In restoring the morale of Yahoo employees, Chief Executive Scott Thompson has his work cut out for him. The company's 14,000 employees have endured five different CEOs over the past five years, several rounds of layoffs, and regular criticisms in the press of the company's slow innovation cycle and executive mismanagement.
Conversations with current and former Yahoo employees reveal that they are looking for Thompson to articulate a clear vision, to narrow the product development focus, and spearhead more transparency from executive management. Meanwhile, some employees expect that headcount reductions are coming.
"Everyone at Yahoo suspects there will be layoffs, but nobody really knows to what extent and when," said one employee who works on an editorial website. "They've probably held off [on layoffs], waiting for a new CEO. It's hard to see the company growing from an employee base perspective," said the employee, who asked not to be identified to preserve his relationship with his employer. He added that media employees were disappointed that the new CEO did not come with "a stronger or more obvious media background."
For the company's technologists, the pick of Thompson, the former chief technology officer and president of PayPal, came "as a relief," said one current product manager. "He's different from the other CEOs we've had in the past. He is a tech guy, he has coded -- we haven't seen that in a long time," he said.
Tech folks said they hope Thompson will narrow the company's focus and concentrate resources on what he believes Yahoo can do best. From chat to news to email, Yahoo lists some 70 different services on its product page, and that doesn't include the recently launched Livestand, an iPad app that collates various media content into a magazine-like display. The app is very similar to start-up Flipboard's popular iPad app, says one Yahoo employee, and is an example of how the company spends too much time playing catch-up.
"The whole product roadmap -- there isn't anything we're not going to do, and the distractions are everywhere," says the employee. "We're counting on Thompson to be calling the right shots in terms of what we do need to focus on."
Thompson is a tech guy. He has coded. We haven't seen that in a long time.”
In large companies like Yahoo, engineering resources can be shifted as priorities change, frustrating many managers, said Mark Risher, a former director of product management on Yahoo Mail who left the company in 2010 to found his own start-up.
"As priorities are shifting, you'll find the three people you thought you were going to hire turned into one because another project looks promising so they want to shift the hires to a different project," he said in a December interview before Thompson's appointment was made.
Another former Yahoo employee, who left in the last year to join a start-up, said that former co-workers of his are hoping that Thompson will accelerate the company's ability to release new features. At the company's hackday events, he said, engineers would develop "something fantastic" but "it never reaches the public" or not until after another company has released something similar. He cited the Yahoo Map feature that lets users modify their travel directions by clicking and dragging their route.
That was a feature Yahoo engineers developed in 2006. The company didn't release it until Google released its own "click and drag" feature in 2007. Six months later, "we released what was good to go a year previous," the former employee said.
Another source of distraction is the media. Current and former employees say that negative reports depicting Yahoo's leadership as dysfunctional and its future as uncertain have driven employees away and prevented talented engineers from joining.
"It's difficult to attract talent when the press and general perception isn't favorable," said Mr. Risher, who echoed the views of others who said that the way Yahoo was depicted in the press wasn't fair or completely accurate.
A larger problem, some employees say, is that they have to read the media to find out about the strategic direction of their own company. In the four months since the previous CEO, Carol Bartz, was fired and the company embarked on a "strategic review," there seem to have been virtually constant news reports detailing the status of the company's efforts to sell its Asian assets, enter in a partnership with private equity investors, or sell itself outright.
"Employees go to the media to find out what's going on with the company internally," says one employee. "Complete transparency and honesty may be able to change people's mindsets, and rather than going out and pulling up Web pages to see what's going on, [they'll] just go ahead and focus on what they need to do."
This employee said that he stays with the company because he keeps thinking things will get better. It's a bit like watching a bad movie. "The movie's gotten really bad and you think, 'This movie has got to get good at some point,'" he said. "You're already invested, you're already sitting there, and you want to see what the ending is."
Depending on how soon Mr. Thompson can change the movie's direction though, the flood of talent exiting the company is likely to continue, said William Barnett, the Thomas M. Siebel Professor of Business Leadership, Strategy, and Organizations at the Stanford Graduate School of Business.
"The future of Yahoo will depend on their ability to attract and retain engineers and managers who are willing to take a risk and move away from the conformist attitudes that have grown up in the company over the years," he said.
Write to Joseph Walker at Joseph.Walker@dowjones.com