Tuesday, February 26, 2013

Marissa Mayer Shakes Up Yahoo, and Not Just Yahoo

Marissa Mayer has hit a nerve. A few days ago I posted about the directive issued by the new Yahoo CEO. To the shock of many, new mother Mayer decreed that her employees would no longer be permitted to work at home.

Since that first post, more people have weighed in on the topic, and the discussion has become compelling and engaging.  

Prior to Mayer’s arrival last year, Yahoo had been poorly managed. It was a fading, not a rising star. Mayer was faced with a series of problems, ranging from lack of innovation to low productivity to low morale. Her task was to right a floundering ship.

It’s difficult to judge her decision without knowing the background. An informed source told Business Insider about the problems that Mayer faced:

Yahoo has a huge number of people of who work remotely – people who just never come in.

Many of these people "weren't productive," says this source.

 "A lot of people hid. There were all these employees [working remotely] and nobody knew they were still at Yahoo."

These people aren't just Yahoo customer support reps. They're in all divisions, from marketing to engineering.

Mayer is happy to give Yahoo employees standard Silicon Valley benefits like free food and free smartphones. But our source says the kinds of work-from-home arrangements popular at Yahoo were not common to other Valley companies llike  Google or Facebook. "This is a collaborative businesses."

Mayer saw another side-benefit to making this move. She knows that some remote workers won't want to start coming into the office and so they will quit. That helps Yahoo, which needs to cut costs. It's a layoff that's not a layoff.

Bigger picture: This is about Mayer "carefully getting to problems created by Yahoo's huge, bloated infrastructure." The company got fat and lazy over the past 15 years, and this is Mayer getting it into fighting shape.

Even though Facebook and Google do not specifically ban telecommuting, both have created cultures that strongly encourage employees to show up at the office. In Silicon Valley the Yahoo policy was the exception, not the rule.

But Mayer did not have the luxury of creating a new corporate culture from scratch. Finding herself surrounded by a dysfunctional culture she issued a directive that was designed to right it.

Still, said John Challenger, chief executive of Challenger Gray & Christmas, an outplacement and executive coaching firm, “A lot of companies are afraid to let their workers work from home some of the time or all of the time because they’re afraid they’ll lose control.”

Studies show that people who work at home are significantly more productive but less innovative, said John Sullivan, a professor of management at San Francisco State University who runs a human resource advisory firm.

“Marissa’s trying to increase the energy and output and change the culture of the company,” he said. “She brings all the Google lessons to the table, and Google is very focused on having your life revolve around their campus so you can spend a significantly larger chunk of time at work.”

Still, Google, as well as Facebook, does allow people to work remotely on a case-by-case basis. But both companies also strongly stress in-person collaboration.

Standard Silicon Valley perks like cafeterias with free food, shuttle buses, gyms, ice cream parlors and dry cleaners not only make employees’ lives easier, but keep them on campus during the day and promote contact with other employees. Nearly all tech companies have desks packed tightly together without walls and communal work areas with sofas and beanbags.

Zappos, the e-commerce company owned by Amazon.com, previously allowed some customer service agents to work from home, but now has a rule against working remotely. The company locks all office doors except one so employees are forced to run into more people on the way out, and budgets fewer than 100 square feet per employee, versus the standard 120 square feet or more.

Telecommuting tends to increase productivity and to decrease innovation. Being physically present also increases face time and enhances interpersonal communication and group cohesiveness.

Rachel Silverman writes on the Wall Street Journal site:

From a collaboration perspective, research shows that face-to-face contact is usually the most effective way to engender trust and cohesiveness among work teams—particularly for new employees, or for teams whose members are unfamiliar to one another, says Michael Boyer O’Leary, an assistant management professor at Georgetown University’s McDonough School of Business.

Face-to-face contact is effective is because it is the most robust way to convey information. Indeed, more than half of emotional information in a conversation is communicated through facial expression, while over a third comes from a speaker’s tone and only 7% is transmitted from the actual words used, says Wharton management professor Sigal Barsade.

However, that doesn’t mean telecommuters are less productive than in-office workers. In fact, they may even work more. A recent University of Texas study found that telecommuters worked five to seven hours more than those who worked exclusively in offices.

On the Atlantic site Derek Thompson suggests that Mayer is wrong because working at home reduces commuting time and stress and makes people happier with their jobs.

But, then, Thompson addresses the question of why so few jobs being done via the internet. He answers:

And yet ... telecommuting isn't taking over the world. The vast majority of "telecommutable" jobs aren't done at home. They're done in the office. Why? 

