Management Case Study
Yahoo! CEO Mayer Is under Pressure to Make Changes
Marissa Mayer, former Vice President of Google Product Search, left the company in 2012 to become the CEO of Yahoo! At that time, the stock sold for $15.74. It sold for $29.77 in January 2016, reaching a high of $52.28 in 2014. Interestingly, investors are not happy with this rate of growth. Some feel that the company’s strategies are lacking, and that new leadership is needed. Hedge fund investor Starboard Value LP demanded that the board fire Mayer.
Mayer was hired to help turnaround the company’s floundering business model. She immediately put in place strategies to grow via acquisitions. For example, Yahoo! paid $1.1 billion for Tumblr, a micro blogging platform and social networking website. This acquisition did not produce the expected growth in revenue. A letter from Canyon Capital Advisors to Yahoo!’s board of directors stated that Yahoo! “has spent more than $3 billion on acquisitions, which, based on the company’s stock price, have been getting ‘absolutely no (or negative) value’ from Wall Street.”
One of the poor decisions that has plagued Yahoo!’s financial performance was its reluctance to transition its offerings to mobile devices. Another involved the company’s investment in Livetext. This app allows users to chat with friends by sharing video and text, but no sound. One writer described it this way: “You could awkwardly watch, but not talk, as you texted your loved ones and friends.”
Several Yahoo! investors are calling for big changes because “Yahoo!’s 15 percent stake in Chinese Web giant Alibaba, valued at $25.7 billion …, plus its $8 billion stake in Yahoo! Japan and $5.9 billion in cash, well exceeds Yahoo!’s market cap of $27.5 billion. That implies a negative value for Yahoo!’s core Internet businesses.” This has led Canyon Capital to recommend that Yahoo! “prioritize a sale of its core business, a portion of its assets, or the entire company.”Yahoo!’s leadership team is against these suggestions.
Yahoo!’s problems have led to layoffs and employee dissatisfaction and turnover. The company has responded by providing a broad set of perks, including iPhones, parties, and free lunches. The firm has a budget of $108,000,000 a year for free food.
“Employees’ faith in Ms. Mayer began crumbling in earnest in August 2014, when Yahoo! embarked on a series of stealth layoffs, current and former insiders said. For months, managers called in a handful of employees each week and fired them. No one knew who would be next, and the constant fear paralyzed the company, according to people who watched the process.”
It is estimated that 33 percent of the work force left the company in 2015. “Worried about the brain drain, Ms. Mayer has been approving hefty retention packages—in some cases, millions of dollars—to persuade people to reject job offers from other companies. But those bonuses have had the side effects of creating resentment among other Yahoo! employees who have stayed loyal and not sought jobs elsewhere.”
Sadly, employee morale does not appear to be improving. Surveys conducted by Glassdoor revealed that “only 34 percent of Yahoo!’s current employees foresee the company’s fortunes improving. That compares to 61 percent at tanking, scandal-struck Twitter and 77 percent at Google.”
According to one business writer, “Mayer’s protracted deliberations over a corporate reorganization last year  that led to the departure of several key lieutenants and broke up the much-ballyhooed mobile team, prompting many mobile engineers to seek other jobs” also contributed to employees’ dissatisfaction.
Another potential problem involves Mayer’s compensation package. “Executive pay at Yahoo! is essentially based on Alibaba’s stock price,” which is outside of her control. “Of Mayer’s $365 million pay over five years, only 3.3 percent will actually be affected by her performances. “This practice is against the common managerial practice of paying people for their performance.
So where does this leave Mayer and Yahoo! as a whole? Some employees, like Jeff Bonforte, Yahoo!’s senior vice president for communications products, love Mayer and the company. Mayer is the best boss he ever had, according to Bonforte. Broadly speaking, however, there are continued threats of more layoffs and calls to sell off parts of the company.
Yahoo! announced in February 2016 that it would lay off about 15% of its workforce. The Wall Street Journal further reported that “Yahoo’s next step may be to initiate a formal sale process, which entails setting up a virtual data room detailing the company’s business metrics, and proactively reaching out to the most likely potential buyers. Or the board could choose to wait until a suitor approaches them with an offer, at which point it would weight that against any counteroffers. … A sale process would also likely mark the end of Chief Executive Marissa Mayer’s attempt to turn around Yahoo.”
