We’ve learned from the readings this week that there are many
organizational structures a company might take. Moreover, we’ve learned that
nowadays a combination of several of these structures is required for a company
to achieve success. In The Wall Street Journal (online) this week there was an
article on Yahoo that brings all this home. The article
“Inside Yahoo: Less Show, More Sell”, in my opinion, highlights how an
established company can keep getting it wrong by staying married to outmoded
hierarchical organizational structures and product strategies (Daft, 2007).
Yahoo, Inc has recently taken on a new CEO, Scott Thompson, who, in an
interview with The Wall Street Journal’s Amir Efrati, spoke of rebuilding the
company by switching its product focus (2012). In the interview Thompson goes
on to say that “the ‘market’” places little value on the company's core
online-ad business” (Efrati, 2012) and that the way to turn the company around
is to pay more attention to fee based transactions (Efrati, 2012). Efrati notes
that ad-sales comprised 78% of Yahoo’s revenues and that fee based transactions
yield lower margins (2012). I’m no math whiz but even I see a possible glitch
or two here. In addition, Thompson intends on growing “his executive team”
while conducting layoffs (Efrati, 2012). Wow!
Yahoo would
certainly benefit from an improved diversification of product lines but, it
seems to me at least, since Thompson has no ad-sales experience to begin with
(Efrati, 2012) he should not discount the product that’s been paying the bills
so off-hand. Instead he could take a cue from Ford Motor Co and how they went
about rolling out their Escape Hybrid SUV (Daft, 2007). A “structural
re-organization” (Daft, 2007) is needed at Yahoo but it needs to go beyond
hiring a new CEO who knows how to run a big company to instead focusing on how
to create a dynamic (hybrid) organizational structure that can quickly respond
to new market opportunities and product demand. Yahoo could perhaps accomplish this by testing their current structure, and intended changes, against Goold
and Campbell's battery of tests listed in their article "Do You Have a
Well Designed Organization" (2002). I would suggest paying special
attention to "The Parenting Test" (Goold & Campbell, 2002).
References:
Daft, R. (2007). Fundamentals Of Organizational
Structure. Organization Theory and Design.(9th ed.)
pp.88-125
Efrati, A. (2012, February 9) Inside Yahoo: Less Show,
More Sell - New CEO Aims to Reduce Emphasis on Ads,
Boost Commission Revenue. The Wall Street Journal. Retrieved from
Goold, M. & Campbell, A. (2002). Do You Have
A Well Designed Organization. Harvard Business Review.
R0203K. pp. 5-11
Very timely example! It seems like Yahoo is faced with challenges along both the "strategy" and "structure" dimensions. In your reading did you come across any information on what Yahoo's current organizational structure is? Given what you know about Yahoo's products and environment, what sort of structure do you think might be most appropriate for the company?
ReplyDeleteHi Jessica,
DeleteYour question prompted a "yahoo" search (rather a google) to see if I could locate Yahoo's org chart. Its true that you can find almost anything on the internet. There is an org chart published at: http://www.theofficialboard.com/org-chart/yahoo-
From this chart one can infer that their Functional structure has negligible horizontal communication. They might perhaps benefit from a hybrid structure that allows them keep their hierarchical systems in place but that creates divisions based on product lines which in turn are horizontally connected with the "Strategy/Yahoo Labs" and "Marketing" departments for added insight...
Felipe,
ReplyDeleteThis was a very interesting read. What do you think will be the outcome of Yahoo hiring a CEO who obviously doesn't know the product and who will be conducting layoff and growing his executive team? In my opinion it would be wise fro this new CEO to keep the people who have been helping Yahoo "pay the bills" and seek their advise as to what can the company do to restructure and re-organize to become more productive. I don't think that hiring more executives is the right answer. Most of the time, people who are working in the company have better ideas than someone coming in from the outside. Current workers, know the company and know what is working and what isn't working. Do you agree or disagree?
First of all, I appreciate the extremely relevant (and recent) example you presented here. I definitely agree that Yahoo needs a change in organizational structure. They have had a lack of response to the market thus far which would indicate to me the need for them to ensure their company is built for this upcoming change. I agree with Jessica in that it seems the issue lies within the strategy and structure. With that said, the new CEO probably does need to increase his executive team (either by size or intelligence) to generate ideas and a clear focus for the company. While I understand that making these sorts of moves require trade-offs, I’m still not convinced sacrificing the common workers is the way to that. I agree with Xiomara that the employees have a lot of insight on what is working and what is not, so I’m not sure if it is a good solution to lay them off. On the other hand, I have worked for companies that were marked by low morale among employees that was contagious and detrimental to the company and their productivity. So, it really depends on the situation. If I was a consultant I would think research on the entire company (all five points on the STAR model) would need to be considered prior to making a recommendation.
ReplyDeleteHi Felipe,
ReplyDeleteIn the article did it mention the recent layoffs Yahoo! experienced? I ask because those may have been prevented had the company, as you suggested implemented an organizational structure that fit the company dynamic. Also, when CEO's do interviews like this, I as the viewer/reader am always interested in knowing more than what the reporter is asking.
Great read and thanks for sharing.
Hi there Felipe,
ReplyDeleteThanks for the great article about the new CEO at Yahoo! Your explanation was very interesting and you are right - it doesn't take a math whiz to see that the numbers don't seem to add up.
This could end up falling under the "What were they thinking category" like when Coca Cola decided to scrap their time honored formula for "New Coke" or when Pepsi rolled out their ill fated "Crystal Clear Pepsi." I still remember the SNL parody of the product having something to do with "Crystal Clear Gravy."
Your recommendations of diversification and reorganization for Yahoo! seem to be on the right track. I am curious if you found any further information as to why the Board of Directors would hire Thompson as their CEO. It would be very interesting to know what went on with the boards decision making process and what skills, (or relationships), Thompson has that helped him to get the job.
Thanks again Felipe!