11622_yahoo Case Study

YAHOO! Sunnyvale, California. When Yahoo! co-founder Jerry Yang invited you to his house, you said, “I’m not taking the CEO job, so I hope you have good wine.” When Yang started talking about Yahoo!, it was a bit confusing, so you asked him to draw an organizational chart so you could follow along. As he drew, you thought, “That’s really the organization?” So you asked who makes key decisions about, for example, Yahoo!’s search function and engine. Yang started drawing arrows, lines crisscrossed all over, and you thought, “This is just like a Dilbert cartoon.” You couldn’t figure out who was in charge of what. “I got it,” you told him, “What Yahoo! needs is a manager.” But, you weren’t the first to figure that out. Several years earlier, Yahoo! senior executive Brad Garlinghouse wrote what came to be known as the “Peanut Butter Manifesto,” in which he said, “I’ve heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular. I hate peanut butter. We all should.” Garlinghouse went on to say that Yahoo! lacked “a focused, cohesive vision,” “clarity of ownership and accountability,” and “decisiveness.” He attributed many of those problems to the company’s structure, saying, “We are separated into silos that far too frequently don’t talk to each other. And when we do talk, it isn’t to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics. We now operate in an organizational structure—admittedly created with the best of intentions —that has become overly bureaucratic. For far too many employees, there is another person with dramatically similar and overlapping responsibilities. This slows us down and burdens the company with unnecessary costs.” In the end, Garlinghouse concluded, “The current business unit structure must go away,” and that “the smoothly spread peanut butter needs to turn into a deliberately sculpted strategy—that is narrowly focused.” This is not the first time that Yahoo! has had problems finding the right organizational structure. At one time, Yahoo! didn’t even have a direct sales unit! Speedy growth, organizational complexity and the fast-paced change of online business have made it difficult to properly structure the company. Indeed, Yahoo! just went through a reorganization less than a year ago in which heads of international markets were given more autonomy so their units could do a better job of appealing to customer preferences in different parts of the world. But complaints started immediately, as few in the company really understood who was responsible for what. Clay Moran, senior vice president and market research analyst for an investment firm, summed up skeptics’ views by saying, “We have seen no noticeable impact from recent restructurings.” With profits down 78 percent and a recent layoff of 5 percent of the company workforce, you wonder where you should start. Clearly, with so many different business units and widespread confusion under the current matrix structure, a new structure is inevitable. But, as you look at Yahoo!’s website, you wonder if a functional, customer, product, or geographic structure would work best, and why? Next, what steps can you take to instill ownership, accountability and decisiveness throughout, but still give the techies enough freedom to innovate and create? In other words, what tradeoff s and balance do you need to make in terms of centralization and decentralization? Finally, the lack of a cohesive vision appears to be at the center of Yahoo!’s organizational structure issues. Is Yahoo!, like Google, a search and Web advertising company? Is it a media company that draws 600 million visitors a year to its rich sources of news, financial information, and online communities? Or, is it a technology conglomerate that builds and delivers Web applications and services? Which should be Yahoo!’s cohesive vision, and what’s the right way to structure the company to support that vision? If you were the new CEO at Yahoo!, what would you do? Questions 1. For Yahoo!, would a functional, customer, product, or geographic structure work best, and why? 2. What steps can you take to instill ownership, accountability and decisiveness throughout, but still give the techies enough freedom to innovate and create? In other words, what tradeoff s and balance do you need to make in terms of centralization and decentralization?

3. Which should be Yahoo!’s cohesive vision, and what’s the right way to structure the company to support that vision?