Executive exodus leaves Yahoo in a pickle

Voluntarily or not, it looks like Yahoo will be getting a lot less top-heavy.

The pioneering but troubled Internet company is headed for a reorganization that, combined with an exodus of top Yahoo executives, will in all likelihood put power in dramatically fewer hands.

A lean management structure can be good for building a nimble, responsive organization. The problem with that idea at Yahoo is that the company is losing many of the executives who have control over day-to-day operations.

Ash Patel

(Credit: Stephen Shankland/CNET News.com)

And in some cases, the departures spread multiple steps down the hierarchy, depriving Yahoo of talent to promote and of expertise to train any new arrivals. Major turnover on this scale can turn succession planning into improv theater.

It appears the executive departures and an imminent reorganization are inextricably linked. From our discussions with Yahoo insiders and people familiar with the matter, it appears some executives want to leave, which means some reorganization is inevitable, while others aren't happy with just how that reorg appears to be shaking out.

To recap our and others' coverage, here's where Yahoo's upper echelon appears headed. First, the exodus:

Last week, two executive vice presidents--Jeff Weiner of the network group, and Usama Fayyad of research and computing infrastructure--said they'd be leaving. A third EVP, Qi Lu, in charge of search and monetization, joined the list this week. Two senior vice presidents also are departing, Brad Garlinghouse of communication and communities, and Vish Makhijani of search.

Second, what comes next? The reorg, as we reported Thursday. Some details on the possibilities have emerged. President Sue Decker is leading the revamp, according to the Wall Street Journal and others.

Patel, Schneider ascendant
Ash Patel--one of the company's earliest engineers and a man who still enjoys talking with programmers--looks to be ascendant overall by leading a new Yahoo products group. That would include areas such as search, Yahoo Messenger, Flickr, and Yahoo Mail.

Currently, Patel is EVP of platforms and infrastructure. That may sound like a behind-the-scenes infrastructure job, but a big part of the company's turnaround plan is the Yahoo Open Strategy, a plan to expose Yahoo's inner workings to outside programmers, and that's Patel's domain.

But should an engineer run all of the products group? Kara Swisher at AllThingsD believes the prospect of reporting to Patel is what was behind the Garlinghouse and Makhijani disgruntlement.

We're also hearing word of a regional organization for other areas, and Swisher reports that Hilary Schneider will oversee the U.S. operations involving advertising and media. She's currently EVP of global partner solutions, where she signs up display advertisers among other things. In the new order, she'll be Patel's peer and will report to Decker.

As for the other regions, Toby Coppel will run Europe, Rose Tsou will run Asia, and Keith Nilsson will run emerging markets, Swisher said.

CTO Ari Balogh will absorb some of Lu's engineering team, Swisher also said. One source we spoke to wasn't optimistic about that arena, believing that Yahoo needs a technology leader who's a young Turk rather than someone from the old guard--VeriSign in Balogh's case.

Hilary Schneider

(Credit: Stephen Shankland/CNET News.com)

A fresh start?
It's apparent from assorted insiders that there's worry about Yahoo brain drain.

But would that necessarily be a bad thing?

Yahoo remains a powerful Internet property, but much of the initiative has shifted to Google when it comes to online innovation. Google found a way to make search ads immensely profitable, is expanding aggressively into many traditional portal activities such as e-mail, and is pushing cloud computing technology with Google Apps.

So, for all the current executives' accomplishments, Yahoo has yet to match Google's overall ascent. Perhaps it's a good time for fresh faces. Corporate turmoil, like war, can quickly promote a captain into a colonel.

Freshness will go only so far, though: the two at the top, CEO Jerry Yang and Decker, are committed to Yahoo "for the long haul," I hear.

I'm not convinced the pair's abilities are in a dramatically different league from most CEOs, but they are suffering under an unusually intense spotlight. Yahoo's bruising battle with Microsoft, replaced now with a bruising battle with billionaire activist investor Carl Icahn, exposed Yahoo vulnerabilities and simultaneously gave shareholders a taste of Yahoo stock above $29.

Even though Icahn was trying to push the now seemingly doomed Microsoft acquisition, he hasn't gone away. He's expected to propose an alternative board of directors soon in anticipation of the company's August 1 shareholder meeting.

CNET News.com Editor in Chief Dan Farber believes Wall Street will effectively oust Yang and that Decker is the likely successor. I'm not willing to make that pronouncement yet, but certainly one challenge at the company, putting several individually strong properties together into a coherent whole, is a task for high-level management.

Wall Street seems mildly pessimistic about the changes so far, though not as much as when the possibility of a Yahoo-Microsoft partnership fell off the table. The company's stock gradually slid over the week from about $23 to about $22. What it does after the reorg and Carl Icahn could determine Yang's fate.

[benjaminstraight]

I guess every company needs a shake up now and then.