The Case

Yahoo’s Performance Review System: A HR Disaster?

This case discusses the Quarterly Performance Review (QPR) which was introduced at Yahoo!
Inc. by CEO Marissa Mayer shortly after she joined the company in 2012. As part of QPR,
managers scored their employees and distributed them into ‘greatly exceeds,’ ‘exceeds,’
‘achieves,’ ‘occasionally misses,’ and ‘misses’ categories, with a target percentage of employees
to be distributed into each category. The lower ranked employees were fired while the higher
ranked ones were rewarded. This HR policy was widely criticized in the media for being similar
to stack ranking. Yahoo also faced a lawsuit from a former Yahoo editor, Gregory Anderson, who
accused the company of executing QPR in an arbitrary way to lay off employees on a huge scale.
He further alleged that even if all the employees on a team were performing well or at the same
level, managers were required to place some of them in the ‘occasionally misses’ and ‘misses’
buckets to meet their targets. While Yahoo stood by its QPR, critics felt that stack ranking was
not a very effective performance appraisal policy and Mayer should look for a more effective one
to revive the fortunes of Yahoo.

RANK AND YANK?

Mayer was tasked with economizing the company’s strategies and reviving the deteriorating
company’s fortunes after becoming CEO of Yahoo. Her emphasis was on finding an approach to
identify and retain top talent and firing unproductive employees. To enable this, she introduced
QPR in 2012. Industry observers were quick to liken the approach adopted by Yahoo to the
forced ranking system. In the 1980s, GE CEO Jack Welch introduced a method which ranked
employees along a bell curve which was called stack ranking system (Refer to Exhibit V for an
image). This technique forced managers to make judgments about employees and outline the top
performers and the worst performers.
LAWSUIT AGAINST YAHOO
Apart from critics, Anderson, who lost his job at Yahoo, described the QPR system as biased and
a violation of federal and California laws governing bulk layoffs. Anderson claimed that he had
received high ratings and a promotion until he took leave of absence in the summer of 2014 to
study at the University of Michigan on a Knight-Wallace Fellowship . Even though the leave was
accepted by two top Yahoo executives, Kathy Savitt and Jackie Reses, Anderson said that his
boss’s boss, Megan Liberman, called him on November 10, 2014, to inform him that he was in
the bottom 5% of the company’s workforce who were being fired. In the lawsuit, Anderson also
alleged that he was fired for reasons not linked to his performance.

CRITICISM OF YAHOO’S QPR

Analysts opined that stack ranking was a ruthless administration system in which superiors
ranked their employees’ performance along a vitality curve and fired employees who dropped
into the lowest category. On November 2013, All Things D , a tech-industry website, reported
that Yahoo staff was increasingly unhappy about the QPR introduced by Mayer. The grading
exercise was said to have cost 600 of them their jobs by then.

THE ROAD AHEAD

Industry experts pointed out that when companies like Microsoft and GE were dumping the stack
ranking system in favor of more employee-friendly organizational policies, Mayer introduced
stack ranking at Yahoo with the launch of the QPR system. Not only did this lead to the company
attracting a lot of criticism but it also resulted in its facing a lawsuit. However, Yahoo stood by
its performance review system...
According to industry experts, Alphabet’s ‘Other Bets’ were turning into financial black holes as
they had been losing billions of dollars annually. Reportedly in the fourth quarter of 2016,
Alphabet had lost nearly US$1.1 billion from its ‘Other Bets’ division. In 2016, the total loss
posted by this division was about US$3.6 billion.
 A study on
Yahoo’s Performance Review System: A HR Disaster?

(Case Study)

By:
PRIYANKA JHA (11503062)
SIMRAN KAUR (11503429)
ANISHKA JAISWAL (11504049)
BABAR BASHIR (11504681)
AISHWARIYA RAJ (11504827)

School of Business
LOVELY PROFESSIONAL UNIVERSITY
Phagwara, Punjab

UNDER GUIDENCE OF:

 TANYA NAGPAL

INTRODUCTION TO CASE

This case talks about the Quarterly Performance Review (QPR) which was presented at Yahoo!
Inc. by CEO Marissa Mayer not long after she joined the organization in 2012. As a major aspect
of QPR, supervisors scored their representatives and conveyed them into 'incredibly surpasses,'
'surpasses,' 'accomplishes,' 'once in a while misses,' and 'misses' classes, with an objective level
of workers to be dispersed into every classification. The lower positioned workers were
terminated while the higher positioned ones were remunerated. This HR arrangement was
broadly condemned in the media for being like stack positioning. Yahoo additionally confronted
a claim from a previous Yahoo proofreader, Gregory Anderson, who blamed the organization for
executing QPR in a subjective manner to lay off representatives on a gigantic scale. He further
asserted that regardless of whether all the workers in a group were performing great or at a
similar level, administrators were required to put some of them in the 'at times misses' and
'misses' containers to meet their objectives. While Yahoo remained by its QPR, pundits felt that
stack positioning was not an extremely powerful execution evaluation arrangement and Mayer
should search for an increasingly compelling one to resuscitate the fortunes of Yahoo.

