Layoffs and the Yahoo Brand

    January 21, 2008

The ’sphere is buzzing with “anonymous” tips that Yahoo CEO Jerry Yang will soon be faced with the tough decision of firing up to 2.500 employees.

Silicon Alley Insider appears to be the ring leader in the rumor spreading and seems to be all for the layoffs.

Jerry reportedly wants to announce the cuts with or before earnings (January 29th), but may not make them if the stock price recovers.

We believe Yahoo should reduce headcount by at least a thousand people, and others are looking for cuts of more than twice that. Yahoo’s stock has recently hit new lows, almost all of its key businesses are losing ground to Google, and shareholders are beyond frustrated. Jerry Yang, moreover, is perceived as a good guy who is unwilling to make the hard-ass decisions necessary to get Yahoo heading in the right direction again–a perception he is presumably eager to dispense with.

I admit, I’m not a financial analyst, but I feel that the cuts could easily have the opposite effect that Yang is hoping he’ll see. Here’s some consequences of laying off 2500 people just because your stock dips below $20 a share.

  1. How well would you sleep at night knowing that you’ve just laid off 2500 based–mostly–on your stock price? More importantly, how would those employees feel? See below.
  2. OK, so perhaps it’s a sound business decision now, but what if those 2500 employees feel like airing your dirty laundry? Can you imagine if 2500 disgruntled employees decide they need to vent by creating a blog post about Yahoo’s faults and failings? Heck, you can’t even stop employees from writing the damaging “peanut butter memo” so how do you plan to stop ex-employees from having their voice heard?
  3. What about the employees that remain? In the peanut butter memo, the claim was made that “We have lost our passion to win. Far too many employees are “phoning” it in, lacking the passion and commitment to be a part of the solution.” What’s going to happen to the passion of the remaining employees, when they see that recent hard-work might be rewarded with future layoffs?
  4. Have you thought about public perception Jerry? Sure, Wall Street might react well to the layoffs, but what about the average Yahoo user? What message will the layoffs send them? With your market share stagnant, you might lose more users if they believe you’re a dying company.

I’m sure there are more consequences that won’t emerge until after any Yahoo firing decision, but I hope that Yahoo’s focusing on the big picture and not just trying to give its stock price a shot in the arm so it can have a pleasant Q4 conference call.