Yahoo! Jammed By Peanut Butter Memo

    November 20, 2006
    WebProNews Staff

An internal memo by a senior vice president at Yahoo, where he extensively criticizes the company’s practices and culture, was leaked to the media; Yahoo comes across as a firm caught in a bureaucratic malaise, where too much duplication and too little passion are the order of the day.

Yahoo! Jammed By Peanut Butter Memo
Yahoo! Jammed By Peanut Butter Memo

Brad Garlinghouse made himself a blogosphere buzzword by composing an internal memo that was subsequently leaked to the Wall Street Journal. Dubbed “The Peanut Butter Manifesto,” he is calling for the kind of internal reform at Yahoo that would involve slashing duplicate services and dispassionate employees from the company.

While outwardly the document praises Yahoo while exposing its less than effective practices, it represents something far more important. For a powerful executive like Garlinghouse to make this kind of statement internally, and for it to get exposed (the Journal chose to make it publicly available instead of hiding it behind the subscription wall), it looks like CEO Terry Semel may have a full-scale revolt brewing.

Garlinghouse cited a blistering New York Times article that dramatically excoriated Yahoo for its plodding business. In his memo, he said he “imagined” the most senior leaders at Yahoo were already discussing the company’s problems.

“At the risk of being redundant, I wanted to share my take on our current situation and offer a recommended path forward, an attempt to be part of the solution rather than part of the problem,” he wrote. “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.”

He provided a number of bullet points summarizing the issues confronting the company: lack of vision, lack of ownership and accountability, and a lack of decisiveness. For that last point, Garlinghouse listed eight examples of how Yahoo ends up with “competing (or redundant) initiatives and synergistic opportunities living in the different silos of our company.”

Those redundancies include the creation or acquisition of duplicate services, like buying Flickr and when Yahoo already had Photos and MyWeb on its product roster. He also accused a number of employees of “phoning it in” while continuing to “hang around” the company without accountability.

To succeed at reclaiming its past glory, Garlinghouse wants to see a more focused vision as part of a “radical reorganization” of Yahoo. That means duplicate services and deadwood employees – “heads must roll,” he wrote – have to go. He’s calling for a 15 to 20 percent reduction in force at the company.

Response from various bloggers has been plentiful. Eric Jackson posted an open letter to Yahoo founders David Filo and Jerry Yang, calling for Semel’s dismissal. He thinks Semel should take COO Dan Rosenweig with him, and CFO Susan Decker deserves the CEO slot.

Jackson didn’t account for Decker’s infamous assertion that Yahoo will be happy to be second in search, an observation that was strongly refuted by surprised executives on the company’s search team. It’s hard to equate settling for second with a more focused and presumably aggressive vision for Yahoo.

The impact of Garlinghouse’s memo on shares of Yahoo stock when trading opens should be intersting to watch. Yahoo’s peanut butter may be about to get very chunky before it smooths out again.

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David Utter is a staff writer for WebProNews covering technology and business.