To determine:
The type of management, whether hierarchical or a decentralized philosophy of control, at Range Resources.
Case summary:
Range Resources started drilling a vertical test in 2004 on the rocky area’s experts called Marcellus. In 2008, Range’s technical teams extracted 30 million cubic feet of natural gas per day and their production jumped to 400 million cubic feet of natural gas per day. Their future projection is to capture 1 billion cubic feet of natural gas per day.
Discovery of Marcellus led company to adopt 10-year growth outlook, based on high production. Range’s finance departments use various tools to monitor performance. Range uses simple balance sheet containing senior bank debt, 10-year subordinated notes and common equity as their finance strategy.
Range’s strategy to keep lid on the expenses involve every employee’s skin in the game. It provides equity to all its employees to keep check on the cost performance of the company.
Characters in the case:
Jeffrey Ventura, President and CEO of Range Resource.
Roger Manny, Range’s chief financial officer.
Explanation of Solution
Given Information:
Managers at Range resources say that maintaining a low-cost structure is the job of every employee, and they make cost control part of the company culture.
Low-cost structure and cost control are job of every employee and part of company culture. It is indicative of a decentralized philosophy of control. As Range Resources rewards their employees with equity ownership for performing best in their respective field by cutting cost. Providing equity ownership to employees creates unique bond with company, it helps employee perform better when everyone has skip in the game.
The whole cost cutting mechanism at Range Resources involves every employee creates an environment in which every employee is vigilant of the cost performance of the company.
Low-cost structure and cost control are job of every employee and part of company culture. It is indicative of a decentralized philosophy of control at Range Resources.
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Chapter P6 Solutions
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Understanding Management (MindTap Course List)ManagementISBN:9781305502215Author:Richard L. Daft, Dorothy MarcicPublisher:Cengage Learning