A $100 million loss, plummeting advertising sales, a stock price that has fallen from an all-time high of $237 to less than $10 per share, and layoffs that cost 800 people their jobs, including the previous CEO. Welcome to Yahoo! At this once phenomenally successful company, so many basic things have gone wrong that the question is, where do you start to fix it?

One key problem is the organizational structure. With just 3,200 employees, Yahoo has 44 different business units. General Electric, with 300,000 employees, has only 13. Yahoo doesnt have a direct sales unitno one, it turns out, is responsible for cultivating customers because customer advertising dollars were being thrown at the company. Consequently, most orders took place via e-mail. Yahoo didnt have to establish relationships with customers because customers came to it. Unfortunately, this led to arrogance. A potential customer said the message was, Buy our stuff [meaning Yahoos advertising], and shut up. Jeff Mallett, Yahoos former president, said, We ran Yahoo to optimize market share. I make no apologies for that. If there was a company that didnt get it [Internet advertising], we moved on very quickly.

Another problem was the overly creative, freewheeling, spontaneous company culture in which everyone, including the CEO, worked in cubicles, representing an overly informal culture with no controls. At Yahoo, employees played soccer in a large open space outside the company boardroom, even while the board was meeting. Furthermore, no one had an overall perspective of what was best for the entire company. Consequently, unit managers would beg, borrow, and steal from the network (the overall company) to help their own properties. Beyond that, ideas were pursued without having to get anyones feedback or approval. Yahoos chief operating officer said, Yahoos original mission was to grow as fast as you can and put things out there and see what works. The more serious problem, he said, was that nobody knew what would work.

Yahoo was so informal, so unfocused, and so freewheeling that no one really worried about whether the company could charge for the services it provided and make a profit. There was a fear, said one manager, that if all of our efforts were put into profit making, wed starve research and development and lose our innovation.

Refer to Narrative 8-1. Before restructuring, Yahoo was described as having an overly creative, freewheeling culture, a highly decentralized decision-making structure in which managers did what was best for their units rather than the entire company, and exhibited resistance to making a profit. Which kind of organization did the company have?