Yahoo – A New HR Challenge Case
By 2001, the dot-com bubble burst made an online advertising slump. Yahoo suffered on revenues since stock price plummeted approximately 86% (Catalano & O’Reilly, 2004). Some of Yahoo’s top executives resigned, and the management announced layoffs in April 2001 (Catalano & O’Reilly, 2004). The company appointed a new CEO, who was working towards achieving a new direction for the company. Also, a new VP of Human Resources was hired and brought on board to align the Human Resource strategy based on the new direction of the company (Catalano & O’Reilly, 2004).
- How the HR Strategy of Yahoo Need to Change Moving Forward
Based on Yahoo employees’ initial discussions, it was evident that Yahoo HR lacked a strategy in its staffing and development approach (Catalano & O’Reilly, 2004). HR’s mandate was only to provide the workforce by hiring people during the boom but lacked a common vision (Catalano & O’Reilly, 2004). Different functional areas within Yahoo HR did not utilize formal practices, and they did not have standard metrics.
As a result, moving forward, Yahoo HR needs to synchronize the HR Strategy with the new company direction advocated by the CEO. The company should recruit talented employees because of the stiff competition in the current online advertising and commercial world. Hiring skilled, talented workers would enable Yahoo to achieve its goals, primarily because of improved creativity and innovation level, which are crucial components when it comes to launching new products and services into the market. If Yahoo hires only skilled employees, it will attain a competitive advantage.
The HR Strategy of Yahoo must start utilizing formal practices in all functional areas and come up with well-developed standard metrics. With standard HR metrics, Yahoo will be able to measure the effectiveness of HR Strategies and track the company’s human capital. These include data such as cost-per-hire, turnover, benefits participation rate, among others. When Yahoo implements standard HR metrics, it will be possible for HR to turn human resources data into meaningful and useful information about the company’s human capital. They include trends over a specific period of time with internal benchmarking, a more detailed performance picture with complementary metrics’ package, the company’s performance results compared to others in the industry.
However, with the new business model, the organizational structure of Yahoo will become more complicated. Yahoo was considered a fun workplace, where employees did not take themselves seriously or strictly and committed to work. Yahoo may encounter several roadblocks to implement the new HR Strategy based on the new company’s direction. These include challenges for obtaining the right talent in the current competitive world for the brightest, innovative, and skilled brains. Yahoo will face challenges also to continuously develop and maintain a skill-set and employee commitment in a manner that would advance the individual’s growth and, at the same time, growth of the company.
- Making Changes in Particular Areas
(a) Hiring: Yahoo needs to design a common approach and strategy for hiring employees. The company should hire diverse and talented people. Given that the Yahoo brand was strong enough, but the employees’ talent and skills were not viewed either externally or internally, hiring diverse and talented people would result in better employees. Diversity in the workplace, coupled with talented and innovative brains, may help the company improve creativity, innovation, and productivity. It will make decision-making faster than their competitors, which is an essential construct of attaining a competitive advantage. The challenge of implementing this change would be the costs. Hiring, being HR practice, may require a significant amount of money to develop and consume a lot of time to implement and deliver. However, the change warrants these costs because they go directly to the bottom line of the company.
(b) Compensation and Benefits: Based on the case study, Yahoo compensations to workers in terms of base salary was below average (Catalano & O’Reilly, 2004). The company needs to improve workers’ compensation for salaries above average for the market and provide incentive payments. Yahoo needs to implement other benefits such as incentive pay and increase workers’ compensation, improving workers’ morale, and increasing retention rate. Properly compensating employees shows that the company values them as workers, and when they feel valued, overall company morale increases and people are motivated to work. This reduces the turnover rate and increase the company’s productivity, but also comes at a cost. The compensation and benefits expenditure will increase, which will cost Yahoo money.
(c) Training: Yahoo needs to design a proper training program, primarily for new company workers. The training program also needs to show new employees how Yahoo’s business operations are conducted besides the basic administration details. It would have significant positive impacts on company productivity. It also increased workers’ motivation, morale and job satisfaction because of the improved efficiency in processes and increased workers’ capacity to easily adopt new methods and technologies, which would result in financial gains for the company. However, developing a training program for workers would cost Yahoo a significant amount of money. It is also costly to train employees because they use working hours. Yahoo needs to implement at least the average training hours for typical employees over twelve months.
- Less on Advertising vs. More on Additional Services
Relying less on advertising for revenue and more on additional services will have some impacts on Yahoo’s HR. Yahoo was a victim of over-reliance on advertising to generate its revenue and needed to diversify its services. Specifically, the business model required to shift to selling additional services, where Yahoo could earn fee charged, or subscription, such as premium audio or video content, or financial information. The shift would increase the role of Yahoo HR to find, recruit, select, and hire skilled, talented employees. Changing the business model at Yahoo, or relying less on advertisement revenue and more on additional services, could create the need for the HR department at Yahoo to focus on workforce or staffing issues. HR would be required to focus on expanding the company’s recruiting base and structure programs for compensation and benefits so that the company could attract relevant and talented workers. Yahoo HR would also be tasked with the additional role of developing a new training program to train existing employees. Yahoo HR would be required to keep up with the changing business model. Also, Yahoo HR would be required to alter their job descriptions for the existing workers, especially if the new business model changed their job positions or functions.
References
Catalano, C. & O’Reilly, C. (2004). Yahoo! – A new HR challenge (A). Stanford, CA: Stanford Graduate School of Business.