Note: The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.
RESEARCH TRIANGLE PARK, N.C. – Jim Goodnight, co-founder and chief executive officer at SAS, has imposed a hiring freeze at the world’s largest privately held software company.
In an interview with Inc. magazine, Goodnight says increasing expenses vs. revenues dictated his decision. A very grim photograph accompanying the interview helps set the mood.
“Right now, looking at our numbers, our expense growth is higher than our revenue growth,” Goodnight told Inc.’s Leigh Buchanan in a lengthy, probing interview.
“Anytime that happens, I put a freeze on hiring.
“We’re up by 4 percent hiring this year. We can’t sustain any more. I think we’ve got over 300 open positions right now. But what I do in this situation is, I just call HR and say, ‘Hey, don’t hire any more people.’
“I don’t care how many people we’re looking for. As a software company, 75 percent of our cost is people. So if I can control costs by not hiring, then it’s fairly easy to keep things in check.”
Currently observing its 35th year as a business, SAS has more than 12,000 employees worldwide.
When the most recent recession struck in 2008, Goodnight made the decision to not lay off any people. SAS has since then continued to grow, making profits as it has every year since the company’s founding more than 30 years ago while now topping $2 billion annually in revenues ($2.43 billion in 2010).
The Inc. interview, which is part of the magazine’s annual “Inc. 5000” listing that highlights privately held companies, offers a great deal of insight into how Goodnight thinks – from his priorities to regrets, such as not spending more time with his children.
But with the economic recovery tottering, Goodnight’s remarks about the hiring freeze and looking back at the steps he took to address the 2008-2009 recession will draw much interest.
Goodnight said in weathering that recession as well as others SAS maintained a “very simple philosophy: Try to make sure the percentage of revenue growth is higher than the percentage of expense growth. It’s a magic formula.”
Apparently that formula has already been implemented for 2011.
Remembering 2008 …
Goodnight recalled in grim detail how he responded to the 2008 crisis.
“It was like a cliff we went over. At the end of October 2008, new sales revenues were up 12.5 percent. In November and December, it almost stopped. We ended up by only 5.1 percent for the year. Everyone else was laying people off, so our people were really concerned. They were spending a lot of time talking amongst themselves about when layoffs were going to be announced here. So in January 2009, I did a webcast where I made it very clear that we weren’t going to lay off anyone, that we had sufficient funds to weather the storm. I did ask everyone to cut down on expenses. In the end, revenue rose about 2.2 percent that year. Expenses went up less than 1 percent. So we were pleased. It was a good thing to put everybody’s mind at ease.”
Read the full interview here. It’s well worth the investment of your time.
INC. also features SAS with a multi-media look inside the company. Find it here.
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