Friday, October 13, 2006

Terry Semel: Cause of Yahoo's Success or Along for the Ride?





It's an age-old question in the study of leadership: Do leaders really matter? In America (at least, outside of business academia), uttering these words is almost sacreligious. We crave heroes and scapegoats. Leaders help make sense of the world around us. Yet, there are some -- they call themselves "organizational ecologists" and, I have to say, they weren't too popular with the MBAs in B-School) who say: no leader in today's large corporations make that much difference. Take anyone else of a minimum ability level and they would do just as good a job. The die is already cast for them, given the company's size, resources, capabilities, and market position. I can hear all the management consultants and recruiters out there shuddering at this notion. And I also believe it's ridiculous. More than belief, there's empirical evidence that the right leaders do matter and can confer significant financial and morale-improving benefits to their companies. By the same token, the wrong leaders can be a drag.

Yet, the ecologists raise an interesting question: If you put leader A in the CEO's chair at time 1, and if you put leader B in that same chair at time 1, what would be the difference in company strategy and performance at time 2? The question is really unanswerable -- yet, it makes for great conversation.

Which brings us to Terry Semel at Yahoo! There's a bit of a pile-on going on now in the wake of GoogTube. Google = fast-moving/innovative/smart; Yahoo! = slow-moving/pedestrian/dumb. Google pounces on an incredible strategic opportunity in buying YouTube. Yahoo can't get a deal done with Facebook and lets it drag on for months. The truth is rarely black and white; there's always more context than what gets printed. Yet, Terry Semel hasn't really helped himself with the Street or in the Valley. After Barron's touted them as ready to break-out of a holding pattern, they've proceeded to whiff on earnings, delay a major ad product, not do a deal with Facebook, MySpace, AOL, or YouTube, and forced their employees to take unpaid sick/vacation time this Christmas.

Who is Terry Semel?

Terry, 66 years old, was born in Brooklyn, NY. He joined Yahoo over 5 years ago, after 24 years as a studio hot-shot heading up Warner Brothers. His hiring was met with surprise and skepticism. Of course, when you hire an outsider, you want something different. The board wanted an anti-Koogle (as in Tim Koogle, Semel's predecessor -- a more Techie Valley guy who had overseen Yahoo's enormous bubble growth -- remember Broadcast.com and GeoCities -- and its post-bubble deflation). And the board got Hollywood: Semel keeps his main residence in LA, got lost the first time driving around the Valley, brought in Lloyd Braun from ABC, and sits on the boards of Revlon and Polo Ralph Lauren. In the early days of Semel's tenure, YHOO's stock dropped. The critics pounced and Semel's hiring was questioned. Then, the stock went up. The critics cheered and said Semel was quite adept in his adopted industry. Now, the critics are out again, as YHOO has remained depressed and they haven't pulled the trigger on some deals. Unfair? Sure. Intelligence does not directly correlate with stock price. But the bottom-line is that there are some things Terry can do differently which would greatly help the overall success of Yahoo.

So, has Terry Semel caused the turnaround of Yahoo in the last 5 years? Or would it have happened anyway, if you'd put any other competent insider (say Jeff Mallett) or outsider in the position? What is he responsible for versus what would any CEO have overseen given the company's resources/positioning/market dynamics which occurred over the last 5 years?

We'll never know what Jeff or anyone else would have done. But here are some practical suggestions on what Terry Semel should change Monday morning:

