PROBLEM-SOLVING APPLICATION CASE (PSAC-)

Changing the Culture at Yahoo! Inc.

You might call Yahoo! the original Internet company. Starting in the mid-1990s by almost accidentally discovering the need for good search engines, Yahoo! became a wildly popular web portal whose valuation shot high during the creation of the dot-com bubble. But over the years Yahoo! lost its way—trying to be too many things to too many people. After a string of CEOs and failed attempts to halt a steady loss in value, Yahoo! tapped Marissa Mayer, somewhat famous as one of Google’s early hires, in July 2012. Her task? To lead the charge and help Yahoo! regain and fulfill its promise as a major player in Internet and mobile. For this case we will focus on Mayer’s challenges in transforming Yahoo! culture and business performance.

Wall Street: Happy Response on the street has continued to be positive. As of this writing, Yahoo! has seen its stock price rise by over 100 percent. Investors applaud Mayer and her plans—and they drove the stock even higher after revenue reports for the third quarter of 2013 exceeded expectation.⁹⁹

Industry Watchers: Hopeful When Yahoo! announced Mayer’s appointment, many industry watchers immediately had high hopes that she would help Yahoo! gain some Google  to drive netizen traffic. Rafe Needleman at CNET is representative of such opinion, when he set out what he saw as the top five issues at Yahoo!. Google and culture make his list several times in comparison to Yahoo!:

• Engineering Culture. “The best Google services are fast, functional, and continually tested and improved as time goes on.”

• Organizational Culture. Needleman quotes  Ismael, one critic of Yahoo!’s organizational structure: “On the Internet you need speed and you need to take risks. Yahoo! accidentally adopted a matrix organization structure that’s antithetical to both.” (Authors’ note: We discuss matrix organizational design in Chapter 15.)

• Killing Projects. Google “maintains an optimism about its direction even as it chops down its underperformers.”

• Long-Term Visions. Needleman suggests that Google can weather setbacks (as with Google’s attempts in social media) because it commits to a long-term vision.

• Culture of Experimentation. Google tries many things, from self-driving cars to eyeglasses that augment reality. Such pure research can pay off in unexpected ways. However, he notes Yahoo! doesn’t have Google’s fat wallet to fund such R&D.100 Yahoo!’s Long Problems with Focus From one point of view, all of Yahoo!’s challenges can be linked to a well-discussed lack of focus. In 2006 The New York Times published an article critical of Yahoo!,101 and in response Brad  house, then a Yahoo! senior vice president, wrote an internal memo published by The Wall Street Journal. We lack a focused, cohesive vision for our company. We want to do everything and be everything—to everyone. We’ve known this for years, talk about it incessantly, but do nothing to fundamentally address it. . . . I’ve heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.  house also notes the organizational result of this cultural dilemma: We are separated into silos that far too frequently don’t talk to each other. And when we do talk, it isn’t to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics.102 A succession of Yahoo! CEOs have tried to fix Yahoo! in this regard. How has Mayer fared? Mayer’s First-Year Report Card After her first year at Yahoo!, Forbes graded Mayer’s performance across its own set of categories:

• Advertising [Revenue]: D. Yahoo! was still struggling with reversing declines in ad revenue while its competitors were increasing revenue.

• Earnings: C. Revenues were flat in 2012 and declined in the first part of 2013. (This was prior to a bump in the third quarter of 2013.)

• Products: B–. Forbes liked the increase in decisions to kill old products (like ) and bring new products to market.

• Acquisitions: B. Forbes called out the acquisition of , among others.

• Morale: B1. Forbes noted that former employees were returning and job applications were way up.

An OB View of Mayer’s Performance From an OB perspective, looking at Mayer’s first 16 months, we can note the following achievements. Mayer has:

• Opened up communications and transparency including frequent internal and public announcements, bolstered internally with a Friday FYI “ask anything” session with employees.¹⁰³

• Used PR to leverage her (perhaps enhanced) legend of achievement at Google to inspire investors and the troops at Yahoo!.

• Removed some business-only executives and replaced them with tech- and product-savvy employees. • Restored Yahoo! as an employer of choice.¹⁰⁴

• Energized Yahoo! engineers into optimism about the future.¹⁰⁵

• Made the tough change in telecommuting policy to help make Yahoo! more productive. (See discussion below.)

• Addressed Yahoo!’s lack of a social community (and outflanked Google) by purchasing Tumblr.106 About That Telecommuting Decision, Other Bumps in the Road You have already read about Mayer’s decision to ban telecommuting for most employees in Chapter 2’s Problem Solving Application on Yahoo! (see page 77). We can now reconsider this controversial decision in the context of the need to change Yahoo!’s comfortable and staid culture. Here’s Forbes magazine on the topic: Whether you agree with Mayer’s decision or not, she needed to do something. She is facing what some would say are significant challenges at Yahoo!, which is considered stodgy and lethargic in comparison to its competitors. To combat that perception, she is searching for innovative ways to make magic happen—always a tough spot for leaders under siege.¹⁰⁷

Mayer’s decisions will continue to generate controversy, from a fashion shoot in Vogue magazine to the teleconferencing decision to reengineering the e-mail structure.¹⁰⁸

Early in 2014 Mayer fired her hand-picked COO based on lackluster sales.109 While bumps in the road are to be expected, the true test will be how well Yahoo! stays on course and makes corrections. As an example, following the decision on telecommuting, Mayer reclaimed some lost support among employees when she significantly expanded parental leave benefits.¹¹⁰

The decision was announced in May 2013, the month before the telecommuting policy took effect. Apply the 3-Stop Problem-