Organizational Challenges

For

Marissa Mayer, Yahoo!’s Newest CEO

Group 7 (John DiLouie, Ann Hoang, Wadeeha Jackson, Abdul Shaik)

February 23, 2013

Dr. Rabinowitz

Leadership and Managing Human Capital Term Paper

Abstract: Marissa Mayer was appointed the new CEO of Yahoo! in July 2012. This paper

explores the organizational challenges Marissa Mayer faces as the newly appointed CEO of

Yahoo!

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Introduction

Prosperity in a fast-paced technological economic landscape requires businesses to

recognize corporate culture, innovation and leadership development are ongoing processes that

have direct effects on profitability and revenue. Companies have put the brakes on aggressive

growth, are carefully monitoring costs, and are reducing spending on research and development

to ride out the economic recession. In such an environment, innovation and all the opportunities

that come with it are put on the back burner. As the global economy bounces back, businesses

are recognizing that a lack of innovation is a risk they simply cannot afford. Companies can no

longer depend on the brands and practices that have helped them well in the past to ensure their

future success in this global economy. Thus, businesses are making every effort to have

innovative approaches in place to adapt, do more with less, and create new products their

customers want, as well as products that customers do not even know they need. Yahoo! is no

exception. Yahoo! was once the world's most popular website. As recently as a few years ago, it

was still the center of the internet world. Yahoo! the giant web portal was the internet domain

people visited for everything from email, finance, news, weather. After three consecutive years

of declining sales, users churn, and a dreary financial quarter, Yahoo! is seeking help from

Marissa Mayer to lead the company forward, becoming more than just a stopover for users on

their way to more appealing and better content.

Marissa Mayer was appointed the new chief executive officer (CEO) of Yahoo! in July

2012. She is the youngest CEO of a Fortune 500 company. Mayer ranked 14th on the list of

America’s most powerful businesswoman, and she is one of four women who have reached the

top of America’s Fortune 500 companies in 2012 (Mayer & Sandberg, 2012). As more women

enter the workplace but remain absent from top positions, Mayer is at the center of the

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conversations about female giants of the industry. The business elites are closely monitoring her

to see how she will lead the troubled internet behemoth Yahoo! as she faces numerous

challenges in her new role of high chief executive turnover and lack of an effective business

model.

Marissa Mayer, Early Career

Mayer's initial introduction to Google was decidedly momentous. She recalls a recruiting

email arrived from a small search engine company. "I remember I’d told myself,' New emails

from recruiters — just hit delete.'" She did not because she had heard about Google from one of

her professors. Also, her own studies focused on the same areas Google wanted to explore. She

interviewed with Google even though she had already received job offers from Oracle, Carnegie

Mellon and McKinsey. Google had seven male engineer employees. Understanding that better

gender equality would make for a more robust organization, Google extended Mayer an offer to

join their organization. Mayer joined Google in June 1999 as the first female engineer and 20th

employee. She went on to create the design of Google's interface search engine and oversee the

advancement, coding, and launch of Gmail, Google Maps, iGoogle, Google Chrome, and Google

News. She profoundly influenced Google’s successes such as Google Earth, Books, Images and

more. In addition, Mayer created Google Doodle, occasionally transforming the homepage’s

logo into distinctive designs, celebrating memorable events, holidays and/or influential persons

around the world. In 2010, Mayer was named Vice President of Google’s locations and service

group. The location and service group included more than 1,000 product managers responsible

for managing Google local, street view and numerous other products. Throughout her thirteen

years tenure, she led the product management effort, during which Google search evolved from

hundreds of thousands to over a billion searches daily.

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In addition to her success at Google, Mayer acquired several patents in artificial

intelligence and interface design. Google takes enormous pride in its corporate culture. They

embrace collaboration, creativity, and encourage the renewal of ideas to engage in complex

technical challenges. They believe in transparency and open dialog. They also want to ensure

that company news reaches their employees first. Despite their rapid growth, Google still value

their roots as a startup and give their employees the autonomy to act on their ideas regardless of

position or function within the company. Google provides an environment where these talented

employees can have fulfilling and rewarding careers working on some of the leading challenges

in technology, and have a tremendous impact on the world. Google’s full-time employees are

equity holders, with significant collective employee ownership and are not represented by a labor

union.

