Employee Attitudes and Turnover Are Issues atYahoo!

Marissa Mayer, former vice president of Google Product Search,left the company to become CEO of Yahoo! in October 2012. At thattime, Yahoo’s stock was selling for $15.74. In January 2016, it wasselling for $29.77, after reaching a high of $52.28 in 2014.Investors were not happy with the drop in revenue—and marketshare—from 2014 to 2016. Some felt the company’s strategies werelacking and that new leadership was needed. Hedge fund investorStarboard Value LP demanded that the board fireMayer.⁸¹

Let’s take a more detailed look at what happened at Yahoo!

According to a Dow Jones reporter, “Yahoo’s expenses have risenwhile revenue has declined in the three-and-a-half years sinceMayer took the reins. In the first nine months of 2015, operatingexpenses totaled $3.9 billion, up 20 percent from the same periodin 2014. During that same time, revenue excluding commissions paidto search partners dropped 4 percent to $3.09 billion.” Yahoo! alsohas been cutting costs via layoffs. The head count in 2016 was10,700, down from a peak of 14,000 before Mayerarrived.⁸²

It is estimated that 33 percent of the workforce left thecompany in 2015. A CNBC reporter noted that Mayer’s concern aboutbrain drain led her to approve “hefty retention packages—in somecases, millions of dollars—to persuade people to reject job offersfrom other companies. But those bonuses have had the side effectsof creating resentment among other Yahoo! employees who have stayedloyal and not sought jobs elsewhere.”⁸³

Even more troubling is the manner in which some of these layoffswere executed. In 2014, “managers called in a handful of employeeseach week and fired them,” recalled one reporter. “No one knew whowould be next, and the constant fear paralyzed the company,according to people who watched the process.” In March 2015, thesituation got worse. “Mayer told the staff at an all-hands meetingthat the bloodletting was finally over. Shortly thereafter, shechanged her mind and demanded more cuts.”⁸⁴

In January 2016, Mayer jokingly told employees at a companymeeting that “there are going to be no layoffs ‘this week.’”Insiders say these types of comments are eroding employee moraleand leading to the exodus of key employees.⁸⁵

Key human resource decisions and policies likely contributed topoor employee work attitudes and turnover. The first was thecompany’s decision that employees could no longer telecommute. Thehead of human resources at the time, Jackie Reses, said, “We needto be one Yahoo!, and that starts with physically being together.”She defended the decision by stating, “Some of the best decisionsand insights come from hallway and cafeteria discussion, meetingnew people, and impromptu team meetings.” Reses believed thattelecommuting hurt the company. “Speed and quality are oftensacrificed when we work from home,” she said.⁸⁶ But thedecision also created bad press for the company.

A reporter noted, “The new rule didn’t just frustrate Yahooemployees who were directly affected, it also set off a fair amountof debate and criticism on Twitter from entrepreneurs, tech companyemployees and journalists who cover the industry.”⁸⁷This in turn likely created a negative impact on Yahoo!’s abilityto recruit highly talented employees.

The second human resource decision was Mayer’s implementation ofthe quarterly performance review (QPR) system. This processallegedly led to the firings of more than 600 people in 2013. Thesystem works by first having managers rank their employees intofive categories, each with a quota: greatly exceeds expectations(10 percent of employees), exceeds (25 percent), achieves (50percent), occasionally misses (10 percent), and misses (5 percent).Two “misses” ratings in recent quarters can result in termination.Many managers see this system as a forced curve, though Mayercontends the rankings instead serve as guidelines.

Anonymous postings on an internal message board suggested thatmanagers did not agree with Mayer. Here is what one manager had tosay:

“I was forced to give an employee an occasionally misses, [and]was very uncomfortable with it. Now I have to have a discussionabout it when I have my QPR meetings. I feel so uncomfortablebecause in order to meet the bell curve, I have to tell theemployee that they missed when I truly don’t believe it to be thecase. I understand we want to weed out mis-hires/people not meetingtheir goals, but this practice is concerning. I don’t want to losethe person mentally. How do we justify?”⁸⁸

Other employees felt the system was vulnerable to human bias andwas not fairly applied across levels of management. Onecommented:

“Will the ‘occasionally misses’ classification apply to L2 andL3 execs also? At every goals meeting, we find Page 76senior staffwho missed even the 70 percent goals. Thus, by definition, theyshould be classified as ‘occasionally misses.’ Two suchclassifications, and that person should be let go, amiright? Howabout we set an example for the rest of the company and can a fewof the top execs who miss (or who sandbag their goals to make surethey ‘meet’)?”⁸⁹

Employees have become even more fearful of the process given thenumber of layoffs.

Sadly, employee morale does not appear to be improving. Surveysconducted by Glassdoor revealed that “only 34 percent of Yahoo!’scurrent employees foresee the company’s fortunes improving. Thatcompares to 61 percent at tanking, scandal-struck Twitter and 77percent at Google.”⁹⁰

Another issue that may be causing feelings of inequity involvesMayer’s compensation package. “Executive pay at Yahoo! isessentially based on Alibaba’s stock price,” which is outside hercontrol: Yahoo! has a 15 percent stake in Chinese web giantAlibaba, valued at $25.7 billion. “Of Mayer’s $365 million pay overfive years, only 3.3 percent will actually be affected by herperformance.”⁹¹ This policy goes against the commonmanagerial practice of paying people for their performance.

So where does this leave Mayer and Yahoo! as a whole? Broadlyspeaking, threats of layoffs continue. The company, which lost $4.4billion in the last quarter of 2015, announced it would lay off 15percent of its workforce in 2016.⁹² Under pressure frominvestors such as Starboard Value LP, Yahoo sold its core businessto Verizon Communications Inc. for $4.83 billion in 2016. The saleincluded Yahoo’s e-mail business, websites dedicated to news,finance, and sports; advertising tools; real estate; and somepatents. It does not include “Yahoo’s cash or its shares in AlibabaGroup and Yahoo Japan. After the deal closes, these assets willbecome a publicly traded investment company with a newname.”⁹³

APPY THE 3-STEP PROBLEM-SOLVING APPROACH TOOB

Step 1: Define the problem.

Step 2: Identify causes of the problem

Step 3: Make recommendations for solving theproblem. Consider whether you want to resolve it, solve it, ordissolve it, Which recommendation is desirable and feasible?