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Changing the Culture at Yahoo!: Marissa Mayer's

Challenge
1.1 Case Details:
Case Code

1.2 Price:
HROB154

For delivery in electronic

Case Length

13 Pages

format: Rs. 400;

Period

2012

For delivery through courier

Organization

Yahoo!, Inc.

(within India): Rs. 400 + Rs.

Pub Date

2013

25 for Shipping & Handling

Teaching

Not Available

Charges

Note

1.3 Themes

Countries

Global

Industry

Information Technology Change Management/

Organizational Culture/
Strategic Human
Resource Management

1.4 Abstract:
This case is about the initiatives taken by Marissa Mayer at Yahoo, Inc.
after she joined as its CEO in the year 2012. Yahoo had been plagued with
problems and had lost its dominance in internet services. Yahoo's board
appointed Marissa, a former executive at Google, as the new CEO of Yahoo
and assigned her the task of reviving the fortunes of the company. As soon
as she took over as the CEO, Marissa started to focus on changing the
culture at Yahoo as a major strategy to turn around the company and make it
competitive again. Over the years, Yahoo had gained a notorious reputation

for being an organization with a bureaucratic culture which stifled innovation

and growth.
Marissa started a number of initiatives to make the organization more
democratic. She recruited many new people for key posts and aimed at
changing the culture at Yahoo. One of the important initiatives started by her
was the PB&J program which encouraged people to give suggestions on
making Yahoo the best place to work. Apart from the PB&J program, Marissa
also started initiatives aimed at reducing bureaucracy at Yahoo and
introducing better compensation structures. But analysts had mixed opinions
regarding the ability of the new initiatives to change the companys culture
in a short time. Some of them opined that it was very difficult to change
organizational culture in such a short span of time, particularly since the
company had witnessed a leadership crisis with successive CEOs. This case
is meant for MBA/MS students as a part of the Strategic Human Resource
Management/Organizational Behavior curriculum. It is also suitable for the
Strategic Management curriculum...

1.5 Issues:
Appreciate the importance of culture as a key organizational context for
strategic change and the long-term success of companies.
Understand the link between an organizations culture and business
strategy.
Analyze the reasons for the problems faced by Yahoo in the years before
Marissa Mayer joined as its CEO.
Discuss and debate whether the new steps taken by Marissa Mayer to
change the culture at Yahoo will help in reviving the fortunes of the company.
Analyze the effectiveness of the strategies followed by Marissa Mayer in
improving the performance of Yahoo.
Suggest the future strategies that should be followed by Marissa Mayer to
improve the fortunes of Yahoo.

1.6 Contents:
Page
No.
Introduction

Background Note

Fifth CEO in Five Years

Changing Culture at Yahoo

New Leadership for a New Culture

The PB&J Program

Other Proposed Initiatives

Looking Ahead

Exhibits

1.7 Key Words:

Organizational culture; Bureaucratic culture; Culture of innovation; Geek
creed; Strategy culture relationship; Strategic change management;
Leadership; Strategic human resource management; Innovation;
Organizational structure; Matrix structure; Talent management; 'Four Cs'
strategy to nurture talent; Process, Bureaucracy, and Jams or 'PB&J';
Performance measurement; Goal metrics; Yahoo;
Introduction
"The human element is central to bringing Yahoo back to its one-time spot
as a top consumer Internet company. My goals are simple: To execute faster,
hire top talent, and make Yahoo the absolute best place to work".

- Marissa Ann Mayer, CEO of Yahoo!, Inc. in October 2012.

