Yahoo needs to work on trust

Update 5-14-12:

In the WSJ today, Thompson is out.  Yahoo has a long way to go to restore trust in the company and its brand.

Update 5-12-12:

According to today’s Wall Street Journal:

Yahoo Inc. YHOO -1.62% CEO Scott Thompson agreed to resign this weekend after the company’s board obtained evidence that contradicted his claim of innocence over his misstated academic record, people familiar with the matter said.

The board is continuing its probe of the matter to determine whether it can fire Mr. Thompson with cause, meaning he would lose out on millions of dollars in severance pay, one of these people said.

Ross Levinsohn, Yahoo’s executive in charge of its media websites, will be named interim CEO with the possibility of the role becoming permanent, this person said. Fred Amoroso also was named Yahoo’s nonexecutive chairman, succeeding Roy Bostock.

The changes at the top of the long-ailing Internet company are a major victory for dissident shareholder Third Point LLC, which brought the matter of Mr. Thompson’s inaccurate academic record to light.

Yahoo’s board plans to give Third Point three board seats to end a proxy fight initiated by the hedge fund, which owns around 6% of Yahoo’s shares. Third Point’s leader, Dan Loeb, will join the board along with restructuring expert Harry Wilson and media-company consultant Michael J. Wolf, this person said.

Update: 5-11-12

Now, Thompson is saying he never submitted a resume.  Well, he may have been hired based on his ability and proven capability, but I think what people are reacting to is that Yahoo in general has had trust issues and now, they have a CEO who has, in the past, lied on his resume.  Even if he did not lie to get that job specifically, it is only semantics–he did lie at some point on his resume.

I have my students write a resume and profile in every marketing class I teach as part of a self-marketing plan.  I always stress (as was stressed to me at the University of Michigan Ross School of Business) that you never lie on your resume–never. There were times I was tempted to change the wording of one of my past job titles to get a job I wanted and I was probably passed over for a job because I did not have the exact wording on my resume that they were looking for, but I knew that I could not change what was true.  If you lie on your resume, it will come back to haunt you when you least expect it.

Thompson might be able to say with a clear conscience that he got his job by his proven track record of ability, but there will always be a glimmer of doubt about how he was able to obtain that experience because of the first time he lied on his resume.

Original Post 5-10-12

Warren Buffett said it–Yahoo has a trust problem.  We agree.  When your CEO is questioned about his credentials, you’ve got a problem.  When Yahoo fired their ex-CEO, Carol Bartz, over the phone, that should have been their first sign that they’ve got trust issues.  We don’t know the ins-and-outs of what is going on there, but obviously, they’ve got some work to do.  Now, it appears they are vetting all board credentials to make sure this is not a wide-spread credential problem.

How can you expect employees and investors and customers to have faith in the Yahoo! product and service when there is so much turmoil going on at Yahoo!?

Yahoo needs to stop for a moment and figure out where they went wrong and what they need to go to regain trust in each other at the highest levels.  There is no way that they can expect customers and employees to be their advocates until they put forth a united front.

I’d like to suggest that the Yahoo board work on the ROCC of Trust and do it soon.

1) Commit to being reliable with each other.  Promise to act in a consistent manner.  That includes sharing information in a consistent manner.  The current CEO can’t say one thing one time and another thing another time.  Either he does have a computer science degree or he doesn‘t.  If he is not consistent about something like his credentials, people will wonder what else he is not consistent about.  This is something HR recruiters will tell you all the time–never lie on your resume–it will eventually catch up with you.

2) Promise to be open and honest with each other.  This is absolutely critical in order to re-build trust.  There is a reason that the board could not fire Carol Bartz in person but felt the need to do it over the phone.  It is not necessarily an indictment of her, but of the inability to be open and honest with each other.  Being open and honest includes sharing the bad news with the good, all in an effort to build the business and make it better for all stakeholders.

3) Prove to all stakeholders that you are competent.  With so much turmoil and mistakes, it makes an outsider wonder who is competent at Yahoo.  The board needs to use their open and honest communication in a reliable way to show its stakeholders that it is truly competent to manage the company.  There are doubts and you can understand why.

