I’ve just finished reading a book about Yahoo! and its current CEO, Marissa Mayer. A fairly slim tome, I got through it in a day on my Kindle.
It’s well worth a look for anyone interesting in how technology companies work (or in this case, don’t) and also how large companies can go around changing the way they work.
Overall, I think if Mayer is given enough time, she can make Yahoo! relevant again. It might not be in the shape that perhaps many of its investors would like, but it could once again be innovative and delivering real value to its users.
More on Yahoo! and Mayer by John Naughton and Jason Calacanis.
Here are my big three takeaways from the book.
There’s no fix for not knowing why you exist
Yahoo!’s well documented problem is that nobody knows what it is for. It’s birth was as a straightforward directory for the emerging web, something that is just no longer needed. All it has is a homepage that still has lots – although a decreasing number – of visitors.
Strategically, this is a killer. Not having a commonly understood vision makes it incredibly hard for an organisation to move forward, particularly during a time of change.
Before Meyer’s appointment, Yahoo!’s board had a decision to make. Was it a media company or a product company? They plumped for the latter, and appointed Meyer, who had a great track record in product development at Google.
Great start, but was everyone bought into the vision of Yahoo! the product company? Did they have the stomach for the fact that it would take years to move the company forward in that direction?
Undoubtably this is the biggest challenge at Yahoo!, and indeed any other organisation that has a problem identifying its reason for existence.
Stack ranking – no matter what you call it – is a bad idea
On her arrival, Meyer faced a problem – Yahoo! was overstaffed and had a lot of people who weren’t performing. Her solution was to bring in a performance review system that she had experienced at Google, and was used in other tech companies.
Here’s how it works. A manager sorts everyone on their team into five different rankings – from totally smashing it, to utter failure every quarter. These rankings over a period of time decide how big someone’s bonus is, or whether they even keep their job.
Sounds pretty standard. But where stack rankings differ is that managers have to have a certain percentage of staff in each ranking. So even if everyone on your team meets, or even beats, their targets, some of them will still have to be rated as failing.
This kind of thing can work well in the short term, in that it quickly weeds out those who really aren’t performing. Soon though, it starts to breed resentment, mistrust and a lack of collaboration.
The case of Microsoft’s use of stack ranking is a good example of how it can create a poisonous corporate culture.
Pitting employees against each other, no matter what the short term gains, is not the way to build a healthy, collaborative environment to work in.
Hiring is hard – but you have to get it right
Probably Meyer’s biggest failure at Yahoo! (so far) was the disastrous appointment of Henrique De Castro as Chief Operating Officer.
He joined the company with a huge financial package and when it didn’t work out, it ended up costing Yahoo! over $100m (!) for little over a year’s work.
A huge, costly, mistake and perhaps what makes it so bad is not the money wasted, but the time. The point of hiring De Castro was that it would enable Mayer to focus on product while someone else took care of the day to day media and advertising business.
For any organisation, hiring the right people is just so important. The people in an organisation forge its culture to a massive extent, and the time wasted, expense and sheer pain of getting it wrong can be incredibly damaging.