"Overall, we think that Marissa Mayer's efforts to change the culture at
Yahoo! can provide long term benefit to the company. As a CEO she, by

herself, can only do so much. To ensure long term innovation, and relevance,
the company must foster a culture of innovation, something that Mayer
seems to be striving for."2
- Trefis , in September 2012
"[W]e are a little more optimistic in terms of what they could potentially
do, but by no means is this an overnight fix. This is something that likely will
be a few years in the making."3
- Ron Josey, analyst, Think Equity LLC (ThinkEquity), in September
2012
In an email sent to the employees of Yahoo! Inc. (Yahoo) on August 25,
2012, Marissa Ann Mayer (Marissa), the new CEO of Yahoo, unveiled a new
program called Process, Bureaucracy, and Jams (PB&J). The new initiative,
one of the many planned by Marissa since she had joined Yahoo, aimed to
remove the bureaucratic culture prevalent in the company. The initiative
encouraged the employees to give their suggestions on improving the work
environment at Yahoo. Suggestions and ideas given by the employees were
to be ranked by the other employees in the organization and the best of
them would be implemented by the management.
The new initiative was democratic and encouraged more participation from
Yahoo's employees in taking key decisions regarding the future of the
organization. Marissa had also implemented many other initiatives to boost
the morale of Yahoo's employees like giving free mobile phones and free
food, keeping the office lights on late in the night, etc.
Since the mid-2000s, Yahoo had been steadily losing its dominance in the
internet services space to new rivals and had not been able to introduce any
major innovations. Many analysts felt the organizational culture prevalent at

Yahoo was one of the major reasons for its failure to compete effectively with
its rivals. Yahoo followed a matrix organizational structure which made
decision making difficult, they said. Yahoo's board appointed Marissa, a
former senior executive at Google, Inc. (Google) , as the new CEO of Yahoo in
July 2012 based on a recommendation by the search committee appointed
by it. Marissa was the fifth CEO of Yahoo in as many years. Yahoo's board had
shown many of its former CEOs the door as they had failed to provide the
leadership needed to turn the company around. Marissa was given the
responsibility of reviving Yahoo's fortunes and making the organization
competitive again. As soon as she took over the reins of Yahoo, she started
to focus on changing the organizational culture at the company as a major
strategy to revive the company. She replaced many senior executives of the
organization to bring fresh perspectives into the organization. According to
Chris Sacca, Independent Venture Investor, "Yahoo finally has someone who
has both business acumen and geek cred at the helm. She stands for a work
hard/play hard, product- and engineering-driven culture, and Yahoo has been
missing that for years."

But opinions were divided on whether Marissa would actually be able to bring
about a change in the company's fortunes. While some analysts opined that
she might not be able to affect a change in the culture of an established
organization like Yahoo quickly, others felt that it might not be so difficult
with good commitment from the top management.

1.8 Background Note

Yahoo was founded by two PhD. students of Stanford University Jerry Yang
(Yang) and David Filo (Filo) in 1994 in Sunnyvale, California, USA. It was
initially started as 'Jerry and David's Guide to the World Wide Web (JDG),' a
website which acted as a directory of several other websites. Yang and Filo
started the website to cater to the needs of the people who wanted to go to

a single place and find websites related to diverse areas. Over time, JDG
became very popular and became the first choice of people browsing the
web to find sites intelligently. It helped people to discover useful, interesting,
and entertaining content on the Internet.
JDG was later renamed as Yahoo in 1994 and was positioned as a
customized database intended to serve different users. Yang and Filo
developed customized software to help users locate, identify, and edit
information available on the internet. Yahoo quickly became very popular
among internet users and it attracted a lot of media attention.
Yahoo was formally incorporated in March 1995 and started implementing a
business plan modeled on that of traditional media companies. Sequoia
Capital , a well-known venture capital firm, agreed to fund Yahoo in April
1995, with an initial investment of US$ 2 million. Yahoo generated its
revenues mainly from online advertisements, banner ads , and ad placement
fees, promotions, sponsorships, direct marketing , and merchandising. It also
generated revenues from monthly hosting fees and commissions on online
sales from its merchant partners. These included transaction fees generated
from the sale of merchandise on its site. In 1995, Yahoo appointed Timothy A.
Koogle (Koogle) as its CEO and strengthened its management team
significantly. Koogle was an engineering graduate from Stanford University
and had spent nine years in Motorola, Inc. (Motorola) before joining Yahoo.
His appointment led to the introduction of more innovations in Yahoo. Yahoo
became the first company to introduce an online navigational guide on the
Internet. It also started offering media content, communication, personalized
information, and commerce services on its website. In July 1996, Yahoo
launched My Yahoo!, a personalized web information service. This service
allowed users to create their personal profile and access information based
on their personal interests. Its new services such as Yahoo! Address Book,

Yahoo! Calendar, Yahoo! Briefcase, Yahoo! Phone Book, and Yahoo! Notepad
helped users to manage their personal information by providing services.
Yahoo raised US$ 33.8 million by selling 2.6 million shares through an IPO in
April 1996. The amount raised through the IPO was used to expand its
operations...

