Marissa Mayer's changes at Yahoo!, 2012-2013

Here's an excerpt from an upcoming book about Mayer and the history of Yahoo! If this account is accurate, she made changes that are very similar to Google practices, but I guess that's the only other company she's worked for - so no big surprise.

• She tried to increase mgmt. transparency and communication, so she started a series of Friday afternoon townhalls called "FYIs" (Google's meetings are on Thursdays and called "TGIFs")
• The food and drink at Yahoo! are free and high quality (I believe they were not free in the past?)
• She implemented a goals-based quarterly performance review process ("QPRs", called "OKRs" at Google) with fixed %s of workers allocated to each ratings tier (and repeat low performers would be let go)

QPRs are the biggest source of employee complaints now. It's possible that the Yahoo! system is closer to Microsoft's (that was abandoned after Ballmer left, due to myriad problems and perverse incentives). 

• When FTEs are uniformly stack-ranked vs. immediate peers, the company risks punishing the "weakest" high performers on strong teams, and rewarding the "best" slackers on poor teams
• The best talent didn't want to work together (harder to get top rating), and focused on specific projects that had the best chance of making them look good
• Due to calibration (where higher managers could unilaterally change ratings for workers they barely knew so their teams would fit the target distribution), resentment and workplace politics increased - meaning less time spent on actual work
• The quarterly rankings left little room for error and set people up for disappointment: an FTE who was rated misses/misses/meets/meets may still get fired, even if (s)he was showing diligence and improvement, and an FTE who was rated exceeds/exceeds/meets/exceeds might not get promoted

Mayer earned some love for refusing carry out massive layoffs (~30-50% staff) that the Board and others were calling for (she did conduct some small layoffs and product sunsets). However, some commented on Glassdoor that she carried out "stealth layoffs" instead. By eliminating WFH and implementing QPR attrition, Yahoo! likely encouraged less committed folks to leave, fired the ostensible low performers, and saved money by not having to pay severance. I am not sure how much their headcount has shrunk since Mayer joined, but some Yahoos are not happy that the salary saved from the stealth layoffs might have been spent to recruit new talent with comp packages much higher than what veteran Yahoos were making. And the stricter promo reqs of QPR makes it harder for veteran Yahoos to advance and get raises too.

Yahoo! needed to cut some dead weight, motivate the staff, and recruit new talent to revitalize their business. Mayer seemed to carry that out with some success, but there were morale and priorities consequences. I'm not saying that turning Yahoo! around is an easy task (others have tried before Mayer), and you can't please everyone, but it may be hard to accurately estimate the net benefits of her policies because there are so many complex repercussions.

The economic effects of layoffs

http://www.newsweek.com/id/233131

Amazingly, an un-trivialized, un-sensationalized Newsweek cover story written by an academic. The author cites several studies that have shown the supposed benefits of corporate layoffs may not hold water. Sure layoffs help the bottom line (temporarily), but also eat into sales, and a company's stock value actually suffers. So it's a net neutral or even negative proposition. And no company ever rebounded from a major layoff to take more market share and greatly increase revenues. In fact it's often just a postponement of losses or the opposite effect, as rivals smell blood in the water and use the opportunity to snatch up talent. Clearly a trend exists that successful companies with good management have fewer layoffs. Southwest, Aflac, and Microsoft have had zero until 2009, while bumbling Delta and GM seem to engage in the practice regularly. And how can we forget Circuit City's Waterloo, when they decided to cut costs by laying off the subset of their sales staff making the highest salaries? Of course those people were also their best workers, so they slaughtered their milk cow for meat while Best Buy swept in to fill the void.

And what about all those socialist European nations with labor laws making it much harder to sack workers? Their labor force must be a lot lazier than America's, right? Well it turns out that worker productivity is actually better in nations with stronger layoff restrictions, like France and Sweden. What a revelation that workers who feel disrespected by aloof management and are terrified of losing their jobs (and health insurance) won't be as dedicated to the company and as focused on doing great work. Economically, America seems to have the tendency to motivate people with the stick rather than carrot. And of course there are the negative externalities of layoffs, such as mental and physical illness, destructive behavior, and reduced spending.

Everyone and their mother knows this, except it seems for the managers who sign the pink slips. They continue the destructive habit because middle managers believe that layoffs can help their careers. If they show their VP that they cut head count and still maintained or improved productivity (by whatever BS metrics they pull out of their asses), it shows they're a great leaders and deserve a bonus (paid for by their laid off staff). As is typical with America, the greed and ambition of a few end up hurting the organization as a whole and many innocent people along the way.

Layoffs just trigger a downward spiral anyway. Management decides to reduce the workforce to save money, but morale and productivity also suffer. Probably the layoffs were not conducted very sensitively, so it puts everyone on edge and many good employees quit even if their jobs were not in danger. The collective human capital of the company suffers, and sales follow. The bottom lines looks bad again, so management decides on another round of layoffs, and so it goes. The bottom line is dictated by costs AND revenues. Maybe instead of the kneejerk layoff reaction, struggling companies could actually figure out how to develop their workers to get the most out of them, which will result in better worker satisfaction, performance, and ultimately earnings. Isn't that real leadership? Any jerk can fire someone, but can you inspire them to do better?

On that note, has anyone seen "Up in the Air"?