That compartmentalization causes Yahoo particular grief because tech innovation demands speed and teamwork.
Most of Yahoo's products and divisions are dependent on one another in some way, and any new product requires cooperation from multiple groups. Everyone from those various groups must be willing to say "yes" for something to happen. When compared with innovative upstarts, that innovation by consensus is a time waster, and sometimes an idea killer.
"Instead of looking for reasons to say 'yes', team leaders look for reasons for 'no' if they can't control it," said one source inside the company.
In November, Yang and Decker announced a plan to address these troubles. It started with a company-wide effort called "One Yahoo" to establish new behaviors toward teamwork and de-compartmentalize the company, according to sources. The idea was to emphasize that the needs of the corporation come before needs of individual business units.
Yang and Decker talked to executive vice presidents, who were told to talk to their next in command. Still, that effort has yet to lead to tangible results, according to people familiar with the company.
Sources interviewed by News.com also said that key managers, including Yang and Decker, want cultural change, but the commitment to "One Yahoo" dissipates below the vice president level, where everyday decisions need to be made. Yahoo representatives declined to comment for this article.
How has this culture affected Yahoo? Think of it from the viewpoint of an average Yahoo user. A woman might one day search for health information about the common cold, then visit Yahoo's health site, and then check her e-mail. For Yahoo to sell a comprehensive advertising package to a retailer like Target--which might like to reach shoppers with a message about cold medicine--the company's sales team ideally would sell Target a package of search ads, graphical ads on Yahoo Mail, and a sponsorship deal on the health page.
To pull that off, the deal might involve leaders from search and performance ad sales; graphical ad sales and sponsorships; Yahoo Mail; and the health editorial page. If any of those leaders' interests are misaligned, the deal could fall through or not meet its full potential. Sources familiar with the company said egos among team leaders can often get in the way of pushing through such deals.
Corporate patterns evolve over time, and they're hard to change once set, according to Adam Galinsky, a professor of ethics and decision in management at Northwestern University's Kellogg School of Management. Southwest Airlines, for example, started out in the airline business with restrictions that prevented its fleet from flying anywhere directly from its Texas hub, except for the four surrounding states. So Southwest had to develop quick turnaround times at those points in order to service the rest of the country, a pattern that made it faster than rivals, he said.
For any company to re-engineer a culture, it must overhaul all elements, Galinsky said. A company must have clear vision (or a compelling reason why change is necessary), define a strategy for the organization, set up a reward system that supports that vision, and hire people who fit into the vision. For example, if you want people to work in teams, but you reward them individually, the reward system doesn't work.
"Where most companies fail is when they change one part, but they leave all the other elements intact," Galinsky said.
Can Yang inspire change?
Yahoo has changed some parts of its culture, like overhauling management. And while company watchers say Yang has the personal capital with employees to run the company, he may not be the charismatic leader it needs to walk the halls and achieve change one person at a time. What's more, insiders say, is that Yahoo employs a few senior executives who are unwilling to change.
There's no doubt Yahoo growth has stagnated.
In the United States, the number of monthly visitors to Yahoo was 137 million in December 2007, up 5 percent from the same month in 2006, according to ComScore Media Metrix. But the company's total monthly page views declined 9 percent year over year from 33 billion in December 2006. In contrast, Google's total U.S. monthly page views rose by 76 percent to about 24 billion. Google's total monthly visitors also grew to 133 million in December, up 18 percent from the previous year.
Search was a similar story. Yahoo's share of the U.S. search market dropped to 23 percent in December, down about 5 percent year over year. Google's share of the search market was about 58 percent, up from about 52 percent last year.
Globally, Yahoo is second to Google, too. In December, Yahoo had 485 million monthly visitors worldwide, versus Google's 588 million, according to ComScore.
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