Reorganizing Yahoo Case Study 12 The Professor

Case Details:


Case Code:BSTR258For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges


Corporate Restructuring
Case Length:24 Pages
Pub Date:2007
Teaching Note:Not Available
Industry:Internet and E-Commerce
Countries :US


The case examines Yahoo's organizational restructuring plans and the launch of its new search engine Panama. Though Yahoo was one of the few companies that survived the dotcom burst, it could not sustain its lead in the rapidly changing business environment and lost the first mover advantage it had in online advertising business. Yahoo acquired several companies in search technology and search related advertising business but failed to take advantage of those acquisitions and fell behind Google, which emerged as a major player in the Internet search market. Yahoo tried to cater to a wide segment of audience and this effort resulted in a highly cluttered home page.

By late 2006, Yahoo faced several problems which were widely reported in the media. In order to address these problems, Yahoo announced reorganization in December 2006 and within a few months it released 'Panama.'


» Understand the problems in the business model of Yahoo!

» Examine the strategies adopted by Yahoo! to revive its business operations

» Critically analyze the reorganization plan of Yahoo!



Yahoo!, Organizational Restructuring, Reorganization, Peanut Butter Manifesto, Panama, Online Advertising Market in US, Online Advertising Techniques, Internet Search Market, Google, Growth Strategy, Innovation, Click-through Rates, Unique Visitors, Banner Advertisements, Promotional Sponsorships, Overture,, Matrix Organization

Reorganizing Yahoo!- Next Page>>

Marissa Mayer faces a tough technical challenge in turning around Yahoo as a business. But critics say some of her biggest mistakes have been on the management side. A main issue, according to an excerpt from journalist Nicholas Carlson’s upcoming book on her tenure, is her adoption of stacked or forced ranking.

Mayer’s system—called Quarterly Performance Reviews or “QPRs,” and adapted from similar approaches at other tech companies—requires managers to rate their reports on meeting their goals from one (“misses”) to five (“greatly exceeds”), and for at least some percentage of them to be in the bottom buckets, regardless of whether any truly “missed,” according to Carlson’s account. Compensation, and even continued employment can depend on these scores. Mayer has repeatedly rejected this assertion, according to the account. (We reached out to Yahoo for comment and will update this when we get one.)

Carlson describes a company that’s seeing the theoretical and psychological problems with stack ranking in action. It has created increased competition, demotivated workers, hurt teamwork, and led to ratings based on arbitrary opinions instead of real performance differences. And even managers are miserable because they’re forced to give people ratings they don’t believe in.

Dissatisfaction came to a head when Mayer agreed to answer anonymous questions in a public meeting for the company’s employees. Here’s the most popular of the many that complained about the QPR process, as voted by employees:

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

And another response that received more than one thousand votes:

Based on my experience, I don’t feel like the process was done correctly nor was I treated fairly. My former manager did not provide feedback or guidance, other than to say that higher-ups decided the numbers and he had no input. Considering how important these ratings are, can we have a legitimate appeals process?”

Both sentiments reflect the core problem with stacked ranking. That human and team performance doesn’t always naturally fit in “buckets” or a curve.

Holding people accountable for their goals and performance is essential. And Yahoo has improved its culture, ability to retain employees, and desirability as an employer under Mayer.

But forcing a distribution ends up making it more arbitrary, rather than more rigorous.

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