The News & Observer is blogging about an interview that SAS’s Jim Goodnight gave to Inc., in which he talks about instituting a hiring freeze to control costs. Here is an excerpt of the Q&A from the actual magazine interview.
You’ve weathered five recessions. How do you make it through tough times?
We have a very simple philosophy: Try to make sure the percentage revenue growth is higher than the percentage expense growth. It’s a magic formula.And how do you do that?
Right now, looking at our numbers, our expense growth is higher than our revenue growth. 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.
So, when expenses grow more than revenue, you put the brakes on expenses. Smart business. If only government would follow this simple but effective rule.