4) Finally, demonstrate some compassion.  Despite what they thought of Carol Bartz, it was not compassionate to fire her over the phone, just as it was abhorrent for the PSU Trustee’s to fire Joe Paterno over the phone.  Compassion means having the other party’s interest at heart and your organization’s interest at heart.  Sometimes you have to consider the big picture  and do what is best for the organization, even if it means that the CEO must stepp out of the way so that the organization’s credibility can be restored.

Yahoo has been a pioneer.  It would be a shame for it to all fall apart because of a lack of trust.


Groupon Needs to Grow Up

I haven’t used Groupon in quite some time.  Their deals are for stuff I don’t need or use for the most part.  Clearly, the company’s efforts to target market to me aren’t working.

I shouldn’t be surprised given the many problems that Groupon has been having.  This CEO’s latest effort to right the ship appears that under his helm, he is DUI, according to the Wall Street Journal today:

Groupon Inc. GRPN -1.39% Chief Executive Andrew Mason told the company’s employees on Wednesday that the daily-deals site needs to grow up—right after he apologized for drinking too much beer.

In a wide-ranging town hall meeting with employees that lasted about an hour on Wednesday, the 31-year-old CEO at times swigged from a beer bottle while he set corporate priorities for the next six months, including beefing up financial controls and hiring more finance staff. Mr. Mason also discussed how the Chicago company doesn’t “have any margin for error.”


CEO Andrew Mason, shown in January, says Groupon needs to grow up.     TJ Proechel for The Wall Street Journal“We’re still this toddler in a grown man’s body in many ways,” Mr. Mason said during the closed-door employee meeting, which The Wall Street Journal observed via webcast. At one point during the address, Mr. Mason’s voice broke and he said, “Sorry, too much beer.”

A Groupon spokesman said the meeting was part of a series of informal weekly town halls, where employees have a chance to ask questions of executives. Beer is available for everyone in the room, said the spokesman, who declined to elaborate on Mr. Mason’s comments during the session.

Mr. Mason’s comments come as Groupon, which went public in November, is trying to steady the ship. The Web company has been under pressure following a revision to its quarterly financial results last month, when Groupon said it underestimated the amount of customer refund requests for its coupon-like offers and disclosed a “material weakness” in its internal controls. Some investors also have questioned whether Mr. Mason is experienced and mature enough to be at the helm of a multi-billion-dollar public company. The revision prompted an examination from the Securities and Exchange Commission, the Journal previously reported.

BusinessInsider also details a number of other disturbing actions by the company as well.


CEO Of OMGPOP Dan Porter Hires Back Laid-Off Workers and Shares the Wealth

Here’s a good news story you certainly don’t see everyday:

OMGPOP — the creator of the popular Draw Something game available for both iPhone and Android — was sold last month for $210 million to social gaming company Zynga Inc.

This was a huge boon to the once-struggling start-up that was close to going bust, according to Fortune. A few months ago, with sales floundering, Porter made the difficult decision to lay off several Flash developers, reports.

Then, of course, the launch — and consequent popularity — of the Pictionary-like game Draw Something changed everything. Within six weeks, it was downloaded by 35 million users, becoming the most popular iPhone/Facebook game around, Wall Street Cheat Sheet reports.

That’s when Zynga came calling — and Porter quickly got to work getting the employees he fired back in the game.

“He was literally negotiating the deal and jamming the re-hires back into payroll to make sure they were covered with hours remaining in the close,” an anonymous source with first-hand knowledge of the situation told Business Insider. “Their options kept vesting and they benefited from the sale.”

In our research on organizational downsizing, this Compassion-based approach to rebuilding trust following layoffs is exceptional.  If there were more CEOs like Dan Porter, the U.S. economy would be much further along in restoring all of the jobs, and the wealth and incomes that go with those jobs, that were lost in the Great Recession of 0f 2008-.