Yahoo! Culture and Leadership

Founded in 1994 by David Filo and Jerry Yang, Yahoo! (the name Yahoo! is an acronym

for “Yet another Hierarchical Officious Oracle,") began as a hobby of categorizing internet lists

into subcategories, evolved into a global brand that has changed the way users correspond with

each other, find and access information and buy things. Yahoo! celebrated its first million-hit in

late 1999 to about 100 thousand unique visitors. With capital backing from venture capitalists

Yahoo! was able to launch a successful IPO in April 1996 with 49 employees and as the first

navigational guide to the web. Today, Yahoo! is a leading global internet company that offers a

comprehensive branded network of services, including Yahoo! Mail, Yahoo! Messenger, Yahoo!

Groups, Yahoo! Answers, and Flickr worldwide. Yahoo! generates revenue from ad displays,

searches and fees from these offerings. Currently Yahoo! competes with Facebook, Google and

Microsoft for online display advertising. Google’s share of all US searches exceeded 66.20% in

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January 2012 while Yahoo! its closest competitor had just 14.10%. Yahoo!’s share has been

steadily declining and in 2012 lost its second position to Microsoft‘s Bing at 15.20% (Kerr,

2012).

In recent years, Yahoo has experienced much turmoil at the executive level. Prior to

Mayer’s assuming her role as CEO, Yahoo! had a total of eight CEO’s within the past twelve

years. In 2012, Yahoo! CEO Scott Thompson announced the company’s biggest layoff of 2,000

employees. The cuts were in response to decreasing stock prices. Shortly after announcing the

layoffs, Scott Thompson was fired due to misrepresentation of his educational background. As a

result the controversy and unstable leadership structure, employee morale had a negative impact

on employee morale. Yahoo!’s inconsistent company strategy, not only creates turmoil within

the leadership structure; it creates uncertainty to their shareholders, employees and customer

base. As Shontell describes, “The cons of working for Yahoo: Too Many silo’s to work through;

you spend more time in meetings than doing actual work.” (Shontell, 2012).

It’s apparent that Yahoo! hasn’t managed change. The shift to move from a technology

based organization to a media giant, chartered an uncertain path for the organization. In order to

succeed at meeting such challenges, Mayer would need to facilitate a working environment of

idea creation through collaborative efforts. Yahoo! needs a radical transformation change that

includes providing a clear direction, innovative technology, strategy, culture, and task.

New Vision and Leadership for Yahoo!

In 2011, Yahoo! Employee Satisfaction Survey (YESS) provided a clear picture on how

Yahoo! employees viewed the corporate culture. Overall, Yahoo! employees did not have

confidence that senior management was capable of leading the company. As a result, 19% of the

employees surveyed indicated that they would look for better opportunities elsewhere. In

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particular, 21% of Yahoo!’s product division, where the majority of Yahoo!’s key talent resides,

surveyed that they did not want to continue working with the company (Swisher, 2011). Much of

the employee dissatisfaction came as a result of the firing of CEO Carol Bartz. Soon after Bratz

departure, the leadership at Yahoo! was much like a revolving door, with more than three CEO’s

assuming leadership within the past three years. Due to the unstable environment, Yahoo! has

experienced a systemic impact on the business as a whole, which aided in an unsatisfactory

working environment for its employees.

Many of Yahoo!’s misfortunes are not tied to culture, innovation, collaboration, identity

or any other organizational buzzword; they were simply the result of extremely poor

management decisions. Yahoo! purchased Broadcast.com for 5.7 billion, a company that had

never shown a profit, at a price that was over 50 times the company’s highest revenue. They

purchased Geocites for 3.57 billion and shut it down 10 years later. They paid CEO Terry Semel

(a media executive with no technology experience) over 500 million to be CEO for six years and

oversee the company’s decline and loss of market share to Google. Yahoo needed a CEO with

vision, a history of success and technological savvy – enter Marissa Mayer.

Marissa Mayer’s ambition and ability to tackle complex problems were attributes that

appealed to Yahoo! Within the past 10 years, Yahoo! has experienced a change in leadership

with little direction and focus. As a result, the company experienced a loss in key talent, revenue

and competitive edge. As Mayer enters Yahoo!’s revolving door of CEO’s, she is presented with

many challenges that will require her to approach transformational change with innovation and

foresight. During her 2012 meeting with Yahoo! employees, Mayer outlined her vision and

strategy for change by introducing “four C’s” (culture, company goals, calibration and

compensation). Mayer also concluded that Yahoo! needs to focus on moving forward and move

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past the old culture by focusing on two additional “C’s” which include “core competencies” and

eliminate the old “consensus culture”. As Tate describes, “culture + company + calibration +

compensation – consensus = a daily mobile routine of personalized core competencies increasing

users’ usage of talent-built, advertising-driven products” (Tate, 2012).

