Yahoo Layoffs: When the Light at the End of the Tunnel Is a Train

Rob Enderle

For Yahoo, which is currently under a proxy fight and trying to replace yet one more board, and with a CEO as yet untested in Yahoo's space (again), "troubled" best defines the company. As turnaround efforts go, the kind that Yahoo represents is the most difficult because a succession of CEOs have shifted the company so dramatically that it has lost much of its core brain trust. And while it is a competent news aggregator and often-preferred financial news site, it has struggled to please investors.


Yahoo has a new CEO and with all new CEOs you look at their first moves to assess whether they know what they are doing. Unfortunately, the Yahoo layoffs announced this week don't support a positive initial review.


Let's talk Yahoo and why the new CEO is beginning to look a lot like the old one.


Layoffs 101


Layoffs, a key but unfortunate tool in the basic CEO skill set, are generally considered to be the last resort of incompetent management with one exception: When a new executive comes in and they reflect on the prior administration's competence, at least initially. This is because layoffs are used to correct an imbalance of costs and revenues, but much like cutting off parts of your body, they come with an unknown cost and can simply replace a known problem with a new unknown one. For instance, IBM, which set the bar on how to do layoffs in the 1990s, accidentally cut critical resources and almost lost one of its most profitable lines as collateral damage.


If we were talking the human body, layoffs would be the most invasive kind of surgery, the kind that has a high probability of killing the patient. This is the reason you do them fast and deep. You don't want to do them anymore than you have to because layoffs can be more dangerous to the company than the problem you are trying to correct.


The other reason you do them fast and deep as a best practice is because you want the people left behind to get back to work. If you do them slow and shallow, a lot of your workers for an extended period of time will be in fear for their jobs and as both Maslow and Herzberg have written, that pretty much shuts them down as productive members of the company. So a slow and shallow layoff can have the same or more direct cost as a fast and deep one, but none of the benefits.


Using the human body metaphor: A layoff's purpose is to get rid of an internal cancer. You want to cut deep enough to be sure of getting all of the cancer so the body will heal. And you want the operation over fast because if it takes weeks the patent likely won't last through the first one.


The collateral damage to a long, shallow, slow layoff, which is what Yahoo appears to be executing, is productivity falls precipitously, you can't recruit high-quality workers (because they don't want to be laid off) and your most valuable workers (the ones who are left) mostly seek other jobs while you are executing the layoff.


The Vision Thing


Add to this the desperate need for a strong vision. Clearly Thompson, Yahoo's new CEO, is trying to turn Yahoo into something, but by being unable or unwilling to talk about what that vision is, he isn't able to get investors or employees focused on the future. Hope and future performance drive both employees and investors and executing a layoff without balancing hope or some kind of direction means that detractors have a field day articulating a strategy to fill the gap. Given Yahoo is in a proxy fight, this mistake alone could cost the board and the CEO their jobs. You learn this in politics. You don't give your opponent control of your message or they'll message you to extinction.


That is what is happening now.


Wrapping Up


I think the bigger problem these initial Yahoo moves showcase is that CEOs just don't get adequate training on how to do their jobs and so get paid a ton of money to learn on the job. That is an incredibly expensive education given they generally kill their companies and/or their careers in the process. If you are rebuilding a car, it helps if you understand how a car works and there is no way to rebuild a company if you don't understand both the company and the people you depend on to make it successful.


This initial layoff at Yahoo indicates that its new CEO is learning on the job and unless that changes, Scott Thompson will likely follow Carol Bartz into obscurity.

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