It’s Morning in America for George Feldstein and Crestron Electronics

Monday mornings after a long holiday weekend are always a challenge getting started, especially when most of the weekend Karen and I spent nursing our two kids who were sick.  So it was a real pleasure to read this article this morning in the latest issue of Forbes.  Given that our economy continues to sputter along with anemic GDP growth and 9% unemployment, the tonic that our country needs so desperately can come from entrepreneurial leaders such as George Feldstein and his terrific company, Crestron Electronics:

In a quiet corner of Crestron Electronics’ cavernous Rockleigh, N.J. research lab, an aged engineer hunches over a chaotic assembly of plastic tubes, spinning motors and wire. He flips a switch and an exhaust pipe spews a plume of white mist. “This is my Rube Goldberg machine,” says George Feldstein, with an impish grin. “I always have to keep my hands busy. Not bad for a CEO, huh?”

At 70 the founder of Crestron Electronics—maker of myriad home automation devices—is as fit and energetic as a man half his age. He’s also a tireless tinkerer, with 14 patents to his name. His latest project—a more efficient humidifier—has been in the works for over a year. Typical evaporative humidifiers require water tanks (breeding grounds for bacteria), while the steam-injection variety gobble electricity. So Feldstein invented a system that pressurizes a small amount of water and pushes it through tiny nozzles, atomizing it into vapor. When he tested it in his home last winter, the mist left a dusting of salt all over the furniture. (“My wife nearly threw me out,” he says.) With any luck the boss’ latest invention will hit the market next year.

Feldstein doesn’t just create gad­gets—he creates jobs. As protesters, pundits and politicians bemoan corporate America’s addiction to cheap overseas labor (the manufacturing sector now employs 11.8 million people, down nearly 40% in three decades), Crestron has added 500 people—20% of the company’s workforce—in the last five years.

Feldstein owns 100% of Crestron, which could very well make him a billionaire. (He won’t comment on his personal fortune.) Based on sales of similar companies over the last few years, Crestron, which carries no debt and pulls in $500 million in annual revenue (on its way to our list of largest private companies), could be worth at least $1 billion. Yet somehow Feldstein has attracted little attention outside of the trade press, even as he provides new jobs by the hundreds in a prolonged downturn.


“I have great belief in American enterprise,” he says. “When the economy went south we brought everything in-house and paid more for it, rather than lay people off. People don’t realize the importance of the continuity of labor.”

Translation: This isn’t about patriotism—it’s about strategy. By manufacturing 80% of his products—1,500 in all—in the U.S., Feldstein says he is able to build technologically complex devices in low quantities with few errors. Hiring at home also allows him to develop the kind of long-term, committed help he needs to keep expanding. Even with the company’s latest growth spurt, Feldstein estimates around 15% of his workforce has been on staff for at least a decade. “We bring in people, and we give them a profession,” he says. “It’s one of the most important things about a job: It should provide a career for people who want them.” And by keeping Crestron privately held, Feldstein doesn’t have to answer to pesky analysts and shareholders who might have him cut costs by shipping production overseas.

If we had 1000 more leaders like George Feldstein in the U.S., our economy would be well on its way to recovery.


Zynga Conducts Mafia Wars on its Own Employees

Update 11-28-11:

Now it looks like Zynga’s leadership and culture is generating difficulty for its growth strategy, and could spell trouble in its employee retention efforts:

Led by the hard-charging Mr. Pincus, the company operates like a federation of city-states, with autonomous teams for each game, like FarmVille and CityVille. At times, it can be a messy and ruthless war. Employees log long hours, managers relentlessly track progress, and the weak links are demoted or let go.

But that culture, which has been at the root of Zynga’s success, could become a serious liability, warn several former senior employees who agreed to speak on the condition of anonymity because of fear of reprisals.

As the discord increases, the situation may jeopardize the company’s ability to retain top talent at a time when Silicon Valley start-ups are fiercely jockeying for the best executives and engineers. It could also hamper deal-making, a critical growth engine for Zynga, which has spent about $119 million on acquisitions in the last two years.

“Zynga should be an example of entrepreneurship at its best,” said Roger McNamee, a co-founder of the venture capital firm Elevation Partners. “Instead it’s going to be a Harvard Business School case study on founder overreach — this will be a cautionary tale.”

Already, signs of trouble are emerging.

In July, Zynga lost a bid for PopCap, a mobile game company. Zynga offered $950 million in cash.

