate in the United States has reached the lowest level in nearly 11 years, roughly 5 percent since 1997 (Solomon, 1997). The proportion of people with jobs is at an all-time high, and the economy continues to grow. Economic growth continues to rise as inflation is remaining steady, and consumer confidence is high (Solomon, 1997). The ?Employment Outlook Survey? of 16,000 companies conducted by Manpower Inc. predicts that 30 percent will seek additional employees in the near future (Solomon, 1997). Because of this upward trend in the economy, for many businesses the biggest obstacle is in labor shortages. Now faced with continual changes in technology and development of new products, the demand for skilled employees in the computer industry is even more taxing. Workers possessing these shortage skills are so critically needed that they are able to ?write their own ticket.? A programmer may be hired by company A, only to be seduced over to company B by a list of perks and benefits. The labor market has metamorphosed into a virtual contest to keep employees.

Company benefits and services programs fall into the Compensation and Protection cycle of the Human Resource Development model, (Werther & Davis, 1996). Human Resource professionals have realized that the task of recruiting and retaining qualified employees could effectively determine the success or failure of the company. The Human Resource department of a company maintains an array of responsibilities, to include recruitment, retention, compensation, and to some extent, corporate culture.

The Human Resources department spearheads the recruitment and hiring of qualified individuals. This involves aggressive recruitment practices, especially when seeking technically skilled workers. Once hired, the department must ensure that these individuals are correctly placed or staffed, into positions that correspond to their skill level and abilities. Once these employees are in place, the focus shifts to retaining these individuals.

It is when business slows and downsizing is a threat that workers become concerned with their jobs. However, in today?s economy the employer is the one concerned with losing workers. These highly trained individuals have come to the company with a variety of human capital: their ability, behavior and energy (Davenport, 1999). Retention of these sought-after employees is crucial. Fitz-Enz identifies three costs of losing good employees as follows: employee-based costs, customer retention, and expenditure in marketing and sales to win new customers (Fitz-Enz, 1996).

Any time a company is forced to replace an attrited worker there is a cost. Efforts must be refocused on recruiting a replacement, orienting and training the individual. The company could miss valuable sales opportunities among other potential losses during this turnover.

Consumers can be fickle people. Some customers become accustomed to doing business with the same company representative. If the customer becomes annoyed with the new employee, he or she may take their business elsewhere. This results in profit loss for the company.

Finally, if a customer were lost, the time and money it could take to attract new customers would be a loss of profit for the company as well. Therefore, employees are a valuable asset to any company, and their retention is crucial.

Compensation of employees is a key element in the hiring and retention of quality workers. Compensation does not necessarily imply salary increases or health plans. According to Leonard, to draw loyalty from employees, a company should ?demonstrate that it cares about their development by exposing them to things that help them grow? (Leonard, 1999).

?Corporate culture? is a new buzzword echoing through the business and Human Resource arena. This term refers to the general working atmosphere of the company, whether it is hostile, friendly, family-oriented, or autocratic. In the recent past, employees were simply fortunate to have work, and employers were at times authoritarian. That environment has started to change. As a society we are changing. Employees are people who want quality of life, not just a paycheck.

The SAS Institute Inc. based in Cary, North Carolina is the world?s largest privately held software company with an estimated net worth of 871 million dollars (Branch, 1999). SAS provides high quality software to business and government agencies. Founded in 1976 by Dr. Jim Goodnight, CEO, SAS currently employs 7,000 (Kalgaard, 1999). SAS has more than 3.5 million software users at more than 31,000 customer sites in 110 countries (Maczka, 2000, paragraph 1), and revenue is expected to reach 1 billion dollars by the end of 2000 (Cole, 1999). SAS has long been the leading provider of statistical and data analysis software. Its users are fiercely loyal, even as the market exploded in recent years with new software (Stodder, 1997). To stay on the leading edge, CEO Jim Goodnight re-invests 33% of SAS?s revenue in research and development each year, 2.5 times the industry average (Anthes, 1997). What sets SAS apart from comparable software firms however, is the rate of retention. SAS has a 5.9% turnover rate, or roughly 130 people per year, which is drastically lower than the average 20% rate (Leonard, 1999), or 1000 people per year for a typical computer firm (Williams, 1999). According to Martinez, SAS?s high rate of retention is attributed to its exemplary labor relations and employee benefits program (Martinez, 1993).

