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Retention success tied to money, but it's much more than salaries

Published on May 15, 2002
on TechRepublic.Com

When management discusses improving employee retention rates, the initial topic is often money-specifically, higher salaries and bonuses. That's partly valid, because money is a key element.

However, as SAS Institute, the largest privately held software company, can attest, retention efforts can be very effective if they focus on more ways to spend the money than just increasing salary levels. With its strategy to boost employee retention, the company has created a culture and programs that encourage and drive employee loyalty.

SAS earns high marks

The driving strategic force behind SAS Institute's approach is a people-centric attitude toward workers, explained Jeff Chambers, director of human resources.

"Our CEO [Jim Goodnight] would rather spend money on the employees than spend money on recruiters to find new employees," said Chambers. With this retention approach, SAS offers workers a range of benefits, including flexible work schedules, career growth opportunities, competitive wages, and fringe benefits, such as on-campus childcare and a gym.

While companies in Silicon Valley have historically averaged 20 to 30 percent annual attrition, and the national average for tech hovers around 16.5 percent, SAS Institute has an enviably low rate of attrition-4.6 percent in 2002 and 4.5 percent in 2001.

The company said retention program expenses, which it declined to share, are more than justified by the overall cost savings. According to Stanford University professor Jeffrey Pfeffer, a well-known authority on business management, SAS's low turnover efforts have saved the company $75 million each year, says Chambers.

Chambers also points out that the Cary, N.C., company believes that intellectual capital is its number one asset and, without it, SAS would not be enjoying its current sales-$1.13 billion in 2001.

"Our only assets are the people who drive out the gate every day," said Chambers.

Feeding the intellectual capital tiger

SAS keeps the intellectual motors running in several ways. The company develops CRM systems (used by 98 percent of Fortune 500 companies), data warehousing and analytic tools, financial and IT management packages, supplier relationship management suites, and applications that track organizational performance metrics. Roughly 25 percent of SAS's annual budget goes to research and development, giving employees plenty of opportunities to expand skill sets with the latest technology innovations.

"These folks are pushing the edge of the tech envelope every day," said Chambers, adding that SAS employs a domain knowledge expert philosophy. These internal experts are mentors who provide less experienced employees insight and guidance on growth opportunities.

A policy of intradepartmental mobility enhances employee skill building. SAS posts most of its open positions internally before advertising them to outsiders, and it doesn't provide specific stipulations, such as requiring employees to be on staff for a certain amount of time before being able to move around internally.

"We're not going to tell people how to direct their careers. Employees can leapfrog around the organization to pick up the skills they need," explained Chambers.

Most businesses frown on liberal internal transfer policies, but SAS's approach fits with its goal of retaining intellectual capital. "If you're going down the hall rather than down the street, we can still call on you to help us understand why you did what you did," said Chambers.

The same philosophy applies to employees resigning due to spousal job transfer, the most common reason employees leave. SAS's teleworking program allows the company to retain many of these workers, who would otherwise have had to leave the company. "If the spouse is relocating today, we can accommodate that," said Chambers. "A developer can code as well in Cary as they can in Boise, ID."

Instituting a great work environment

Along with job flexibility and opportunities for career growth, SAS has an array of employee perks that it claims contribute to the low attrition rate. Most employees have offices with doors, providing privacy and the ability to focus without the distractions common to cube farms. Break rooms on every floor make it easy for workers to step out, take a coffee break, and interact with colleagues.

SAS offered several unique perks long before dot coms brought them into vogue. On Mondays, SAS offers employees fresh fruit. On Wednesdays, the company supplies energy-boosting M&Ms to help employees get over the week's hump day.

"We are the largest corporate customer of M&Ms," said Chambers, who wasn't able to provide the company's annual M&M budget. "I don't know and I don't want to know," he said with a laugh.

Should an employee get sick (from eating too many M&Ms, for instance), he or she has access to on-site healthcare. To assist employees in staying well, the company also has a gym at the headquarters' campus. Chambers estimates that each year, 99 percent of the company accesses the gym, which sells discount tickets to movies and sporting events and offers access to tennis courts and a swimming pool.

The company subsidizes on-site daycare for 600 children of employees at the Cary campus. SAS also provides proportional subsidies for workers in other communities. Chambers estimates that 25 to 30 percent of the staff pays $300 a month on a pretax basis for full-time care of newborns to prekindergarteners-a service worth roughly $1,000 at market rate.

Flexibility extends to work hours

Liberal sick day policies, vacation allotments, and flexible work hours are part of the mix of workplace benefits. Every employee receives three weeks of vacation per year and four weeks after 10 years tenure. The company also closes during the week between Christmas and New Year's Day so employees can enjoy holidays with family and not feel pressured to work during that period.

The company tracks absenteeism but doesn't put a limit on sick days per year. A similar level of flexibility extends to work hours.

"It's perfectly acceptable for an employee to leave at 3:00 P.M. if their kid has a soccer game," said Chambers; managers trust employees will complete work assignments.

Chambers annually examines salary compensation levels to make sure the company is providing equitable pay. A company profit-sharing plan is in place, and it sometimes kicks in up to 15 percent of every employee's annual salary.

The impact of SAS's employee-friendly approach has not only lowered attrition rates, but it has garnered awards. For three consecutive years, SAS has ranked in the top three of Fortune magazine's lists of the 100 best companies to work for. In 2000 and 2001, Working Mother magazine ranked SAS among the 100 best companies for working mothers.

Chambers stressed that competitive salaries and perks aren't the key to SAS's low attrition and impressive awards.

"Employees looking for the biggest cash compensation and stock options aren't going to like it here," he said. People stay because of communication, respect, trust, work-life balance, and the ability to grow professionally, he added.

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david southgate
writing for living.