Carol Bartz’s Challenge at Yahoo: Choose a Path, Build a Team and Do It Fast

mic Listen to the podcast:

New Yahoo CEO Carol Bartz has a long to-do list — chart the company’s strategy, weigh a potential search partnership with Microsoft, boost morale and round out her management team — and not much time to deliver amid a weak economy that is hurting online advertising, say experts at Wharton.

On January 13, Yahoo named Bartz, a Silicon Valley veteran, to be Jerry Yang’s replacement as chief executive although Yang will remain as “Chief Yahoo” of the company he co-founded in 1994. In addition, Yahoo president Sue Decker said she would resign. Until the announcement last week, Bartz, 60, was the executive chairman of Autodesk, a computer-aided design software firm where she was CEO for 14 years before stepping down in April 2006. Bartz also worked at Sun Microsystems, Digital Equipment and 3M.

Yahoo chairman Roy Bostock, who, along with Yang, declined merger overtures from Microsoft throughout 2008, said in a conference call that Bartz is “a seasoned … and highly regarded technology executive with a decisive leadership style and proven track record.”

This past month has been a busy time for Silicon Valley leadership changes. In addition to the news about Bartz, Apple CEO Steve Jobs announced that he would take a six-month leave of absence to address health problems that have drawn media attention in recent weeks. The companies’ situations contrast sharply: Apple is led by a dominant and respected personality who may, or may not, be planning an exit strategy; Yahoo is looking for the type of leader that Jobs represents. As Wharton management professor Lawrence Hrebiniak puts it: Yahoo needs someone with “spunk. Bartz has to come in and take action.”

Analysts overall have been positive about Bartz’s appointment although many suggest that she lacks online media experience. Bernstein analyst Jeffrey Lindsay said in a research note that Bartz “has been a good CEO,” but is “not a natural choice for Yahoo.” Citi analyst Mark Mahaney agreed that Bartz “brings to Yahoo organizational chops, a fresh perspective and substantial technology industry experience,” adding, however, that she would need to hire a lieutenant with extensive media industry experience. Gartner analyst Allen Weiner characterized Bartz as a “solid and safe choice” who will need Yahoo insiders for media expertise.

Taking the Deep Dive

Wharton observers say Bartz could infuse Yahoo with a trait much needed at the company: decisiveness. Yahoo’s biggest problem, they contend, is lack of focus. Is Yahoo a media company? Is it a technology outfit? Does it need to be in search? Who are Yahoo’s biggest competitors — Google or established media companies? Bartz’s job will be to answer those questions.

“I don’t think people know what Yahoo is right now,” says Wharton management professor Keith Weigelt. “Yahoo’s core product requires technology, but it’s really a media company. Yahoo [has many] positive characteristics, but Bartz needs to bring in a strategic focus. Yahoo is way too broad.”

That complaint comes up frequently among Wharton experts, analysts and shareholders. “Yahoo is this odd company that is part search, part technology and part media,” says Kendall Whitehouse, senior director of IT at Wharton. “Bartz needs to pick one or two of those parts. The focus has shifted as Yahoo has changed leaders.”

According to Whitehouse, Hrebiniak and others, Bartz’s biggest decision will be whether to outsource Yahoo’s search service to Microsoft, which wants to take market share from Google. Google accounted for 63.5% of search queries in December, according to research firm ComScore. Microsoft, which accounts for 8.3% of the more than $30 billion search market compared to Yahoo’s 20.5%, has expressed interest in buying Yahoo’s search business, which generates revenue by linking ads to specific queries. Experts at Wharton suggest that outsourcing search to Microsoft could make sense for Yahoo by boosting revenues, cutting costs and giving the company a focus. The move could enable Yahoo to become a next-generation media company, says Whitehouse.

If Bartz has a strategy for Yahoo, she isn’t making it public. Her immediate goal is to meet with Yahoo employees and gather information for future moves. “It’s no secret that Yahoo has had challenges over the past year, but as I look around I see a powerful global brand with a great collection of assets, strong technology, good cash flow and talented employees,” Bartz said on the conference call introducing her as CEO. Regarding the well-publicized questions swirling about Yahoo’s strategy, Bartz did not divulge any specific thoughts. “I have a lot of ideas on these subjects, but it would be very presumptuous to discuss them on my first day on the job. I’m first going to do a deep dive to meet the great people of Yahoo before I start speaking about how I plan to lead the company,” she stated.

For now, Bartz said everyone needs to “give this company some breathing room.” How much breathing room Bartz gets remains to be seen, but her challenges are clear, say experts at Wharton.

Employee Morale and Shareholder Confidence

Her first mission is to calm the waters at Yahoo. The company has angry shareholders, a restive board member in Carl Icahn, who is itching for a search deal with Microsoft, and employees in need of a leader. In addition, employees have had to endure a year of dour media reports about Yahoo’s future. And then there is the financial crisis that’s hurting online advertising — the mainstay of Yahoo’s business.

According to Wharton management professor Rahul Kapoor, Bartz needs to make a few early moves to address the short-term concerns. The biggest of those, he believes, are employee morale and shareholder confidence. “The present economic crisis won’t make addressing those challenges any easier.”