But PopCap’s founders worried about the company’s reputation after hearing rumors of the company’s rescinding share awards and fierce internal competition, said two people with first-hand knowledge of the situation. Instead, PopCap agreed to a rival offer from Electronic Arts, worth $750 million in cash and stock and the potential of an additional $550 million if certain earnings goals were met.

Several start-ups have also rebuffed Zynga this year, including Rovio. This summer, Rovio, the maker of the popular mobile game Angry Birds, walked away from discussions of a deal worth roughly $2.25 billion in cash and stock, three people briefed on the situation said.

With the I.P.O. fast approaching, competitors are preparing to poach disgruntled staff members. This month, one recruiting firm sent cookie baskets to some 150 Zynga employees.

“I expect a lot of game and tech companies will begin recruiting Zynga’s talent after their equity becomes liquid,” said Gabrielle Toledano, head of human resources for Electronic Arts. “Competitors will make the case that they offer much more compelling opportunities for creative people.”

Zynga declined to comment, citing the mandatory quiet period before its I.P.O.

While from the outside Zynga may have the fun and whimsy of the Willy Wonka chocolate factory, the organization thrives on numbers, relentlessly aggregating performance data, from the upper ranks to the cafeteria staff.

Original Post 11-10-11:

There is greed, and then there is the Gordon Geckko-type greed that Zynga’s CEO Mark Pincus and his top executives are displaying by asking some of their employees to give back a portion of their promised restricted shares or be fired:

Early last year, as Mr. Pincus began preparing to take Zynga public, he and several other executives decided the company had doled out too many stock rights to certain people in its early days, say people familiar with the matter. The executives chose an unusual solution: They began demanding that certain employees surrender some shares or be fired.

Those shares matter as Zynga approaches an initial public offering, expected this year, that could value it at close to $20 billion and make holders of large blocks of stock wealthy.

Zynga’s demand for the return of shares could expose the company to employment litigation—and, were the practice to catch on and spread, would erode a central pillar of Silicon Valley culture, in which start-ups with limited cash and a risk of failure dangle the possibility of stock riches in order to lure talent.

Built into that arrangement is the chance that founders will later wish they hadn’t given away so much stock, and also that some very early employees will end up with bigger windfalls than latecomers who contribute more to the company. Many in Silicon Valley cite an early-hired Google Inc. cook whose stock was worth $20 million after the firm’s 2004 IPO.

Zynga attempted to avoid such pitfalls. In meetings last year, Zynga executives said they didn’t want a “Google chef” situation, said a person with knowledge of the discussions.

The result was a list compiled by top Zynga executives of employees whose job performance might not justify their large grants of restricted shares, which are shares that are doled out free but don’t immediately “vest” and become saleable. Some employees Zynga reviewed had total grants worth tens of millions of dollars. Demands to return stock, however, applied only to portions of not-yet-vested share grants.

Although I can certainly understand the need for pay for performance, I would argue that the proper way to handle poor or mediocre performance is to change current compensation, whether in salary, bonuses, or future stock grants, and not by taking way previously promised stock.  That’s breaking a promise, and done to only enrich others in the company or investors.  Such behavior by Pincus and others at Zynga thus violates the Reliability and Compassion pieces of the ROCC of Trust and only makes current employees less willing to trust in future promises made by the company.


Great wisdom from CEOs…

I hope my students read this article in the NY Times today–in fact, I think I’ll make sure they do.  Each day in class, 2-3 students share an article about a company they are following and how it is relevant to our class topics.  Now it is my turn.

Adam Bryant, who has interviewed CEOs for his Corner Office column has distilled their wisdom into five important qualities that they look for.

1) Passionate Curiosity “Passionate curiosity, Ms. Minow said, “is indispensable, no matter what the job is. You want somebody who is just alert and very awake and engaged with the world and wanting to know more.”

2) Battle-Hardened Confidence: “I like hiring people who have overcome adversity, because I believe I’ve seen in my own career that perseverance is really important,” said Nancy McKinstry, the chief executive of Wolters Kluwer, the Dutch publishing and information company.

3) Team Smarts:  (my students will love hearing this one after all the team projects we make them do in business school!).  The most effective executives are more than team players. They understand how teams work and how to get the most out of the group. Just as some people have street smarts, others have team smarts.