It is clear that Mayer intends to infuse some of Google’s cultural influences throughout

Yahoo!’s organization. Prior to Mayer’s transition to Yahoo!, the corporate culture resembled an

environment similar to many financial institutions. As Paul Graham writes in “What Happened

to Yahoo!”, “The Company felt prematurely old. Most technology companies eventually get

taken over by suits and middle managers. At Yahoo!, it felt as if they had deliberately

accelerated this process. They did not want to be a bunch of hackers. They wanted to be suits. A

media company should be run by suits” (Crunchbase, 2012). Corporate culture has a significant

impact on the accomplishment of a company. As described by Graham, the corporate culture at

Yahoo! resembled an environment similar to most financial institutions. The comparison of

“suits” vs. “hackers”, describes a culture that influences an environment of structure vs.

innovation. By promoting a culture that requires a consensus to move forward, management may

have missed the many opportunities to gain an edge on competitors such as, Google and

Facebook. Mayer’s vision to move the company outside of a consensus culture to a more shared-

power strategy approach, exhibits her design to engage all employees in a collaborative process

to change the culture at Yahoo! By actively involving employees in the decision making, goal,

and idea creation process, Mayer influences an environment that encourages ambitious ideas.

Cultivating a culture that supports and encourages employees to add value at all levels,

influences a fearless culture and ties the employee to the organization in ways that are

immeasurable. Mayer flourished in a similar environment at Google. In contrast to Yahoo!,

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Google corporate culture has been revered by many, and they encourage employees to share

ideas. As described in the Washington Post article, “Building a ‘Googley’ Workforce”, Google

employees are encouraged to suggest wild, ambitious ideas often (Goo, 2006). Employees that

are encouraged to participate in the process of corporate cultural change can increase the

likelihood for long-lasting internalized change.

Mayer recognizes that in order to move the Yahoo! forward, she will need to attract and

retain talent to execute her vision. The focus on company, calibration and compensation requires

management to hire innovative team players. Recruiting the “right” talent will attract individuals

from competitors such as; Google, Apple and Facebook. Hiring new talent will move Yahoo!

from its current stagnate state and promote an environment of new ideas. Mayer’s wants to

promote a collaborative environment where innovation is used to achieve a competitive edge. In

an email to employees in August 2012, Mayer announced a program called Process,

Bureaucracy, and Jams (PB&J). PB&J was created to influence a collaborative working

environment. Employees are encouraged to brainstorm with colleagues and come up with

innovative ideas to fix problems. As Mayer expressed in her email, “Redundant process and

policy, bureaucracy are the worst enemy to innovation and efficiency” (Carlson, 2012). By

facilitating an environment that encourages creativity, Mayer can improve employee satisfaction

and retention rates. Businesses such as Google, Apple and Facebook are known for cultivating a

corporate environment of innovative thinkers. In order for Yahoo! to gain a competitive edge,

Mayer will have to continue her efforts to build a corporate culture that encourages innovation.

Yahoo! Future and Position

Yahoo! is embarking on several new initiatives that have investors buzzing. The stock

has been rising based on decent fourth quarter numbers and positive response to Mayer’s

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investor calls (Guynn, 2012). As with every other internet company, the big push is mobile and

how to monetize mobile strategy. While they have no immediate solutions, Mayer is committing

almost half of her engineering staff to take Yahoo! mobile and make it a big player on users’

smartphones and tablets. She believes that Yahoo! already has the strengths and infrastructure to

move into having a large mobile presence. Sports, news, email, financial data and weather, the

type of data users are looking for, while mobile are already key components of the Yahoo! Portal

(Emerson, 2013). The key is making checking into Yahoo! a user’s “daily habit” (McKenzie,

2013). Beyond mobile, there are many other opportunities Yahoo! is pursuing for growth and

expansion. 75% of Yahoo!’s revenue comes from the America’s region (Emerson, 2013) so

international growth is both a challenge and an untapped resource. Based on her experience at

Google with smaller but highly successful buy-outs, Mayer also wants to increase acquisitions,

focusing on smaller deals and companies valued under 100 million (Guynn, October). This

would build on Yahoo! and Mayer’s recent efforts acquiring SnipIT (a Pinterest style news feed),

OnTheAir (video chat) and Stamped (Emerson, 2013) which is a promising start up based around

an iPhone app that lets people document and share recommendations of their favorite things.

