January 28, 2008 4:00 AM PST

At Yahoo, a need to hit refresh

If Yahoo could be placed on a psychiatrist's couch, the Internet giant would be told it was suffering from an identity crisis.

For nearly 10 years, Yahoo has delivered Web services to millions of people daily, and in the process made billions of dollars. But somewhere along the way, it has become mired in bureaucracy and an embarrassing inability to respond to more nimble (though considerably larger) Google. The question for Yahoo now: how do you reinvent a corporate culture and find a way to get an estimated 14,000 employees working on innovative projects once again?

More details of a plan executives hope will do exactly that should become public Tuesday. If early media reports are correct, Yahoo will announce plans to cut between 5 percent and 10 percent of its workforce when it releases fourth-quarter earnings.

"The biggest challenge Yahoo has is cultural. It's gotten away from the creative company it used to be--that's the difference between it and Google."
--Umesh Ramakrishnan, vice chairman, Corporate Technology Partners

Such a move will punctuate more than a year of internal wrangling at Yahoo, beginning with the departure of Chief Operating Officer Dan Rosensweig and entertainment head Lloyd Braun in December 2006, followed in June 2007 by CEO Terry Semel's exit. In the almost eight months since Yahoo co-founder Jerry Yang stepped in as chief executive and Sue Decker became president, the Sunnyvale, Calif., company hasn't managed to quell investor anxiety and stem losses in key search market share.

While the layoffs are a step to reduce expenses at the still-enviably profitable company, they won't solve the biggest problems at the Silicon Valley icon. In interviews with CNET News.com, Yahoo insiders, analysts, and others close to the company say changes in the executive suite have done little so far to change a company bogged down by ineffective group decision-making and a damaging aversion to taking risks.

"The biggest challenge Yahoo has is cultural," said Umesh Ramakrishnan, vice chairman of executive search firm Corporate Technology Partners. "It's gotten away from the creative company it used to be--that's the difference between it and Google. Yang needs to bring that culture back and bring innovation to the forefront."

In fairness, many Yahoo watchers do believe that cuts, which would be the company's first major paring since 2001, would be an opportunity to start fresh. Specifically, JP Morgan analyst Imran Khan said cutbacks would help Yahoo reach profitability targets, trim poor performing units like its social network Yahoo 360, and help reinvest in search, graphical ads, and partnerships.

Still, one source familiar with the situation said the proposed cuts don't weed out unproductive units or employees. Rather, Yang and Decker are likely to make cuts across the board, even within divisions that are performing well or are considered strategic imperatives, such as data services, according to the source.

"Instead of finding failing programs, they'll demoralize people hitting on all cylinders," the source said.

A culture is born
Yahoo, like Google, enjoyed a long period of growth and innovation during its first seven years. Under the direction of co-founders Yang and David Filo, and then-CEO Tim Koogle, it defined the term "portal." It launched hits like Web-based e-mail, instant chat, and Web search. In 2001, however, the dot-com bust hit the company hard, pushing its stock from a high of $475 in January 2000 to a low of $4 in September 2001.

Former Warner Bros. chief Terry Semel joined Yahoo in 2001 to turn the company around and build a media powerhouse with close Hollywood ties.

By many accounts, the Semel era transformed the company from a free-wheeling and innovative dot-com to a buttoned-down outfit where new products were subject to review by committee. Departments became responsible and rewarded for their own profits, much like many U.S. companies. At the time, the approach made sense and Yahoo saw dramatic financial improvements.

But those "big company" controls had a downside: they caused people to think about how to protect their own turf and put themselves--instead of the company--first, according to people familiar with Yahoo.

Of course, this sort of organization isn't unusual. Many mature organizations set up reward systems that ultimately pit one division against another--a structure that can prevent the exchange of ideas and teamwork and stall standout products, according to Raymond Miles, professor emeritus at UC Berkeley's Haas School of Business who recently published a paper called "The Ideology of Innovation" in the scholarly journal Strategic Organization.

"Now suddenly my boss is competing with your boss, because his department is less willing to share knowledge," Miles said. But "new ideas don't pop out of whole cloth of someone's head, they pop out of four or five people's heads."