Yahoo Inc. CEO, Marissa's (Mayer) approach of quarterly execution audit (QPR) came in for
huge analysis by examiners in 2016 as it was utilized to terminate many representatives in the
organization. A few investigators felt that the methodology was like stack positioning or
constrained positioning. As a major aspect of the approach, Yahoo audited the exhibition of each
worker and positioned every one of them on a size of 1 to 5. The modest positioned workers
were terminated. Gregory (Anderson), an ex-editor who directed Yahoo's cars, homes, and
shopping, private venture, and travel locales was terminated in November 2014. He documented
a claim in the Federal District Court in San Jose, California, in February 2016. He affirmed that
the organization's ranking directors normally controlled the worker rating framework to
terminate many individuals without a legitimate motivation to understand the organization's
money related objectives.
 COMPANY PROFILE

Yahoo was founded in 1994 by Stanford University graduate students Jerry Yang and David Filo.
Yahoo provides internet services around the world, including search engine, web portal, Yahoo
mail, directory services and more. The company was incorporated in 1995 and went public in
April 1996 (YHOO on the NASDAQ). Yahoo is headquartered in Sunnyvale, CA. As of this
writing, Yahoo is the most visited website on the internet. When Yahoo was originally founded, it
was called Jerry’s Guide to the World Wide Web. When the founders decided to change the
company name, they could not get a trademark for the name Yahoo, so they added the
exclamation point, thus the trademarked version of the name Yahoo! Yahoo! Media Relations has
a great description of the History of Yahoo – How it All Started. as well as Key Milestones which
only appears to go through 2003.

Yahoo employees are expected to work long hours, and in return, the company offers a lot of on-
site perks (see below). There is a work hard, play hard mentality. The company fosters an
environment of teamwork, offering video games and Foosball, and celebrating achievements and
milestones with company parties.

Company events are very popular at Yahoo and include visits from influential speakers, quarterly
company meetings, summer picnics, end of the year parties, even a Yahoo Halloween party
(Oktoberfest).
 PROBLEMS

1. Rank and Yank

HR policy was widely criticized in the media for being similar to stack ranking. In this
method the employee’s performance is compared with that of other employees. This
method creates a situation wherein employees consider each other as competitors and
teamwork takes a toll.

2. High stress and increased turnover

The ranking method led to a number of employees being laid off by the company.
Employees were continuously under tremendous pressure at all time. Employees are
unlikely to perform there best in such an environment.

3. Decreased performance

The employees are always worried about the ranking system and are afraid of losing their
job anywhere soon. In such a scenario, employees are not willing to ask for help when
needed and hence have almost no chance of improving their performance or even
developing their skill set.

4. Doesn’t unleash the talent in people

Human resource practices are developed in order to attract best people for the job and
then getting the best results from them. This method of ranking employees and
terminating the employees with low performance does not help in nurturing the
employees.

5. Decreased motivation

For any organization, employee motivation plays an important role in achieving the
corporate goals and becoming successful. In this case, it is clear that employees were not
at all happy with the way they were being treated. This decreases the motivation of the
employee and he no longer feels any association with the company and hence results in
the downfall of the company.
 SUGGESTIONS

1. Employee friendly policies

In order to improve the performance of the employees, organizations need to come up

with policies that are focused on getting the best out of your employees. Policies that
help and motivate the employees in realizing their potential and improving their
performance. Techniques like KPI, Performance Appraisals, Feedback, MBO etc. can
be used in developing your employees.

2. Competency mapping

Competency mapping identifies an individual’s strengths and weaknesses. This helps

an employee in understanding himself in a better way and also helps in highlighting
the areas that need some attention.
Competency mapping encourages communication between management and the
employees. Employees are able to clearly understand the expectations of their role.

3. Rewards and recognition

It is important for management to reward the efforts that employees put into
achieving their objectives. If the efforts of employees go unrecognized, it affects the
level of motivation among employees. Continuous appreciation and recognition help
in maintaining moral and continued high performance.

CONCLUSION
There is no doubt that employees are the most valuable assets of an organization. In order to
keep employees motivated to perform and give their best to the organization, management needs
to step forward and develop channels for better communication. Continuous feedback and proper
management can have a great impact on the performance of an employee.

It is important to understand and highlight the competencies of employees so that they get a
chance to introspect themselves and understand their position and role in a better way. With a
clear understanding of their roles and what is being expected of them actually helps in keeping
an employee motivated.

There are number of performance management tools and strategies that can be used by
management in order to keep their employees in check and management needs to adopt strategies
and policies by keeping the pros and cons of those strategies in mind.