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Saturday, January 31, 2015

Marissa Mayer and the Fight to Save Yahoo! by Nicholas Carlson | LibraryThing

Fascinating book.  We are about to begin another in the perennial and interminable battles for the presidency.  Several of the candidates claim extensive experience as business leaders so it's always interesting to read the inside stories of corporate business successes, failures, and often malfeasance.

I've read many books about Enron, the HP/Compaq merger problems, the 2008 housing crisis, etc. and much of the blame for those debacles can be blamed on individuals at the top.  What is it we consider success for a company?  Increased stock prices?Long-term viability? Best products and services? One common factor seems to be enormous compensation regardless of success or failure.

Marissa Mayer was lucky.  The initial investment in Alibabo was just paying off when she became CEO injecting huge amounts of capital into the struggling Yahoo whose founder, Yang, and Chairman of the Board Bostock had rejected a purchase of from Microsoft that would have paid stockholders a 62% premium!

One of the first things she did was to institute a management system used at Google (and at Enron, I might add.)  It involves employees coming up with quantifiable goals which they are then measured against annually and get a score.; "It was a forced curve. In general, only 75 percent of any group got in the top three buckets. Twenty-five percent of every team had to go into the bottom two—“ occasionally misses” and “misses.” The result: Teammates directly competed with each other to make sure that they weren’t a part of that 25 percent." Those with low scores get no raises and/or the axe.  A well-intended system, it's major flaw is (as Kurt Eichenwald noted in his article in Fortune) that employees work poorly in groups because since there are usually quotas for each performance category even a good employee might rank low in a team of high performers, someone has to. That means they tend to work poorly in groups and to undermine each other since they were ranked relative to their colleagues.  That's what happened at Enron as well.  It tends to destroy morale.

Yahoo is currently under attack by shareholder activists who argue that Mayer has not turned Yahoo around, nor has she met any of her original goals or timetables. Whether anyone could have is another story. Yahoo got famous by providing something people needed at the right time in the evolution of the Internet.  Reinventing oneself once a certain level of size is achieved is very difficult.  The Yahoo saga continues and may be fun to watch.

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