CONTINUED: The vision factor…
Page 1 | 2 | 3

See more CNET content tagged:
Jerry Yang, Yahoo! Inc., vice chairman, Terry Semel, co-founder


Join the conversation!
Add your comment
Good Article
Thanks Stefanie. Nice to read an article on he importance of culture in an organization. It's often the most underestimated factor inhibiting corporate performance.
Posted by cparente (8 comments )
Reply Link Flag
Agreed, n/t ...belongs HERE! :8}
:8} Sorry
Posted by btljooz (401 comments )
Link Flag
Like ALL Large Coporations
that get too big too fast, mo$tly for the wrong reasons, Yahoo needs to remember the K.I.S.S. method.

What mostly helped Yahoo grow into what it is now is Simplicity.

Hey, Yahoo! As a user of many years, I give this advice: [b]K[/b]eep [b]I[/b]t [b]S[/b]hort & Sweet!!!

Knock off all the complication, go back and look at your roots, LEARN from your early Simplicity. ;)
Posted by btljooz (401 comments )
Reply Link Flag
Hire Koogle back
Hindsight is 20/20; it's clear that TK was responsible for the Yahoo magic. Yang and Filo may have founded the company, but Koogle came around early and his mark was (obviously) substantive. If he'll take the job the Board should hire back TK. Firing people -- unless they're in the executive suite that caused this mess -- seems like exactly the wrong thing to do. All they'll do is drive up the street, take jobs at Google, and implement all the things they would've had they been allowed to at Yahoo, one or two which will make Google gobs of money and allow it to pound Yahoo further into the ground.
Posted by michaelo1966 (159 comments )
Reply Link Flag
Yahoo's new direction
Millions of people now want to get on the web, to do videos, mashups, businesses, trades, look for jobs, make websites, blogs, this and that. And they don't have the patience to learn two dozen different interfaces or type the same stuff into two dozen different sites. Yahoo needs to become a do-it-all portal with a simple interface. You should even be able to connect your video camera to Yahoo, upload and edit the result, then put it in a templated site or blog or store or whatever, and auto-connect with friends and interested parties to notif or sell, using neural-net-like tags. But again, the tech must be hidden. The tags would be auto-generated by an artificial intelligence program, although techies could override. We also need more picture and video recognition, not just text. This is the next phase, and Yahoo could catch on to it, since they have such resources, although not quite organized and simplified.
Posted by cybervigilante (529 comments )
Reply Link Flag
When you sign up for a yahoo account, it asks you what city you were born in, and your date of birth. ANYONE who knows that information can use it to hack your account and reset your password. Anyone. Even better, yahoo does not allow you to change that information once you enter it. So if someone finds a way to hack your account this way, there is NOTHING you can do to stop them. You can't go back and create a fake birth city or date. I believe this flaw is big enough to receive national attention. I've sent Yahoo several emails and reported it to their security division, and they have done NOTHING.
Posted by nmcphers (261 comments )
Reply Link Flag
YHOO used to crash
when it had 80000 simultaneous users...anybody remember that "ap"? that told you how many people were using yahoo at the same time?
for a long time its operating profits came from bank interest on its war chest. now, it's a dinosaur.
the brand itself is aging, and lacks any means to refresh, without purging some of its dust, like yahoo personals, which is a serious money maker for it, but just another reason to use MySpace's less meat-rack formulas for opening a dating circle; find real ways build community that has site -stickiness (a 90s term) and get organisedly back into the vision of what a portal is.
the recent "web 2" makeover is jarring, and, by my tests, a ram hog.
overall, imho what yhoo reallly needs is to find out what people actuallly want, and then see if it can deliver it.
Posted by bridge solution (42 comments )
Reply Link Flag
Remove the bloat
I use Yahoo mail since it comes with my DSL account at AT&T. To use their web mail when away from home, I login from a login screen that takes me to the crowded Yahoo home page. I then have to click on a mail link there. This directs me to a page with more news links, where I have to again click another mail link to actually get to my inbox. Maybe the other web mail services would run me through the same gauntlet to generate them more page views, but it's a waste of my time. Fortunately I can use a mail client at home to read Yahoo mail for free as part of AT&T's package, otherwise I would be looking for another mail service.
Posted by jshale (37 comments )
Reply Link Flag
You can go to Yahoo email directly
Why are you logging in through the home page to check email?

