Xto Energy and Devon Energy

XTO Energy and Devon Energy

Milestone #3

Tom Bolger

David Huckabay

Anthony Johnson

Andy Leach

XTO ENERGY INC.

Company Background

XTO Energy Inc. is a premier domestic natural gas and oil producer engaged in the acquisition, exploitation and development of quality, long-lived gas and oil properties. The Company, whose predecessor companies were established in 1986, completed its initial public offering in May 1993. Its properties and activities are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska and Louisiana.

Competitive Environment

XTO operates in the lower-cap oil and gas business. They compete directly with larger independent companies like Devon Energy, Anadarko, and Apache. XTO's main focus is acquiring established, long-lived properties, which are low in risk, and apply the best technology possible to maximize production.

Structure

Based on interviews with management, we found that XTO's management style encourages innovation. Employees are encouraged to ask for forgiveness and not permission. We've learned this semester through lecture and readings, that this management technique empowers employees and gives them the autonomy they like and the freedom to create. Employees that work under this type of management style are not faced with the possibility of losing

their jobs if they make a business decision that turns out to have negative consequences. Employees are free to innovate and take pragmatic risks. The company culture at XTO is described as laid back and relaxed. XTO believes that major oil and gas companies are unable to implement this type of culture due to their size. Since XTO is smaller, the company is able to deploy a much different policy from what the majors employ. As the company rapidly grows, this relaxed practice has become a concern for XTO's management. The company has recently grown so much that they've had to pull back slightly on the relaxed atmosphere. Management has been working with Human Resources to increase the amount of structure within the company. It remains to be seen if this policy will stifle company innovation.

XTO's main focus in managing people has been to adapt and adhere to employees' interests and skills. If an employee becomes unproductive or disinterested with her current job accountabilities, management will find alternatives for the employee first before termination. Management will transfer an employee to a business unit where she may have the best opportunity to excel, and where her skill set and interests will be most utilized - an alignment with the "best practices" concept studied in this course. Rather than lay off or fire good employees that aren't a good fit in a particular department, XTO looks to find a place for that employee that will create a win/win situation for the employer and employee. This also builds employee moral and may be attributed to the incredibly low employee turnover.

In researching XTO and its culture, it was interesting to read a post provided on the company's website from the President. It reads, "We've assembled a team of extremely talented, dedicated professionals. Our technical staff averages close to 20 years of experience and our turnover is exceptionally low. We advocate nurturing an "intellectual infrastructure" to apprentice young employees into top-tier performers." We found this statement as further support for the company's management strategy of maintaining the best employees in the business and supporting them to grow into top performers. We also found that XTO takes experienced people from competing companies, inserts them into the lower ranks of the company and moves them up through the chain of command. They believe it is best then to promate based on relative skill rather than seniority with the company. So, even though a person with outside experience may start with XTO at the bottom ranks, he has the opportunity to move up quickly through the ranks based on demonstrated skill with XTO.

Due to the nature of the laid-back management style at XTO, the management team is very flexible in managing personnel. Without strict personnel rules, management is easily able to adjust to the needs of its employees. XTO has been able to develop a solid team that adapts easily to the task at hand. In times where most companies would begin a hiring frenzy when things are busy, XTO is able to rely on its employees to work harder. On the other hand when industry cycles shift downward, XTO is not overly stocked with personnel. This style of personnel management assures its' employees that they will never loose their jobs due to cycles in the oil and gas industry. XTO has never had to institute a round of lay offs in the 15 year history of the company. We would have to stress that XTO would not be able to implement this type of management style without the commitment of its people. XTO has been extremely successful at retaining talent, and in turn it has benefited both the employee and XTO.

XTO strongly believes in promoting within. As in the case of Men's Warehouse, this policy builds trust with employees assuring internal personnel that they will not be passed over by external candidates. They can rest assured that hard work will be rewarded, in the form of promotions when the opportunities present themselves. This also allows XTO to reduce turnover. The fewer external candidates employed for key positions, they less likely they are exposed to turnover. We found that only one officer in the history of the company was brought in from outside of XTO. The fact that employees are also promoted based on skill set and not experience, eliminates the employees' fear of having to remain in one specific position or in a limited role for numerous years before they are even considered for a promotion. With the practice of promoting on skill rather than on seniority, XTO strives to avoid a situation where an extremely talented and skilled employee is overlooked by upper-management due to lack of tenure with the company. This management style also promotes input at all levels. If an employee has an innovative idea or skill to offer that is valuable to the company, there is an incentive to proactively voice the idea with a legitimate hope of promotion. Given