In a recent study, random employees working in 1,116 manufacturing companies were surveyed to obtain information on benefits and working conditions, (Albertson, 2000). Among the findings, the average overall cost for fringe benefits for employees was between 29.3 to 29.7% of payroll, (Albertson, 2000). This percentage becomes more reasonable when considering the high cost involved in turnover rates.

SAS has developed many innovative programs that keep their demographically diverse employees happy and loyal. Among the programs are an on-site child-care facility, an on-site medical clinic, a 35-hour workweek, a full gym and recreation area, two gourmet cafeterias, and many other perks. According to David Russo, Human Resources Vice-President, SAS encourages people to ?have a life outside of work? (Willard, 1999)

In 1981, when SAS was still a small company, several female employees became pregnant. CEO, Jim Goodnight realized that he could not afford to lose these valuable workers. In the basement of the company?s second building, SAS began its first daycare center (Fishman, 2000). Now the company?s pre-school facility boasts a 700 child capacity, 10 times the number of employees when the daycare was first formed (Fishman, 2000). This benefit allows employees with families more flexibility with childcare, as the facility is located at the SAS complex. According to a recent survey, most such companies do not provide day care for employees, (Albertson, 2000). Parents are free to pick up their children for lunch, or to stop in to check on them. With 52 percent of employees being women, this program is appreciated.

SAS provides an on-site medical clinic staffed by 2 doctors and 6 nurse practitioners (Anthes, 1997). This facility is available to employees and their dependents, and may be selected as their primary care provider. The clinic offers not only medical care but nutrition assessment and education, physical therapy, massage or ?stress? therapy, psychological counseling and vaccinations as well (Cole, 1999). Nearly no other such companies provide this service, (Albertson, 2000). By providing this convenience to the employees, less time is spent traveling to doctors for appointments.

In today?s world of 60-hour workweeks, SAS is bucking the trend. The company does not demand long hours from employees, although the industry average is at least a 40 hour work week (Albertson, 2000). SAS enforces a 35-hour workweek (Cole, 1999). At 6:00 P.M. each evening, the gate to the Institute shuts and even full-time employees go home for the night. According to Cole, Goodnight discovered that the productivity curve drops radically after 5:00 P.M. (Cole, 1999). SAS employees are able to enjoy their evenings at home after picking up their children from the company?s daycare facility. Today?s generation of workers not only wants a terrific job, but a quality home life as well.

SAS employees have every reason to be physically fit. The company has a 36,000 square-foot on-site gym. Again, this is a rare service to industry employees (Albertson, 2000). The gym is furnished with cardio machines, a dance studio, a gym child-care facility, and an indoor lap pool. This facility is available to both employees and their dependants at no cost. To make it even easier to stay fit, SAS offers a free laundering service of gym clothes (Anthes, 1997). At the gym employees may purchase a low-fat snack or lunch at the food bar (Williams, 1999).

Unlike most such firms (Albertson, 2000), Two subsidized on-site cafeterias make it easy to have a good meal at SAS, where the average cost is $3.44 (Williams, 1999). The food service facilities just make enough to keep them open. The cafeterias also provide live piano music for diners (Anthes, 1997). Employees can check the day?s menu on their office computer (Williams, 1999). Because SAS has many international employees, the cafeterias offer ?theme days,? where recipes from various countries are prepared (Williams, 1999). The cafeterias save employees the money and hassle of going outside the workplace for lunch, and cut down on business lunches. Parents may pick their children up from the daycare facility and bring them to lunch at the cafeterias, which are equipped with highchairs (Fishman, 2000). It is estimated that over half of the Cary location employees eat lunch on the SAS premises (Williams, 1999).

When one SAS employee developed a carpal tunnel syndrome, the company realized that ergonomics was a concern. SAS?s focus on health and safety have brought about the staffing of two full-time ergonomics specialists. The team has no set budget and responds to problems as they arise (Mottl, 2000). The goal is for the workers to be comfortable on the job and to have safe surroundings. Offices in the Institute are equipped with ergonomic keyboards, footrests and adjustable chairs. SAS also believes that the workers? environment can either inspire or depress them. The company has built an on-site greenhouse to provide fresh flowers to offices (Mottl, 2000). An in-house artist paints pictures to hang in the 19 SAS buildings (Anthes, 1997).

