Yahoo! Puts Diversity to the Test

For all I know it could be pure coincidence. And yet, a mountain of research tells us unequivocally that a diverse workforce will improve the bottom line, so we ought to look at one example that seems to disprove the point.

Case in point: Yahoo! Or better: Marissa Mayer’s Yahoo!

Background: we know that the leaders of America’s great tech companies adhere to liberal values. They certainly believe in diversity. Sheryl Sandberg, the COO of Facebook, has so much time on her hands that she is leading a feminist crusade.

Unfortunately, they do not practice diversity. It is commonly recognized that employees of Silicon Valley companies are predominantly white and Asian males. To the general embarrassment of many of their leaders the companies are anything but diverse. And yet, they are doing rather well in the marketplace, don’t you think?

When Marissa Mayer took over Yahoo! she apparently decided that she wanted more diversity in the workforce. She must have read the same research that we have all read. So, she directed her staff to give preference to women in hiring and promotions. Seems unfair enough. In truth, it is discriminatory.

Now, a disgruntled male employee is suing Yahoo! for gender discrimination. The Daily Caller has the story:

Yahoo top level managers allegedly used an employment review process to discriminate against male workers during an extensive restructuring process, according to a lawsuit filed Monday.

Company President Marissa Mayer implemented the review not long after being appointed in 2012. Gregory Anderson claims managers used the review to discriminate against male employees. He was fired from the media division of the company in 2014. Chief Marketing Officer Kathy Savitt allegedly gave females unfair preference resulting in hundreds of male workers being terminated.

“[He] alleges that Savitt has publicly expressed support for increasing the number of women in media and has intentionally hired and promoted women because of their gender, while terminating, demoting or laying off male employees,” the lawsuit, which was obtained by The New York Times, stated. “Females with the same Employee Score as male employees were treated better.”

We do not know the disposition of the ongoing case. For now, we will limit ourselves to the more pertinent question: did the extra diversity help or hinder Yahoo!’s bottom line?

Again, it may be coincidence. There might not be any direct causation. Still, we are well within our rights to ask how Yahoo! has been doing. We know that it was doing rather poorly when Marissa Mayer took over. Mayer inherited a mess. She was hired to turn the company around.

How is that working out? As Google and Apple and Facebook rule the world and the Fortune 500, Yahoo! is an also-ran.

If we exclude the value of some investments made before Mayer’s arrival, Yahoo! has a negative worth. Timothy Lee tells the story on Vox.com:

Yahoo is one of the best-known brands on the internet, but its core internet business is in a grim situation. How grim? There's a debate over whether the company itself — what most of us think of when we think of Yahoo — is actually worth less than zero dollars.

Back in 2005, Yahoo invested $1 billion in one of China's hottest technology startups, Alibaba, getting a roughly 40 percent stake. The bet has paid off handsomely. In 2012, Yahoo sold part of its stake back to Alibaba for $7.6 billion. Since then, Alibaba has continued to grow rapidly, and Yahoo's remaining stake is now worth around $25 billion.

That number is remarkable because Yahoo as a whole isn't worth much more than that. Indeed, if you subtract the value of all of Yahoo's major assets — including a multibillion-dollar stake in Yahoo Japan (an independent subsidiary in which Yahoo is a minority shareholder) and a few billion dollars in cash — from its market value, you get a big negative number. "If you just solve for the missing number, you are forced to conclude that Yahoo's actual core business of being Yahoo (and Tumblr and whatever) is worth negative $13 billion," as Bloomberg's Matt Levine put it in December.

He continues:

In 2012, Yahoo's board hired Mayer, then one of Google's best-known executives, to turn the company around. Nearly four years later, it's becoming clear that her turnaround effort is failing. Mayer has invested lavishly in both engineering and media talent, but there's no sign that these investments are paying off in the form of higher revenue.

Things came to a head on Tuesday, when Yahoo released its quarterly financial results along with a new turnaround plan. Yahoo announced that it was laying off 1,700 workers and focusing on its most successful products — including its search engine and popular email service. But in the same press release, the chairman of Yahoo's board announced that the board is going to "engage on qualified strategic proposals" — that is, consider offers to sell the company.

It's a humiliating announcement for Mayer, because it clearly signals that the board is losing patience with her turnaround efforts. And the looming possibility of a sale is going to make it all the more difficult for her to motivate Yahoo's remaining staff to work hard on her latest turnaround plan.

Mayer was hired to rescue a failing company. It is altogether possible that Yahoo! could not have been saved by anyone. And yet, Mayer's plan has clearly not worked. She bears primary responsibility for the failure.