The Business Sensei

Yahoo’s Pfizer Problem

What is Yahoo’s Pfizer problem? That may seem a bit of an odd question: Yahoo is, after all, a fallen titan of the Internet age. As companies go, Yahoo is barely old enough to drink. Pfizer, on the other hand, is, well, Pfizer: a 150 year old pharmaceutical giant quite possibly best known for giving the world Viagra. What is a “Pfizer problem” and what does it mean for Yahoo to have one? No, it has nothing to do with pharmaceuticals. Rather, it has everything to do with Hank McKinnell.

Hank McKinnell was the CEO of Pfizer from 2001-2006. This was, in retrospect, perhaps not Pfizer’s finest period: after five extremely disappointing years, Pfizer’s board forced McKinnell into retirement. This was quite the change from 2001 when they couldn’t stop shouting his praises. McKinnell, it seems, looked like a great leader in 2001. While looking like a leader may, in fact, be enough to make someone a leader, it isn’t enough to make them a good leader. That’s a bit more difficult.

Thus we come to Yahoo. From its lofty perch at the pinnacle of the Internet hierarchy in the late 1990s, Yahoo is now something of a has-been. Its search business eaten by Google, its marketplaces by eBay and Amazon.com, Yahoo is struggling. According to the NY Times article, “What Happened When Marissa Mayer Tried to be Steve Jobs,” Mayer, the current CEO, has so far failed to actually do more than make cosmetic changes. That’s not to say that she hasn’t managed to generate a great deal of sound and fury, but her actions have done little to actually turn the company around.

Like Hank McKinnell, Marissa Mayer looks like a great leader. To be clear, she’s brilliant and she was a fantastic engineer at Google. But being a CEO is not an engineering problem; it’s a people problem. A great leader does more than give lip-service to the concept that people are the company’s biggest asset; they live that ideal. Leaders build relationships, they form connections, and they act in ways that cause that web of relationships to spread throughout the company. Marissa Mayer, to much fanfare, eliminated Yahoo’s work-from-home policy, a decision which generated a great deal of smoke but only actually affected maybe 1% of the company. It was a distraction. However, since she also built her infant son a private nursery next to her office, it was a distraction that also served to sever, not build, relationships.

Exemplary leaders create commitment by enabling people to trust one another. Unfortunately, Yahoo adopted an employee rating process similar to Microsoft’s late and unlamented employee stacking method: team members who received high ratings got huge rewards, people at the bottom were fired. As the NY Times reported, top people at Yahoo did their best to never work together: it’s much easier to get a top rating when you surround yourself with weak players. The same thing happened at Microsoft. Furthermore, when the goal is to make sure someone else takes the fall, trust is hard to come by: at Microsoft, engineers sabotaged one another in a variety of subtle ways. Sometimes a leader gets lucky and manages to make an employee stacking system work for a time; that’s unfortunate, because then they often think it really is a good system, even after their luck runs out.

The leader is, rather obviously, the person at the top of the company hierarchy. That’s more than just a figure of speech: the CEO is in the position to see the furthest. The biggest difference between leaders and managers is scope: how far ahead can you look? Well, the CEO is the person whose job it is to look the furthest. Marissa Mayer likes to dive down into the depths of the code base: this may be a great activity for an engineer, but for the CEO of a multi-billion dollar company employing thousands of people? Details matter, and if you spend too much time on them, it’s easy to lose track of the big picture. However, a characteristic of human nature is that we like to do what we’re best at and when we aren’t sure what to do, we do the things we know how to do. In Marissa Mayer’s case, that appears to be focusing on code and data in the areas where she is most comfortable. She’s doing what she’s trained to do.

Hank McKinnell got booted out of the leadership role at Pfizer because he was doing immense damage and the reasons why he only looked like a leader were not particularly amenable to change. Marissa Mayer has a chance to actually become a great leader and make a difference… but only if she takes the time to learn the right skills to actually become a leader instead of merely looking like one.

The Doom of Yahoo?

If creativity were simply a matter of having a bunch of people in an office, well, IBM of the 1980s and 1990s would have been the most creative business on the planet. The company employed close to 300,000 people worldwide, all working out of offices. As we all know, IBM went on to invent Windows, the Internet, online search, social networking, and the mobile phone. Oh wait, maybe not.

Creativity is an odd beast. According to the New York Times, Marissa Mayer at Yahoo decided that the reason she had to end Yahoo’s telecommuting policy was to make the company more creative. Another article in the Times claimed that the reason was because Yahoos weren’t actually working at home: the article mentioned Yahoo employees founding startups while on Yahoo’s payroll. At least the explanations for Mayer’s actions are creative, so maybe her policy is already bearing fruit!

Unfortunately, the idea that forcing everyone into the office will somehow enable managers to “keep an eye” on employees is both pointless and counterproductive. Again, if that were all it took, we’d be seeing a lot more amazingly productive employees at all those companies that don’t allow telecommuting. Yet, the reality is the other way around, provided the organizational culture and metrics for measuring performance actually encourage the appropriate behaviors. Frequently they don’t, which certainly appears to be the case at Yahoo. Bringing people into the office isn’t going to change that. Fixing a culture trapped in a cycle of defeat is much harder than a few slogans and forcing people to all mix at the water-cooler; however, forcing everyone into the office certainly feels like Taking Action. It is an Exercise of Power. It feels good, even though the actual results are likely to be both less positive than its supporters believe, and less negative than the naysayers are predicting. In short, a few people will probably leave and the rest will get used to working in the office again. At that point, all the old problems will still be there and will still be killing Yahoo. If Yahoo wants to fix that, perhaps they should learn how to set actual effective goals, with a well-defined strategy that they can then evaluate. I’m sure that’s what they think they’ve already done; I’m also quite sure that if they had actually done it right, they wouldn’t be having the problems they claim they are trying to fix.

Let’s face it, if you have effective goal setting and measurable strategy, then an employee who founds his own startup while on the payroll should be picked up simply because he won’t be meeting his objectives. Moreover, employees with goals they believe in and who are working for an organization they value do not, as rule, start their own companies on the side. Forcing people to sit where they can be watched over may force some people to behave, but it won’t make them enthusiastic or creative. If Yahoo is looking for compliant employees, they’re on the right track. If they really want creativity, maybe not so much.

As far as creativity, again that’s a tricky problem. In the 1990s, Yahoo was so far outside the box that they created a new box. Since early 2000, however, Yahoo’s been stuck in that very same box of their own creation while other companies, notably Google, thought outside of it. As I discuss in my talk, “Organizational Culture and Innovation: A Two-Edged Sword,” creativity is largely a function of environment and culture. Individuals do matter, of course, but even the most creative people will be stifled if the culture doesn’t truly support innovation. Even in organizations that claim that their culture supports innovation, what they really mean is that they support innovating in what they already do, not coming up with something radically different: the desire to protect existing products is very powerful, although it won’t stop your competitors from eating your lunch. Thus, after a certain point organizations become better and better at making what they already do more and more effective, but become equally resistant to doing something that’s really new. In other words, you can improve your better mousetrap all you want until someone shows up with a cat. You have to know how to change your culture and build up the four elements that support creativity if you really want to see serious innovation.

Google built a creative culture from the ground up. That culture involves people working closely together. Yahoo does not have that culture. Just bringing people back into the office isn’t going to change that. Yahoo is far more likely to end up not with creativity but with compliance.