To make matters worse, investor “SpringOwl Asset Management called for firing as many as 9,000 of Yahoo!’s workers, who numbered 11,000” in June 2015.
Although key investors are waiting to hear the details of Mayer’s turnaround plan, some are very unhappy with the company’s strategic direction. They are demanding changes. Jeffrey Smith from Starboard Value L/P, for example, concluded that “dramatically different thinking is required,” and that changes are needed “across all aspects of the business starting at the board level, and including executive leadership.”
The following is the REQUIRED format for your case study papers. While you will also be taking a series of objective tests, these course projects are considered the most important grades of the course.
The following are the minimum case study requirements:
Each case study MUST consist of at least four pages (no more than five).
Cover page (one page) – A 10-point penalty will be deducted from the case study grade if any of the following information is not included:
· Your name (Please don’t make me guess your identity)
· Name of course
· The case study name
For your case study paper, include the following components in your finalized submittal in the following order and use them as Section Headings (USING BOLD TYPE) for formatting your submittal. (Use the italicized terms below as your section headings). Then write your paper in complete sentences in third person voice using a narrative writing style.
NOTE: This is a written business case study. Therefore, proper spelling, punctuation, capitalization, etc. are REQUIRED. This is not a series of text or Twitter messages!
Content Pages (2-3 pages: a minimum of 750 words but no more than 1000 words of content).
1. Providean Executive Summary of the case by summarizing your report– not the case itself. Must be clear and concise and be at least one paragraph. NOTE: This will be the last section written when preparing your case study.
2. Identify the Statement of Immediate (obvious) Problem (s) (your company’s issues) including the root cause of the immediate problem, and the secondary problem(s) that may not be solved when immediate problem is solved.
3. Describe your company’s Situation (SWOT) Analysis by explaining at least three items for each element:
4. Describedhow the four management functions (planning, organizing, leading & controlling)
would help address this case.
5. Provide an Action Plan for this case including how to prevent a future similar occurrence. Must include what should be done by whom, whyit should be done and how it should be done. Should include a contingency plan should problems arise.
References (on last page of paper): Minimum of three but no more than 5 quality sources. (5 points as part of the Grammar grade) Note: This is your original work. Therefore, a maximum of 20% of your case study submittal can be direct quotes or paraphrasing another’s work. A one-point penalty for each percentage point above the 20% maximum will be assessed.
Five-point penalty if correct APA format is not followed.
- Document MUST be left justified in a portrait format.
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- Write in third person voice (he, she, it, the company, etc.) only. Do not use first person (I, we, and us) or second person (you, them) voice.
· Your content MUST be broken into paragraphs. The first line of all paragraphs should be indented. Whole blocks of type are not acceptable. A 5-point penalty per page submitted with no paragraphs.
- Numbers 10 or larger, type the number. Less than 10, type the word (one, two, etc.)
- Financial figures are to be written as $50 (not fifty dollars); $1,500 (not one thousand, five hundred dollars); $1M (not one million dollars); $3.2B (not three billion, two hundred million dollars).
- Never end your sentence with a preposition like ‘to, from, by, with, between, before, after or during’. (E.g. The company could not have anticipated where the threat came from.)
- Always use italics for the name of a source (magazine, book or newspaper title) e.g. Wall St. Journal.
- NEVER use the words ‘sticking’ (instead use ‘placing’ or ‘inserting’ the product into the market); ‘everyone’ (no product appeals to/or is used by everyone-ever!), ‘stocks’ (it is ‘stock’) or ‘came up with’ (use ‘developed’).
- Always capitalize the first letter of proper names.
- When you attach your project to the online drop box, use SINGLE MS Word file or PDF attachment IN THE ORDER YOU WANT IT PRINTED AND READ. No multiple MS Word or PDF file attachments will be accepted. (10-point penalty per attachment for multiple documents submission).
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· It is REQUIRED that you follow the APA style of writing.