If Yahoo Is The Peanut Butter … Where’s The Jelly?

This week’s top story has been the Peanut Butter Manifesto as written by Yahoo Sr. VP Brad Garlinghouse. The manifesto started as a panicked internal Yahoo memo but leaked to a few bloggers late Friday night. The Wall St. Journal published it Saturday morning. By Monday morning, all hell had broken lose across the blogosphere.

Garlinghouse expresses passionate concerns about Yahoo, its business models, multiple divisions working on similar products, and the bloated size of management. He keys in on three central themes; vision, accountability and decisiveness, eventually calling for a 15 – 20% cut in staff.

The memoesque manifesto gained its name from Garlinghouse’s analogy of thinly spread peanut butter. “I’ve heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.” Garlinghouse goes on to declare, “I hate peanut butter. We all should.”

While it is easy to ridicule his efforts and even easier to speculate on his motives, it’s hard not to agree with much of what he says. The exception is the part about reducing headcount by 15 – 20%. That’s approximately 1 in 5 out of a highly charged entrepreneurial group. Losing that talent would be an awesome mistake and Yahoo is not suffering financially for retaining it as badly as it eventually would for shedding it.

It might be suffering perceptually however. Garlinghouse states Yahoo, “… lacks a focused, cohesive vision …”, wanting to “… do everything and be everything — to everyone.” He writes, “We are scared to be left out. We are reactive instead of charting an unwavering course. We are separated into silos that far too frequently don’t talk to each other. And when we do talk, it isn’t to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics.”

In the end, he brings it down to management, hiring or acquiring leadership from outside the company resulting in what he sees as, “… disparate visions of what winning looks like.” That’s about the point he gets into the peanut butter analogy and the meat sort of slides off the bread so to speak.

The next theme Garlinghouse covers is one of ownership and accountability. Yahoo is a massive organization within which Garlinghouse sees several levels of redundancy and bureaucracy. “For far too many employees, there is another person with dramatically similar and overlapping responsibilities.” To add to the confusion, Garlinghouse sees a culture where there are too many people in charge. Between several operational layers of the company, “…there are so many people in charge (or believe that they are in charge) that it’s not clear if anyone is in charge.”

With too many chefs (including but not limited to); the Chef De Cuisine, a scalding of Sous Chefs, a rack of line cooks and ten students doing prepwork (a decigrouping, no doubt), working together to spoiling the soup, Garlinghouse sees a culture of indecision making everything bland.

He is quite correct at least in the sense Yahoo seems to have no central direction. Parts of the company appear to be doing quite well but overall, it is hard to articulate a perception of Yahoo’s long-range plans.

Garlinghouse provides a list of divisions that are competing instead of collaborating.

– YME vs. Musicmatch
– Flickr vs. Photos
– YMG video vs. Search video
– Deli.cio.us vs. myweb
– Messenger and plug-ins vs. Sidebar and widgets
– Social media vs. 360 and Groups
– Front page vs. YMG
– Global strategy from BU’vs. Global strategy from Int’l

From his point of view, there is no incentive to win and hardly any to move forward in day to day operations. “Far too many employees are “phoning” it in, lacking the passion and commitment to be a part of the solution.”

Lack of incentive appears to even stretch to the end of each pay-period with Garlinghouse stating, “… our compensation systems don’t align to our overall success. Weak performers that have been around for years are rewarded. And many of our top performers aren’t adequately recognized for their efforts.”

Garlinghouse, who claims to, “…proudly bleed purple and yellow everyday…” and to have “… shaved a Y in the back of my head …”, came to Yahoo in its 2003 purchase of Dailpad, and has since led the Yahoo Communications Products division. According to his conference speakers’ bio, Garlinghouse is, “… responsible for the strategy, management, development, and financial performance of Yahoo!’s communications products, which include Yahoo! Mail, Messenger, and Photos.”

His prescription to mend Yahoo’s malaise is dramatic and radical with the requisite measure of brutality. Dramatic refocusing, restored accountability (read: heads rolling the hallways between cubicles), and radical reorganization. All sealed up and signed in a script nobody outside the building should ever have to read. Except of course, this time we did.

In the manifesto according to Garlinghouse, declaring exactly what everyone should focus on can help solve a loss of focus. Heck, that’s simple enough. What isn’t so simple is the declaration of what Yahoo is and the shedding of stuff it isn’t. Garlinghouse suggests Yahoo needs to, “… exit (sell?) non core businesses and eliminate duplicative projects and businesses.” That means dumping or repositioning key staff members.

Garlinghouse wants to take the “smoothly spread peanut butter”, and turn it into “a deliberately sculpted strategy”. This is seriously going to get messy, no matter what the external world might think. Yahooligans love being Yahooligans and you know how Yahooligans get around sculptures made of peanut butter… don’t you? Well, one can guess and ya know it ain’t gonna be pretty.

Whatever the outcome, Garlinghouse wants it to come from the top, decisively. “We need to place our bets and not second guess. If we believe Media will maximize our ROI — then let’s not be bashful about reducing our investment in other areas. We need to make the tough decisions, articulate them and stick with them”, he writes.

Moving into accountability, Garlinghouse calls for heads to roll. Currently organized into Business Units (BUs), Garlinghouse suggests the leadership of each business unit needs to be held directly accountable for the performance of his or her unit. After kicking the underproductive to the curb, Garlinghouse calls for a radical restructuring of management and compensation systems.

Getting back to peanut butter analogy, Garlinghouse suggests the current system of compensation is sort of like well, poorly spread peanut butter. He calls for Yahoo to be, “much more aggressive about performance based compensation” in order to “weed out our lowest performers and better reward our hungry, motivated and productive employees.”

Business is brutal and to execute a plan that calls on Yahoo to “Blow up the Matrix”, the slaughter of redundancies is necessary. This is the part that calls for the 15 – 20% reduction in headcount and the focusing of responsibility under a general management structure.

Garlinghouse makes a number of bold statements in the next paragraph, one of which is troubling on a number of levels, concluding with another that appears to contradict the previous paragraph about restructuring.

“Kill the redundancies. Align a set of new BU’s so that they are not competing against each other. Search focuses on search. Social media aligns with community and communications. No competing owners for Video, Photos, etc. And Front Page becomes Switzerland. This will be a delicate exercise — decentralization can create inefficiencies, but I believe we can find the right balance.”

All contradictions aside, the idea that search is not a part of virtually everything Yahoo does is bizarre. (Who does he think he works for, Google?) One of the things about Yahoo that continues to charm investors is the uncanny ways Yahoo finds to monetize the search function of everything without putting all their eggs in the PPC basket. Another troubling aspect to the paragraph is the level to which competition within the Yahoo organization seems to be paralyzingly present.

As ridiculous as his memo may be to outside observers, Garlinghouse undeniably has a few important points to make. Yahoo needs to do something to define itself against its rivals lest it become a holding company with a nostalgic name. As it stands now, Garlinghouse paints a picture of a company in holding. While his solutions seem to be plucked out of a motivational management book, he is obviously a very concerned VP ready to fight for his company and possibly his place in that company.

He concludes his memifesto on a more positive note. “We may have fallen down, but the race is a marathon and not a sprint. I don’t pretend that this will be easy. It will take courage, conviction, insight and tremendous commitment. I very much look forward to the challenge. So let’s get back up.”

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