Yahoo Reports: Too Few Dollars, Too Few Cuts

by Robert Grove

Yahoo numbers are in and, as expected, they are disappointing.  Page view and search query growth is a glimmer of light in the financial darkness but attempting to get control of costs, the company announced layoffs of 1500 employees in the next 2 months. The layoffs are about equal to the number of employees the company hired this quarter and about half of what industry watchers had been calling for and still leave the company’s payroll bigger than most believe is necessary.  CEO Jerry Yang’s layoff memo tried to rally the troops — but with cuts due before the holidays, it’s difficult to explain to employees what’s best for “us” when people are concerned they might be “one of them”. 

The layoffs are a step in the right direction but not a good one. History has shown that it’s usually better to take “the hit” all at once rather than slowly bleed out staff over a protracted period of time. The go-slow approach only creates a feeling of uncertainty among staff and doesn’t fully solve the company’s troubles.

Yang seems reluctant to make the deep cuts that many see as necessary. One possible explanation is his affection for the “yahoos” who work there and his desire to try and do right by staff in a corporate culture that tries to promote a “family” loyalty to the company.  If that’s the case, it is a noble effort that will surely fail.

In the early 1990’s, Digital Equipment Corporation fell on very hard times due to bad decisions and a shifting industry that they were too slow to react to.  Founder Ken Olsen had the same loyality to employees that Yang is showing and initially refused to lay off staff, instead burning through a several billion dollar cash reserve to keep the family together. In the end, the money was gone, employees had to be laid off anyway — and, because the company was more focused on trying to take care of staff than fixing the company’s problems, ultimately DEC, the second largest computer company on earth, became a footnote in tech business history.

The moves by Yang seem to reflect a similar attitude and approach.  Let’s hope it doesn’t lead to the same disasterous end.

Full story HERE