Ian CasselKeymasterOfflineTopics: 113Replies: 40
For six years in a row, privately held Hilcorp Energy, has been named among the top 100 best places to work by Fortune magazine. It is the highest ranked oil and gas company by far on such lists. Founded in 1989, the company has over 1,800 employees and operates assets producing over 300,000 barrels of oil equivalent per day (boe/day).
1,160 employees were surveyed and 93% said the Hilcorp workplace was great:
So why do employees love Hilcorp Energy?
Everything the company does is designed to foster a sense of ownership among the employees, so that their goals are aligned with those of the company.
Jason Rebrook, President of Hilcorp, says, “A lot of good companies have tried this, but it’s hard to execute,” Rebrook said “…We want everyone around here thinking like owners.”
It’s all about unlocking the superpower of incentives:
Buy-In Incentive Plan: This unique long-term incentive program provides all 1,800 full-time employees the opportunity to build personal wealth over time by allowing them to participate in Hilcorp projects and as the projects start generating positive cash flow, the employees share in the return.
When Rebrook visits a project site, “some of those guys sitting there are invested in the field,” he said. “They want to hear from me, hear what’s going on and where we’re headed.”
That creates an extraordinary sense of alignment, and it even helps with safety — the employees succeed or fail with the company, so if an accident happens that hurts the bottom line, it cuts into profits for any employees invested in the project, Rebrook said.
“Rather than a few benefiting from everything, the whole company gets the benefit when good things happen,” Rebrook said. “When Hilcorp wins, we all win.”
All of that openness and alignment with its employees means the company can give them an enormous amount of autonomy, Rebrook said.
“If you’ve got a well down, you turn it on, you don’t need to call anybody,” Rebrook said. “I want you to own that well, figure out how to get it back on. Don’t wait for us in Houston to tell you.”
Greg Lalicker, Hilcorp CEO says, “We want it to be in everybody’s best interest that Hilcorp succeeds and, when we do succeed, that everybody shares in the rewards equitably. This alignment helps motivate everyone making the 10,000 little decisions to do the right thing.”
Bonus Program: Every employee’s annual bonus is aligned with Company’s goals – “When Hilcorp Wins, We all Win” – and bonus payout percentages are the same for all full-time employees. The target bonus is 30% with a stretch bonus of 60%. During the past five years, all employees have received an average of 36% of their base salary annually.
The bonus program is tied to company wide targets over a series of five-year periods, which incentives if Hilcorp achieves the goals.
From 2006 to 2011, for example, the target was to double the production rate from 40,000 boe/day to 80,000 boe/day, to double reserves from 125 million boe to 250 million boe, and to double the value of the business from $1 billion to $2 billion.
Greg Lalicker says, “When the 2011 goal was met, every employee got $50,000 to spend on a car—the same amount for everyone who was here the whole five years. Our 2011 to 2015 target was to reach 120,000 boe/day, 500 million boe, and $6 billion value, and the reward was $100,000 cash per employee. Now the latest target is 275,000 boe/day. The reward will be the cash equivalent of one boe for every day a person was employed at Hilcorp during those five years. Depending on prices, that will come out to $50,000 to $75,000 for anyone who was employed for the entire five years. Operations people like the idea that the first barrel they produce each day is theirs—as long as the company meets its targets.”
Hilcorp also pays a bonus linked to overall company performance – production rate, midstream income, reserves, and operating costs. The annual bonus payout is up to 60 percent of salary and is the same number for every employee—no team component, no individual component—one number for the entire organization.
This all sounds great but what about free loaders that don’t pull their weight?
Lalicker explains, “It is pretty simple to deal with: our people are expected to succeed in their job, and if they don’t, then we coach them and try to help them improve. If that doesn’t work, we look to see if they could succeed someplace else in the company. And if they don’t succeed there, then they are out.”
Does the individual freedom and autonomy come as a shock to new arrivals?
He continues, “It often takes about two years before new staff fully gets how the company works. It can be a bit of a shock. It’s hard for people to realize they have the freedom to do something until they see that people don’t get chewed out for making reasonable mistakes. New employees usually need to see us set the plan, create the bonus program, and actually pay out before they fully believe in the model. Once they get it, most of them like it—our turnover for staff who have been here more than two years is extremely low.”
In addition to the incentives above, the company also provides the following:
Talent Scout Referral Program: Employees are directly rewarded through our Talent Scout program. In the past two years, we have paid out over $150,000 to our employees! Employees receive $50 for any candidate interviewed and $2,500 for every candidate hired. The amount paid is grossed up so the referring employee realizes the full $2,500 award!
The Hilcorp Giving Program: The Company will establish a charitable trust of $2,500 to help employees support any U.S. based 501(c)(3) organization. Hilcorp also helps increase an employee’s giving power by providing on-going matching gifts up to $2,000 per year. Employees have donated more than $9 million to charities of their choice through this program.
Hilcorp Helping Hands: The Hilcorp Helping Hands (HHH) program was initially organized by employees in our Houston office after hurricanes devastated the homes of more than 60 co-workers in Louisiana. The program provided housing, food and clothing to impacted employees. HHH has since been formalized as a way to help Hilcorp employees who have encountered unusual, unexpected, long-term financial hardship. HHH is overseen by an employee committee comprised of representatives from each major division, structured to provide a voice for all types of our employees and is fully supported by our leadership team. This program is fully funded through employee cash donations and payroll deductions.
Hilcorp Cares (Chaplains): The Marketplace Chaplains USA program is a free, confidential service designed to offer help to employees and their families when they are in need. They have even officiated employee’s weddings! The non-denominational chaplains make regular visits to Hilcorp facilities, and they are also available on a 24-hour-a-day, 7-day-a-week basis through a toll-free telephone number.
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Sources:Kevin MartelliParticipantOfflineTopics: 0Replies: 3
Thanks, great post! it would be interesting to know how the value of the company is calculated (since employees are partially compensated based on company valuation). This is important since this metric would probably counterbalance the growth target metrics, which may lead to excessive / inefficient capex to achieve growth at any cost.
In US shale oil sector “growth at any cost” incentives have probably distorted the supply side – in fact I think US shale oil has been consistently losing on an aggregated basis >$20bn of negative FCF per year since 2011 or something – see also this interesting article by FT
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