4) A Simple Mind-set: A lot of people have trouble being concise. Next time you’re in a meeting, ask somebody to give you the 10-word summary of his or her idea. Some people can do a quick bit of mental jujitsu, and they’ll summarize an idea with a “Here’s what’s important …” or “The bottom line is … .” Others will have trouble identifying the core point.

5) FearlessnessAre you comfortable being uncomfortable? Do you like situations where there’s no road map or compass? Do you start twitching when things are operating smoothly, and want to shake things up? Are you willing to make surprising career moves to learn new skills? Is discomfort your comfort zone?

My students are all seniors, just about to graduate.  This is great advice as they launch their careers and think about the road ahead.

This is also good advice for all of us as we think about the career decisions we make and whether or not we currently have these qualities or need to improve upon them.  As I read through this list, I see Aneil.  He has embarked upon a new career and has for the first time in a long time used these qualities in his new job.  I guess we don’t always know how our current jobs will help prepare us for the next one.


Great example of renew yourself regularly…

As I was reading Bloomberg Businessweek this morning, I came across an article about Panera Bread and its CEO, Ron Shaich.  I just taught a Panera case in my undergrad marketing strategy class and the case came with a video of Shaich–I was very impressed with him in the video–one of his employees talked about how he had built a culture of trust down to the store level.

In this article, he reinforces the importance of renewing yourself regularly, which we discuss in our book.  He said that he makes his best decisions while he is on vacation, including the decision he made to focus his energies on Panera away from AuBon Pain.

It is a good reminder that we all need to get away from the details of work to focus on the big picture.


What is Your Burning Platform? Nokia has identified its own.

If I had a dollar for each time one of my students or clients used the phrase “burning platform,” I’d be writing this blog from the Caribbean.  Well, from today’s Wall Street Journal comes Nokia’s CEO and his efforts to communicate an urgent need for transformation change to his employees:

Just days before Nokia Corp. Chief Executive Stephen Elop is to reveal his plan for turning around the ailing handset maker, an internal memo penned by the executive describes a company besieged on all sides by competitors and in desperate need of a huge transformation.


Agence France-Presse/Getty Images
Nokia chief Stephen Elop, pictured in September.

Comparing Nokia to a man standing on a burning oil platform who jumps into icy waters to escape the flames, Mr. Elop says dramatic action is needed to reverse a decline that has left the Finnish company “years behind” the competition.

The complete text of Stephen Elop’s memo can be found here, and it’s quite compelling.  Does your company need or have a burning platform, and if so, do your colleagues understand it?

Sheldon Yellen, CEO of Belfor, Learns Compassion by Going Undercover

We’ve become fans of CBS’s Undercover Boss for its portrayal of CEOs and how they learn the capabilities and concerns of their employees.  The latest episode features Sheldon Yellen, the CEO of Belfor, the world’s largest property restoration company based in Birmingham, MI.  Mr. Yellen learns the personal and job-related challenges that several of his employees, and as a result learns some compassion for them and what needs to be changed in firm’s reward and promotion systems.

More top executives need to become more empathetic with the employees’ concerns, and we think becoming an undercover boss is a great way to start.


CEOs need help building trust

CEOs might look at this and think, “I know how to build trust”–“my people trust me”.  But,  a new survey found that “C-level execs are far less likely to acknowledge other people’s feelings and show other people that they care.”  So, you might be a reliable, open, and competent leader, but until you can demonstrate to others that you care, you cannot demonstrate total trust.

This study looked at over 38,000 leaders to discover that caring was the missing ingredient.  They found that CEOs just don’t know how to manage conflict, which is surprising.  They suggest that CEOs could acknowledging that the other person is unhappy or just let them know that you care about them.  Very simple things to do to demonstrate caring.

We have often said that caring is the last aspect that leaders get to when building trust because it is often the hardest–it is the most vulnerable.  We have to get outside of ourselves and take an interest in another person.  We have to care about their interests as much or more than our own and we are not good at doing that.  This is why when we find a caring (and competent) leader like Bob Lintz or Mary Ellen Sheets (both profiled in our book), we wish we could clone them.