  1. Sell your house in Bel Air and move full-time to Atherton or some otherwise acceptable zip code near Yahoo HQ. I know you have a family and friends in LA, but it sends the wrong message.
  2. Mingle with the "rank-and-file". You don't have to play hacky-sack in parking lot, but a little "management by walking around" and lunching in the cafeteria would be welcomed.
  3. Tone down the Tom Cruise appearances at the Yahoo campus. Yahoo shouldn't be about the bling, but be about the "!" -- what made Yahoo unique in the first place. Now, to be fair, there are a lot of celeb drop-ins/drive-bys at the Googleplex. But, the point is (and it goes for Google or any other company) that this is not the red carpet. It's a business and it's about destroying the competiton.
  4. Suck up the sick days. It sends the wrong message to the team. I've never seen a company force use of vacation/sick days and see it work for them in the long-run.
  5. Expand the brand. Semel's not getting any credit these days for 2 phenomenal deals Yahoo made: Flickr and Del.icio.us. Keep it going. Is Facebook going to revolutionize the world or Yahoo? No. Will it be better than Yahoo 360? Yes. Should you be quick to move on others in the future. Unquestionably.
  6. State the vision and why Yahoo is unique. Is Yahoo the next multi-channel web platform? Sure looks like it. Why don't you sell it now to Wall Street and others before the Skype guys launch the Venice Project.
  7. Keep the "talent firewall" in place. GigaOM discussed Yahoo's attempts to keep its top talent ensconced at Yahoo. As mentioned earlier, the best way to do this is not by re-pricing options or giving more, but getting talent jazzed to stay (see here how to do so).
  8. Keep up the individual goals for the Yahoos. In a 2002 CNET article, David Mandelbrot, a Yahoo VP, said: "To have accountability, you have to have individual goals.... We didn't have that before." Keep it up.

Now might be the perfect time to buy YHOO, when expectations are exceedingly low. Can Terry turn it around? Yes, with a few successes, these current nay-sayers will disappear. However, without following some of these 8 suggestions above, Yahoo will continue to hamstring itself.

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10 comments:

tom said...

"So, has Terry Semel caused the turnaround of Yahoo in the last 5 years? Or would it have happened anyway, if you'd put any other competent insider (say Jeff Mallett) or outsider in the position?"

Totally would have happened anyway. I don't think Terry was responsible for the turnaround in the sector which is really the question. He rose with the flood as did yhoo and everyone else in the sector. what innovation has been a byproduct of yhoo over the past two years? nothing that i can think of. sure they got a great deal on Flickr but that is nothing innovative...more like lucky. yhoo is good if you have a long standing email address and good for their finance page and stock msg boards but all of that was released under TK's leadership.


The reality is that the things Terry is doing now won't have any effect on yhoo for a year or two at best but the term 'best' might not be the right choice.... He doesn't even live here for christs sake. when was the last time a respectable CEO lived 400 miles from where his employees are? wtf is he thinking? at the very least, if only for publicity or to gain some respect from employees, he should have bought a home here and let it be known. you think Zuck is more excited to talk to Terry or Larry? i'd go with Larry hands down.

Vision and culture can make or break a company. goog obviously has long term vision of being the delivery platform for advertisers by replacing the three traditional networks as we know them..radio, print and television, with one that is much more efficient and customizeable to each and every eyeball. At the end of the day the market will drive towards efficiency and what goog is building is an efficient platform for delivering personalized advertising that is impossible to achieve using the first three ad delivery media(print, radio and tv). i have to wonder what Semel's cronies in hollywood are thinking now. aaron spelling is probably turning over in his grave. wait until googlenet or whatever they call their solution for free broadband access is called. when you use that connection for every piece of data you receive because it's the best and easiest way to receive(it's efficient :) the info you want or need what use will you have for a magazine or newspaper that by virtue of their using paper are killing the rainforest, traditional television where you have to sit through a commercial of some 50 year old telling you about the wonders of levitra(ie, not targeted to you because youre not a 'qualified' prospect which is inefficient for the mfg of Levitra and inefficient for you because you could be learning about something that you would benefit from in the time wasted on watching grandpa tell you how he get get wood now). Radio really f'd themselves when they sided with the far right wing conservative hipocrites and ganged up on Howard Stern and now are crying rivers about the success of an alternative, ie satellite, because they know that for the user of satellite there are more choices, ubiquity in programming(channel 100 on sirius is howard stern anywhere in the country) and it is just real. real meaning not some fluffed up hide behind your image of wholesomeness that is radio as we're supposed to know it. howard stern, opie and anthony, bubba the love spunge and lamont and tenelli here in SV are examples of what isn't supposed to happen on radio but they by virtue of their rating could actually be what people want to listen to. efficiency isn't just about big companies, it's about our everyday lives and whether or not you realize it, it drives behavior.