You can access Yahoo email by going to <a class="jive-link-external" href="http://mail.yahoo.com" target="_newWindow">http://mail.yahoo.com</a>
Posted by iBuzz (330 comments )
Link Flag
Finance and Sports rock - don't touch those!
I guess everyone wants Yahoo to be Google. Whatever. I love
finance.yahoo.com and sports.yahoo.com just the way they are. I
use those everyday. Except for occasionally checking
news.yahoo.com, I don't usually use much more from them. But
those are great sites -- the best in their class in my opinion. I
hope their cuts don't affect anybody in those divisions.
Posted by iBuzz (330 comments )
Reply Link Flag
Their advertising shows their desparation
They use questionable animated advertising from time to time, things that animate across the page you're reading.... Things that make you run your spyware detectors, because you can't beleive a company of Yahoo's (former) prominence would do them... But no, it's not Spyware... It's Yahoo running Desparationware
Posted by johnxtampa (22 comments )
Reply Link Flag
Yahoo<---Obsolete, A brand still without a product
Maybe some Chinese company will come along and buy the name
and start selling stereos and steam irons or something with the
Yahoo brand. Yang and company need to just pull the plug and go
away. Yahoo just doesn't have anything unique to offer. After
being horribly mismanaged by the incompetent Terry "I make the
most money for doing nothing" Semel, Yahoo needs to die a quick
death and go away!
Posted by aaydogan (123 comments )
Reply Link Flag
Yahoo Can Change
I have been using Yahoo messenger for a long time, I think now atleast 5 years, and I like it enough never to have to move to use anything else.

Sure there is the MSN messenger, but so what, I like Yahoo better and got used to it.

YAhoo can still come around, nothing is too late, if they stop counting beans and start to concentrate on inovation (what got them started), stop hiring managers, lawyers and function bean counters and start hiring young fresh mind with ideas, pay them the Big bucks, cuz no laywer or business manager can come up with anything other than a report comparing this quarter to the prior.

There is only two types of people in this world: Leaders and Followers. Yahoo used to be a leader, now it's just catching up and following.

Get rid of all the fat pork that made you to follow, and start leading again, or you will be R.I.P. and I will have to switch messenger clients.
Posted by RompStar_420 (772 comments )
Reply Link Flag
Yahoo merge with EBAY!!!!
A merger with Ebay (first proposed back in 1999) could save Yahoo. Ebay gets millions of page hits daily that Yahoo could translate into more joint website visits. (e.g. imagine seeing a small box showing Ebay auctions closing soon on Yahoo.) It would make up for the marked failure of Yahoo Auctions. And would bolster Yahoo's marketplace against Google's Checkout Service...

Also Yahoo-Ebay-Skype-Paypal-Craigslist would be better under the same roof, and it would be a force to recon- with...

It would happen if Yahoo and Ebay would announce a merger.... I think that would be a better company.... It would certainly add some "umpph" for Yahoo's failed Yahoo Auctions and slightly lack luster performance of "Yahoo MarketPlace".... A Paypal/Yahoo Market Place could soooooo totally compete against Google's upstart "Google Checkout" online store service....
Posted by JCPayne (820 comments )
Reply Link Flag
maybe they could move
maybe yahoo would run better in china. didn't they help the communist gov't there hunt down some dissidents or something one time? they should all be on good terms.
Posted by galacticgufus (44 comments )
Reply Link Flag
I just found a flaw in the yahoo mail system where I can see other peoples inbox. I can't read their mail, but I do appear to be able to delete it. I have an account in yahoo mail classic with over 70,000 unread emails in it, and when I sort by date, the view changes and I am looking at what is obviously someone else's email. I can refresh to see a new account.
Posted by all106 (1 comment )
Reply Link Flag
In regard to your Yahoo writing,let my tell you ,that for about a week,I can not acces my inbox at Yahoo
I`been using for years,Idid everything that I was supouse to be able to regain the acces with no luck.
Is there a way to communicate directly to a costumer helper,by phone?. I d`nnt want to lose the addresses of so many friends.
Posted by avpg (1 comment )
Reply Link Flag

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot



RSS Feeds

Add headlines from CNET News to your homepage or feedreader.