Perhaps Bartz’s more significant contribution to Yahoo will be in developing the company’s long-term strategy, Kapoor adds. Bartz alluded to this during her introductory news conference by noting that “It has been too crazy. That is going to stop…. This is a company with enormous assets that frankly could use a little management.”

Hrebiniak suggests that Bartz first needs to get stakeholders together in an offsite meeting to assess strategy and build consensus to move forward with a plan. “She’s under pressure to act. [Microsoft CEO Steve Ballmer] is seeking action on a search deal. The economy is bad. Investors want action. She knows she has to act and, as basic as it seems, you start with getting key players together, talking and laying out strategy.”

Creating a coherent strategy for Yahoo will be a formidable task. Yahoo is a complex company that breaks down to three primary parts: Media and content, technology development and ad-funded search. Of those three legs, search is the item most in question. “Strategically, a Microsoft deal looks like a good move,” says Hrebiniak. “Ballmer wants to get this deal done and go against Google. Yahoo should take the money and find other opportunities.” Weigelt agrees. “Yahoo is losing the battle with Google slowly,” he says. “I’d seriously consider the Microsoft search deal as a way to focus the company.”

Yahoo would still have significant assets even if it sold the search business. The company “has done some intriguing work on the technology side,” notes Whitehouse. Yahoo Pipes, a technology that aggregates web feeds to create new applications, and a venture with Intel to create TV “widgets,” or on-screen software that complements television programming, are two examples of innovative technology from the company.

Meanwhile, Yahoo also has been busy rolling out the company’s “Yahoo Open Strategy” intended to make it easier for developers to create software programs that work across the company’s various web sites. Adding that technology to Yahoo’s proven ability to aggregate users — the company attracted 146 million unique visitors in December, just behind Google’s 149 million, according to ComScore — could create a powerful combination, argues Whitehouse. “A technology-focused company that understands media could be powerful.”

The other option for Yahoo would be to become solely a media company. Yahoo has numerous properties — Yahoo News, Flickr and Yahoo Finance — that are among the category leaders. Various press reports have detailed talks between Yahoo and Time Warner about a deal to have Yahoo take over AOL, which was No. 4 in overall Internet traffic in December with 110 million unique visitors, according to ComScore.

During her conference call, Bartz acknowledged the complexity of Yahoo, but said the main goal is to get focused on executing well. “The important thing is being best in all of our markets,” she said. 

Ultimately, Bartz’s success will be judged on how she reshapes Yahoo’s competitive position, Kapoor suggests. “Yahoo’s big puzzle is how to create more value for its enormous user base especially in the wake of an ever-expanding threat from Google. Strategic reconfigurations will be the key to how Bartz affects Yahoo. This is a multiyear effort and she has her work cut out in the short term.”

As Bartz addresses strategy and short-term challenges, she must also build a management team. Wharton observers say that she needs a mix of insiders and long-time colleagues she can trust. From there, she can focus on rebuilding Yahoo’s management talent, which has been eroded due to turnover and layoffs.

Weigelt expects Bartz to hire a few outsiders, as she did at Autodesk. “You look back at Autodesk where she moved pretty quickly, fired underperformers and brought in her own lieutenants.” But she will also need the help of Yahoo insiders — the most important of whom may be Yang. Weigelt expects Yang — who knows Bartz well, in part because they both serve on the board of Cisco Systems — to step back and let Bartz run the company. Meanwhile, given the departure of Decker, Bartz will have to hire a No. 2 executive to carry out her plans. Analysts such as Mahaney expect Bartz to hire someone with media experience.

Wharton management professor Peter Cappelli suggests that Bartz “find an insider, someone with expertise in the media side, to help understand the ins and outs of the company and provide some balance as to what is possible.” The rationale for such a move is clear, he says: Bartz needs to move quickly. “If the top two people are outsiders, they are both trying to learn how things work at the same time. Also, you don’t need two different outside perspectives.”

Hrebiniak agrees. Given some level of discontent within the company, Bartz will need “a No. 2 who can facilitate internally…. She will need a peacemaker who can get consensus … and carry out her strategy.”

Citing Knowledge@Wharton

Close


For Personal use:

Please use the following citations to quote for personal use:

MLA

"Carol Bartz’s Challenge at Yahoo: Choose a Path, Build a Team and Do It Fast." Knowledge@Wharton. The Wharton School, University of Pennsylvania, [21 January, 2009]. Web. [22 October, 2014] <http://knowledge.wharton.upenn.edu/article/carol-bartzs-challenge-at-yahoo-choose-a-path-build-a-team-and-do-it-fast/>

APA

Carol Bartz’s Challenge at Yahoo: Choose a Path, Build a Team and Do It Fast. Knowledge@Wharton (2009, January 21). Retrieved from http://knowledge.wharton.upenn.edu/article/carol-bartzs-challenge-at-yahoo-choose-a-path-build-a-team-and-do-it-fast/

Chicago

"Carol Bartz’s Challenge at Yahoo: Choose a Path, Build a Team and Do It Fast" Knowledge@Wharton, [January 21, 2009].
Accessed [October 22, 2014]. [http://knowledge.wharton.upenn.edu/article/carol-bartzs-challenge-at-yahoo-choose-a-path-build-a-team-and-do-it-fast/]


For Educational/Business use:

Please contact us for repurposing articles, podcasts, or videos using our content licensing contact form.

 

Join The Discussion

No Comments So Far