This LINN Energy LLC Metric Matters More Than You Think

Source: LINN Energy LLC (LINN Energy LLC LinnCo LLC).

As investors, we tend to get caught up in the numbers. We evaluate how much debt is on a balance sheet, and how much of a company's cash flow is being paid out in dividends. Those are all quantitative measures that we can use to compare one company to another. However, there's another side to investing that's much harder to quantify, and that's the quality of a company's culture. It's a measure that The Motley Fool is finding to be very important to long-term investors, which is why I want to take a closer look at how LINN Energy LLC scores on this metric.

Quality mattersThere are very few ways to quantitatively measure a company's culture, but one that's emerging as an excellent resource is Glassdoor.com. Now, we might be a little biased, as The Motley Fool has been named the Best Place to Work in America(for businesses with less than 1,000 employees) for the second straight year. That being said, there is a reason for this ranking: The company has put an emphasis on having an exceptional culture, because culture is proving to be a driving factor in long-term business success.

Source: LINN Energy LLC.

So, with that background let's look at how LINN Energy's culture stacks up. Currently, the company has a 3.5 star rating on glassdoor.com. However, that rating is based on just 15 reviews, which is an extremely limited sampling of the company's 1,600 employees. That being said, 85% of those current or former employees who reviewed the company said they would recommend working there to a friend, while 100% approve of the work of CEO Mark Ellis. That approval rating is important even though it's only based on 10 ratings, as it shows that those who work for him are willing to anonymously endorse him because they believe in his leadership abilities. For investors, that's huge since we want to see strong confidence in the CEO, especially when the industry is in a downturn -- his employees believe in his ability to navigate the company through any situation.

This also tells us that the people who work at LINN Energy want to be there because Ellis is a strong leader. That being said, by digging a bit deeper into the reviews, we can see that the company does have work to do: Not all of the reviews of the company were glowing. Some reviewers complained about the office politics or that the management plays favorites, and one former employee called it a police state. There were also a number of complaints about the IT department. All of which tell us that while employees approve of the company's leadership, that leadership seems to need to improve its culture if it wants to take the company to the next level and become one of the top energy companies in the country.

Peer reviewOverall, we see that LINN Energy ranks in the middle of the pack when it comes to its company culture. For example, its glassdoor.com rating is well below the top-rated oil company: Chevron's rating is 4.1 stars. Chevron scored high marks for taking care of its employees; its compensation and benefits scored well above average. Meanwhile, employees praised the company's culture, its work-life balance, and the autonomy given with challenging assignments.

The company's rating is also below that ofConocoPhillips , which has a 3.9 star rating. It also scored high marks for having a great work-life balance, it encouraged critical and creative thinking and offered upward mobility. What's important to note here is that LINN Energy's CEO, and a lot of other senior management, came from ConocoPhillips and/or Burlington Resources, which was acquired by Conoco, so one would think this culture would have carried over. Instead, some reviewers hinted that there's a bias toward former Burlington/Conoco employees, which, if true, could impair the company's ability to retain talented employees from companies or assets it acquires.

Investor takeawayCulture is becoming an important metric for investors because companies with strong cultures are turning out to be winning investments. Because of this trend, as investors, we'd like to see LINN Energy improve what appears to be a less than ideal culture from what we see on its glassdoor.com rating. By doing so, the company will be able to retain and attract even better employees who can take the company and its returns to a whole new level when oil prices normalize.

The article This LINN Energy LLC Metric Matters More Than You Think originally appeared on Fool.com.

Matt DiLallo owns shares of ConocoPhillips and Linn Energy, LLC. For anecdotal evidence that glassdoor ratings matter, ConocoPhillips has vastly outperformed LINN Energy in the years that I've been invested in both companies. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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