1.8.1

Excerpts

1.9 Fifth CEO in Five Years

In May 2012, Yahoo fired its CEO Scott Thomson (Scott) just four months
after his appointment. Scott was dismissed by Yahoo's board after it was
found that he had falsified his rsum by including a computer science
degree which he did not have. Scotts sudden ouster led to chaos in Yahoo
which had been facing a string of crises. Yahoo appointed its head for global
media business, Ross Levinsohn, as interim CEO till it found a new CEO.
Later, in July 2012, Yahoo's board appointed Marissa as its new CEO upon on
the recommendation of the CEO search committee appointed by it. Marissa
was the fifth CEO of Yahoo to head the organization in five years...

1.10

Changing Culture at Yahoo

Despite all the troubles that were plaguing Yahoo in 2012, it was one of the
major portals on the internet with 700 million visitors and many people still
used its services like email and search. But Yahoo was unable to come up
with appealing new products for its consumers in areas like social networking
and was lagging in other key growth areas like mobile internet. It was
steadily ceding advertising market share to its competitors like Google and
Facebook and was unable to increase its revenue...

1.11

New Leadership for a New Culture

As soon as Marissa took over as the CEO of Yahoo she set about the task of
reviving the company's fortunes. One of the key challenges before her was to
change the culture at Yahoo to make the company competitive again. She
replaced some senior executives with new people whom she perceived to be
more growth oriented. Marissa believed that a new and strong top
management team at Yahoo would help in bringing in fresh perspectives and
help in changing Yahoos bureaucratic culture. She appointed Ken Goldman
as the new CFO of Yahoo and Kathy Savitt as the new CMO (Chief Marketing
Officer)...

1.12

The PB&J Program

The key task assigned to Marissa was to make Yahoo competitive again
and to get it to effectively compete against companies like Google and
Microsoft. And one of the main hindrances to innovation at Yahoo that
analysts often cited was the notorious bureaucratic culture which grew
rooted at Yahoo over the years. Many talented senior engineers at Yahoo had
also left the company as it had not introduced any major innovation for many
years. Yahoo's existing customers too were visiting the site just to use its
older services like email and search which they had been using for a long
time...

1.13

Other Proposed Initiatives

Apart from the PB&J initiative, Marissa also planned to implement several
other initiatives to change the culture of the organization. She used a shared
email list called "dev random" to establishing connections with Yahoo's
programmers by engaging in regular email discussions with software
engineers who did not report to her. Similar to Google's "TGIF" meetings ,
she also instituted "FYI" meetings every Friday at Yahoo headquarters where

employees could ask her questions, announcements of new hires were

made, etc...

1.14

Looking Ahead

Marissa initiated other efforts to revive Yahoo's fortunes. She decided to go

back to the basics and start focusing on the company's core products like
search, mail, ads, etc. as well as focus more aggressively on mobile internet
in the future. Some analysts opined that it would not be difficult to change
the culture if there was good commitment from the top executives of the
organization. As Yahoo could still attract top notch talent like the executives
Marissa started to hire since she took over, they believed that these new
executives could bring new perspectives to the organization as they were
untouched by the prevalent culture at Yahoo...

1.15

Exhibits

Exhibit I: Movement of Yahoo's Share Price from January 2006 to January

2013
Exhibit II: Key Financials of Yahoo from 2007 to 2011 (In US$ Thousands)
Exhibit III: CEOs of Yahoo
Exhibit IV: Important Internet Services Offered by Yahoo
Exhibit V: Memo Announcing PB&J