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Yahoo To Fire Another 15% As Mayer Attempts To Hang On (theguardian.com)
New submitter xxxJonBoyxxx writes: Yahoo chief executive Marissa Mayer has announced plans to cut the company's workforce by 15% and close five foreign offices by the end of 2016 after announcing a $4.4bn loss. Yahoo shares have fallen 33% over the past year, including a 17% drop in the last three months. Its shares fell again in after-hours trading after Mayer announced her plan. Yahoo expects its workforce to be down to 9,000 and have fewer than 1,000 contractors by end of 2016. About a third of Yahoo's workforce has left either voluntarily or involuntarily over the last year. And the cuts may just be starting: one activist investor (SpringOwl) says the total number of employees should be closer to 3,000 for a company with its revenue.
Why would anyone think there's a constant proper relationship between revenue and the number of employees across all businesses? I mean, let's just skip right over that employees are paid different amounts, businesses take different amount of human effort to create the wealth, the market will support different prices for different services, and the business will have a different amounts necessary to pay their vendors and capital requirements.
Suppose I have a farm business. One year I decide to spin-off the part of the company that picks the tomatoes. The previous company suddenly has much more revenue per employee. Should it go out and hire more people? The tomato picking company has little revenue per employee. Should the tomato picking company fire a bunch of people. Of course not.
-Dave
Of course, whenever she loses her job (voluntarily or involuntarily), I'm sure there's a golden parachute that will deploy and she'll be set for life either way. Ain't capitalism grand.
That sort of arrangement is common-ish practice with senior executives in some industries. Even with NDAs, etc. a company could be very uncomfortable about someone who once let it, and knows all of its secrets, going to a competitor...their contracts have all sorts of clauses and compensations.
For example, the guy who used to run the division of the (huge) company that I work in ended his tenure, and had a contract that basically said "when you leave here, you can't work in this industry again for at least 10 years". On the face of it, the contract terms sound s**t, but when there's a suitably golden parachute payment to protect against loss of earnings, then it makes it more palatable.
It sounds pretty outrageous for foot-soldiers like us, but when you get very high up the food chain, it's more common practice than you might think.
The company was going in the wrong direction before she was even hired. They hired her as a gamble to make a big change to save the company. It didn't work. Going back to the way it was is stupid, it wasn't working before. The only things worth keeping are its overseas holdings. The core company is worthless. Firing her and hiring a replacement won't change that. They took a big gamble and lost. There is no going back.
I would argue that the core company isn't "worthless", it's just worth far less than it used to be. Plenty of people still go to yahoo.com, use it for email, news, etc. i still go to the financial part if I want to find out more about a company as I've found their tools to be pretty decent for aggregating everything of interest about a public company.
That said I tend to agree with the investor who says that they should be around 3000 staff members. My question to him is also "what is the proper CEO compensation for a company with this revenue?" My guess is that it's not even in the ballpark of what Mayer is getting.
The bottom line is that there's still a business there, probably not any real growth potential. So the proper thing to do is downsize, concentrate on the core(s) that are profitable and be really good at those areas where you're known to be really good.
That's odd advice in the internet world where everybody wants perpetual growth, but there are plenty of stores in my town here that aren't looking to grow but rather provide steady income until retirement. We have to be realistic and understand that that particular model is also relevant on the internet.
Do you have ESP?
2. Why would a company care about someone who wasn't successful as CEO running another company?
Because that person has knowledge of trade secrets, internal processes, vendor relationships, future product plans, etc. Sure, they might be shit at leading a company, but what they know could be extremely valuable to a competitor.
Thanks to the War on Drugs, it's easier to buy meth than it is to buy cold medicine!
>1. Such agreements are not enforcible in California.
I believe the rule was they are not enforceable in California so long as the company stops paying you.
A golden parachute sounds like they didn't stop paying you.