Yahoo is getting innovative - no more telecommuting

Melissa Mayer took over as CEO of Yahoo in July 2012. At the time, I was sceptical when the board picked the third new CEO in just two years. The fact that the previous two CEOs had been fired reflected badly on the board's ability to select a new CEO. However, the stock market has been quite positive concerning Mayer's ability to turn around Yahoo (share price up 23% more than index during her tenure).

A couple of days ago Yahoo's HR-department sent an email to all staff stating that telecommuting or working from home no longer would be allowed.

To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices. Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being

Any company that tries to innovate in a competitive industry needs people working together during long hours. That is why you get free food at Google. Innovation requires diversity, but research shows that it is more difficult to work with people that are different in terms of skills, age, or race. Spending time face-to-face creates trust and also makes it easy to transfer tacit knowledge. Tacit knowledge is the type of knowledge that is hard or impossible to write down.  Trust and tacit knowledge are absolutely essential for innovation to happen in a company. The academic thinking behind this has been well described by Nonaka in  1994 (The knowledge-creating company).

One can have telecommuting in a company or among employees that do not need to deliver innovation. We call such companies modular. A journalist sending in her story to the editor is a good example. The routines are very worked out and there is no need for face-to-face interaction between the editor and the journalist, as long as they do not want to innovate. Or the call centre worker that saves two hours commuting time might be more friendly calling from home.

Some academics consider companies nothing more than contracts between the company and its employees. In such a view, it is perfectly acceptable to telecommute if that is what is written in the contract. However, other academics think that a company can be much more than a number of employment contracts. A company can be a community with a shared purpose to create a product or service. If you have the company-as-community view, you cannot specify all the details in a contract and the company cannot be modular. A community cannot be modular.

Yahoo was a pioneer in Internet advertising and is still having good cash flow from its past innovations. However, Mayer wants new innovation and she is trying to change the culture of the organisation. It is easy to understand the frustration of some employees resulting from the memo quoted above. They were young ten years ago and worked hard, now they have a family and want to spend more time with their children so they telecommute. The telecommuters might create good software or projects, but it will not be innovative software or projects. Most of Yahoo's telecommuters are probably not lazy. It is just that nobody can be innovative working alone.

Some pundits are now irritated with Mayer (e.g. here, here, here) because she tries to do what is best for the company. Many people considered Mayer as a new kind of CEO that would put more emphasis on a family friendly workplace. These people argue that she should know better because she is a 37 year old mother. They are now disappointed, but they neither care about the survival of Yahoo nor Mayer's professional judgement. I find these comments very sad and sexist. Why should Mayer behave in a certain way because she is a 37 year old female with a child? We should applaud that she is doing what she thinks is good for the company. That should be the responsibility of all CEOs.

Yahoo's shareprice is $21.20. I think the stock market will like Mrs Mayer more.

UPDATE
Best Buy also scrapped a flexible work program in February (here). The argument is very similar. The company is in a crisis and people at head office need to be in the office and collaborate to get results.