One half of the answer is that people like working with other people. Telecommuting can be lonely and unfulfilling. But corporate policies like Mayer's are another part. Companies are jealous of their employees' time and allegiance, especially in competitive industries like media technology, and Mayer probably doesn't want to lead a massive hiring and turn-around effort while her deputies Skype in from their living rooms. It's understandable for executives to want to build an atmosphere where the office becomes a destination, a place where workers want to come together, where ideas percolate and bounce around an office and end up on a memo in the director's inbox that becomes a Hot New Thing. 

In the end, the market will decide. Either Mayer will have succeeded in righting the company or she will have failed. But, by defying the conventional wisdom and by provoking a firestorm of criticism she has shown great courage and real leadership. As a CEO coming to the company from the outside, she needed to take charge and to show everyone that a new leader had arrived.

[Addendum. Rocco Pendola on The Street wrote this:

Over the years at Yahoo!, incompetent people hired more incompetent people who went on to hire even more incompetent people. These B-players maintained the status quo, while implementing all of the perks Silicon Valley and other tech staffers have come to expect and enjoy. At Yahoo!, working at home became expected, not a convenient consequence of competence.

Mayer is simply making another move -- in a long series of moves -- to clean up the mess. Firing people is a pain in the ass. And layoffs look bad.

Do you really think Mayer did not, in some way, communicate with the A-players (or at least their direct managers) ahead of making this move? She's using this "edict" to further streamline a bloated, self-entitled and largely ineffective segment of the workforce. That much should be obvious. And, based on what I mentioned earlier in this article, there very well could be exceptions. It will be interesting to see how Mayer handles these things case-by-case….

Certainly, I am speculating just like Mayer's detractors, but, frankly, it's far more logical and rational speculation. I consider very real contexts from which Mayer might have made this decision. I do not cast her off as a bumbling fool who made an errant move. That's not the Marissa Mayer I have watched lead Yahoo! for the last 7-8 months, presiding over a roughly 35% increase in her company's stock price.]


David Foster said...

"She knows that some remote workers won't want to start coming into the office and so they will quit."

And generally, in situations where you put a whole bunch of people in a situation designed to get some of them to quite, some of them will....generally, though, not the ones you WANTED to have quit. I thought all experienced managers knew this.

If you have too many people, then be man enough or woman enough to get rid of the ones with low productivity or who are doing unneeded jobs and can't be usefully transferred to something else. Don't just create a situation that will get people to quit and count of fate to have the RIGHT ones quit.

Also, "remote employee" doesn't always mean "isolated." I know people who work from home rather than in the local company office *when they are in town*, but are OUT of town about half the time, meeting with other company employees in groups around the country and the world, as well as with customers and business partners. What possible useful function could be served by forcing such an individual to come into a local office, when his/her most important internal contacts are in other places entirely?

Lastango said...

FWIW -- and because I have nothing new to say about this -- here's the text of a comment I put up elsewhere two days ago when a blogger at a soft-focus feminist website was raking Mayer over the coals for setting working women back and abandoning an established employment format:


This change wouldn't happen without a reason. Let's recognize that Yahoo! is a sinking ship, and (IMO) cannot be salvaged. If so, the best that can happen is maximize the profitability and value of the pieces, and then find a merger partner for the main part while selling off some of the pieces. (That can come about in various ways; for instance, the merger partner can take over the whole, with knowledge that valuable pieces can be sold later.)

Mayer's job, then, is to maximize value of the whole and the parts. It's possible that the work-from-home model is poorly administered there, and no one knows any longer if the stay-at-home staff is really contributing or not. Perhaps people are abusing it because there's no monitoring. Or, if Yahoo! needs to cut staff, there may be a sense that the stay-at-home employees are the least productive. Getting rid of their status means some will leave voluntarily, and that's cheaper than firing them.

There isn't much time for the executive team to save Yahoo!, and they need to move fast. If there's a merger partner(s) on the horizon, Yahoo doesn't want to have to explain to a prospective partner why there are so many questionable contributors on the payroll. If Yahoo! has major programs on the go that need to be completed as quickly as possible, they may need all hands on deck, and have little tolerance for marginal contributors.

Just because the work-from-home model is reportedly functioning in some environments, or at companies which are in certain situations, or by some measures, doesn't mean it's best for Yahoo! at this point in time. Further, Yahoo! may have made a mess of the model, and knows it doesn't have time to go through the elaborate human-relations challenge of fixing it. So they have to dump it. That sort of measure is typical of a company in survival model, and it isn't pretty to watch.

Stuart Schneiderman said...

Thanks, Lastango, for co-posting your comment. It's consistent with what Michael Schrage said, as I quoted in the next post, but you also add a very interesting perspective on the company's future.