(Taylor, 2012)

But one of the biggest reasons Mayer was brought on was to help Yahoo! regain its

former dominance in search. Yahoo! was once the biggest players in search but after Google’s

rise, it eventually outsourced its own search engine, partnering with Microsoft and Bing (Tate,

2013). It is one of the three areas of major improvement that Mayer has said is her focus (along

with email and homepage). Since she was once head of search at Google, Mayer is uniquely

qualified to take on her former company for a larger share of the lucrative share market,

especially in mobile. Yahoo! already has its foot in the door because its search is what powers

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searches conducted on Siri, Apple’s digital assistant on the iPhones and iPads. “Overall in

search, it’s a key area of investment for us,” Mayer said. “We need to invest in a lot of interface

improvements. All of the innovations in search are going to happen at the user interface level

moving forward and we need to invest in those features both on the desktop and on mobile, and I

think both ultimately will be key plays for us” (Tate, 2013).

All of Yahoo! new initiatives have been driven by Mayer’s oft-repeated statement, “daily

habit.” Daily Habit is a buzz word, focus and mission statement all rolled into one. It is the

answer to the question what is Yahoo!? Mayer has been dropping the phrase into all her

interviews and all the companies’ press releases. It very succinctly boils down the entire Yahoo!

strategy into two words. In its earliest incarnation, Yahoo! was the table of contents for the

internet, one of the first and best portals that guided people to content. Mayer sees a similar

challenge in people’s ability to find what they need on their mobile device. “We could provide a

feed of information that is ordered, a web ordered for you, and is also available on your mobile

phone” (McKenzie, 2013).

Yahoo!’s stock has risen in the last few months based on equal parts financial data and

revenue growth and confidence in the prior success, vision and optimism of their CEO Marissa

Mayer. In a press release coinciding with the release of its fourth quarter financials, Yahoo! CEO

Marissa Mayer stated, “In 2012, Yahoo! exhibited revenue growth for the first time in 4 years,

with revenue up 2 percent year-over-year. During the quarter, we made progress by growing our

executive team, signing key partnerships including those with NBC Sports and CBS Television,

and launching terrific mobile experiences for Yahoo! Mail and Flickr. At the same time, we

achieved tremendous internal transformation in the culture, energy and execution of the

company” (Mayer, 2013).

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Mayer must not only rescue the morale of her employees, she has to reach out to

Yahoo!’s customers who are aware of all the company’s troubles and have the same cynical

attitude as her workers. The key to regaining their customer base is go beyond merely driving to

create revenue as the suits before her have done but to have true passion and commitment

towards the product. The early consensus in the technology and business press is leaning towards

believing in Mayer’s approach. “The most important thing is to give end users something

valuable, inspiring and delightful that makes them want to come to Yahoo! every day.

(Fidelman, 2012)”

Conclusion

Every business is characterized by a diversification of challenges and strategic priorities,

each must determine how it will explain innovation – the type of value-added outcomes it needs

to innovate. Regardless of how innovation is defined, the success of innovation will come from

the organization’s ability to produce and promote ideas to increase the chance that one or more

of these ideas will have an enormous impact on the organization and the world. For example,

search engine for Google, tweets for Twitter, and iPhone/iPad devices for Apple. Organizations

are a social wonder that requires many people to generate and implement new ideas. It also

requires those individuals to interact, work together, build on one another’s viewpoint, think and

imagine. Innovation needs to be an organization standard that is strengthened by the

organizational culture. For many businesses, becoming more innovative requires nothing more

than a culture transformation (Smith & Hall, 2012). Leaders play a pivotal role in making this

happens.

As a successful, high-profile executive from Google, the pressure is on for Mayer to

apply the lessons she has learned with the internet search giant and exploit it in a new way to

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benefit Yahoo! Mayer will bring Google’s innovation and reputation for solving challenges with

simplistic solutions to Yahoo! Mayer needs to turn the confidence of the company around by

transforming Yahoo!’s organization’s culture, inspiring curiosity, encouraging employees to ask

“why” and “what ifs” and for thinking outside the box. Yahoo! has begun to create new and

exciting initiatives that have their stakeholders excited. Yahoo! must continue to innovate in

order to prosper in this fast-paced, ever-changing technological landscape. Yahoo! is making

every effort to acquire new innovation in place to adapt, do more with less, and come up with

wow products their customers want, as well as those they do not even know they need. As

commented by Mayer prior to the start of her new position “Yahoo!’s products will continue to

enhance our partnerships with advertisers, technology and media companies, while inspiring and

delighting our users. There is a lot to do and I can’t wait to get started” (King, R., 2012).

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