CEO Jim Goodnight offers discounts on property in his subdivision as well as to memberships to his country club, and stays at his hotel. Every white-collar employee has a private office and the opportunity to create a flexible work schedule (Fishman, 2000). All workers receive three weeks of paid vacation each year with an extra week from Christmas to New Year?s Day. This contrasts greatly to the data found in Albertson?s 2000 survey, where it was discovered that the majority of companies require individuals be employed for at least one year to accrue two weeks of paid vacation, and the median number of paid holidays is nine annually (Albertson, 2000). There is no limit to sick days for SAS workers, although industry average is only 17% allowing paid sick leave (Albertson, 2000). Employees also receive a year-end bonus and profit sharing.

Other perks include an elder care program, an on-site ATM, a putting green, sky-lit meditation rooms, soccer fields, baseball diamonds and pool tables (Fishman, 2000). SAS Institute also recognizes domestic partners in unconventional relationships as dependents. SAS employees are sweetened a bit each week as well with free M&Ms on Wednesday, fresh fruit on Monday (Anthes, 1997), and free juice and soda always (Fishman, 2000).

SAS has been called the ?sanest place on the planet to work? (Cole, 1999). SAS has an infrastructure with little stress, treating employees as adults. Vice President of Human Resources, David Russo says ?policies and procedures generally are written for the 20 percent of people who are going to violate them, not the 80 percent that do right by them? (Cole, 1999). CEO and founder Goodnight?s philosophy is stated as such: ?It is important to the success of the organization that employees are treated with respect and care; that they are given interesting work to do; that they are paid a fair and competitive wage; and that they are allowed to participate in the fruits of their labor? (Cole, 1999).

Potential employees in technical fields go through ?SAS bootcamp? (Leonard, 1999). This program includes 8 weeks of training, team building and professional development to prepare graduates for jobs within the company.

SAS Institute is certainly not the only software company in the Research Triangle Park area in NC. Compared to neighboring companies such as Nortel Networks, IBM, and Cisco, SAS still stands ahead.

SAS Cisco IBM Nortel

Flexible work Schedule Flexible work schedule available and standard 35 hour work week Telecommuting in some areas. Work schedule dependent upon location Flexible work schedule available, if standard work week is met Dependent upon direct supervisor

Fitness facility on-site or local membership On-site facility, or membership to local facility branch offices Fitness center with professional staff. For employees only Fitness center Fitness program, does not include facility or membership

Child care Two on-site day care centers Referral service Referral service Referral service

On-site cafeteria Two on-site gourmet cafeterias Yes No No

Dry-cleaning service Yes Yes No No

Sick days Unlimited sick days, and health clinic on-site Can be earned with time in company Can be earned with time in company Can be earned with time in company

On-site medical clinic Yes No No No

Vacation days Three weeks paid vacation, as well as a week off for Christmas Nine paid holidays per year, vacation days can be earned with time Ten paid holidays per year, vacation days can be earned with time Unspecified number of days, dependent upon years with company

www.sas.com www.cisco.com www.ibm.com www.nortelnetworks.com

(Table 1)

Variety is another key to retaining employees. At the SAS institute, employees are able to easily move from one position to another within the company. According to Goodnight:

?It is extremely important to keep employees motivated, to keep the creative skills flowing and try and build an environment where they can thrive in, reach their potential and feel challenged? (Hein, 1999)

Most of the company?s savings come from not having to recruit and train new employees (Nash, 2000).

The SAS Institute has created a corporate culture worthy of praise. The people at SAS think of themselves as a community and not simply co-workers (Nash, 2000). The company was named in the top 10 of Fortune Magazine?s 1997, 1998 and 1999 ?100 Best Companies to Work for in America (Branch, 1999). It was also listed by Working Mother Magazine as one of the top 10 companies for working mothers (Cole, 1999). Business Week conducted a Work and Family survey in 1997 in which SAS ranked fourth (Anthes, 1997). These awards are testimony to the effect of creating a superior corporate culture.

The SAS Institute Inc. is a company that values employee health, well being, and personal and professional growth as the key to success. It is a workplace that respects individuals and encourages creativity, quality, and innovation. The philosophy is; ?If you treat employees as if they make a difference to the company, they will make a difference to the company. The corporate culture at SAS has built the business strong, attracted talented workers, retained those employees, and may well serve as a model for other companies to emulate.

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