I think it is pretty rare that a CEO that is brought in once a company is established is really the one responsible for the success. that, imho, can be attributed to the employees. the ceo's job is to create a culture where innovation and common sense prevail over trying to please wall street or impress the naysayers. goog made it pretty clear that was their philosophy when they turn the tide on the status quo and did their ipo the way they did and their dealings with wall street go to show that pleasing wall street isn't what their about. they are about innovation and efficiency and with that will come pleasures to wall street but not on pressure from wall street. can a ceo f a company up would be the next logical question and the obvious answer is....hell yes. terry sends a statement to us all(no, im not employed by yhoo) when he gets on his Falcon every friday(probably thurs really) and goes south or when he brings the biggest faker known to inhabit earth to yahoo's hq in hopes of firing up the troups. wtf is that? incase you didnt put two and two together, i am referring to tom cruise. oh yeah, if i were an employee i would be so excited to see that little pipsqueak weasel. it is no wonder he got boo'd at their last all hands.

Marshall McCluhan coined the term 'global village' and goog is in a position to deliver it soon. yhoo doesn't have the ability to catch up unless a miracle happens...but since Tom Cruise is a Phelan6(or whatever the hell they call the highest ranking Scientology level) perhaps he can help. HAHA.

Eric Jackson said...

Hi Tom: Thanks for the comment. I think your reaction shows how important leadership is for those within and outside the company. Sometimes simple things make a huge difference. Thanks, Eric

Anonymous said...

Does leadership matter in a tech company? Of course! Ask the "A" caliber and up engineer if s/he will fight hard for a guy like Semel? Of course not if there's no great performance $ award while guys like Semel always gets highly paid even for mediocrity. Top engineers will just join a startup where pay for performance truly matters; they also will bring their great ideas to the startup; why give the great ideas to a company like Yahoo nowadays - so Semel can take home an extra $100 million.

Eric Jackson said...

Thanks for the comment. It's always interesting to measure how engaged employees are with their top leadership. I find the best-performing companies over time have people throughout that will take a bullet for their leaders. Thanks, Eric

Tom said...

Eric, It is all too common that I witness failing upward in top executive mgmt in SV. it begs the question of whether anyone performs diligence on hiring decisions. interviewing someones old boss as a reference check is std but interviewing ones customers or peers or direct reports is where you can really find out what is going on. its a catch 22 i guess because by speaking with those folks, there becomes a breach in confidentiality, etc. ideal for upward mobility of unqualified people. i can't count the number of times(i could but haven't kept track) i have not understood how a person was promoted or recruited to a role with more responsibility when i thought to myself, "are you kidding", "omg", "wtf". i understand the lessons learned by failing but all too often it is cluelessness that prevails.

Eric Jackson said...

Tom: From what I see in my work, the problem is more acute in fast-growing companies (therefore, not a surprise in SV). The quick pace means that HR is too busy filling slots rather than screening. Time is usually scarce. However, usually, in my experience, neglecting this over time comes back to bite people. We shall see. Cheers, Eric

Anonymous said...

steve jobs and apple are an obvius example of how much good leadership matter in a company...

Eric Jackson said...

Absolutely. Thanks for the example. There are many others. Andy Grove was super during his time. Eric

bestonline323 said...
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bestonline323 said...

Most of us weren't expecting to see Terry Semel step down from the CEO's job at Yahoo just yet, but with Google out-Googling everybody, there's not a lot of patience to be had for the leader of the no. 2 Internet property. As former Yahoo exec Ellen Siminoff told The New York Times, “It’s not fair to say that Yahoo totally blew it. Yahoo did a fine job in search. It’s just that Google did an amazing job. So in comparison, it doesn’t look as good.” Having read both that story, and the one in The Wall Street Journal (subscription required) this morning, I'd take the Journal story as being far more accurate, since it doesn't present Semel's Yahoo career as a litany of failure. In fact, Semel got Yahoo into a strong enough position after its 2001 swoon that, in a sense, it was set up to be compared to Google—even if it wasn't set up to conquer it. It was Semel who had the savvy to hire Madison Avenue types such as Wenda Harris Millard in late 2001, and Jerry Shereshevsky. And they, in turn, got the ad industry not only believing in Yahoo but in Internet advertising itself. Yahoo was the first major Internet property to bounceback after the dot-com bust, by realizing that it had to court the traditional ad industry instead of chastising it for what was once the ultimate crime: "not getting it." And it was Semel who bought search pioneer Overture, without which Yahoo couldn't even have competed in the same universe as Google. And remember when everyone was sure Semel's first move at Yahoo should be to sell it, maybe to Sony?

Cheers,
Jenny
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