Reasons Behind Yahoo!'s Four-Year Slump

• 2. Self-Isolated Leadership
  
  Several years ago, I worked with Dartmouth Business School Professor Sydney Finkelstein on building a consulting practice based on the research from his book Why Smart Executives Fail. He researched more than 60 one-time industry-leading companies that in the end drove off a cliff in terms of their performance.

  These companies' executive team members always looked great on paper: the best business schools, the perfect career trajectory, many achievements to point to. Yet, these same people were responsible for bringing down their companies. One key reason for this -- common across all the failures -- is that the top executives got rid of or discouraged anyone around them who voiced a different perspective than theirs. This appears to have happened at Yahoo!.

  According to those I spoke with, executives often didn't engage in detailed discussions with lower-level managers responsible for areas that were under-performing. "I would have liked to talk to them more," said one ex-Yahoo!. "I had one good conversation with [one Yahoo! executive] and one good one with [another executive] in [the last few years]. That's it. I know others tried to educate them on the issues. Nothing came of it."

  There was not enough debate about key decisions made at Yahoo!. The last six months have seen a steady drain of senior talent. One employee contrasted that with how President-elect Barack Obama has selected key members of his Cabinet: "He's put former rivals around him in Clinton and Richardson, who definitely don't agree with him on some issues. You know they're going to speak up. You also could see any of them leading the country if necessary. We definitely don't have that depth of talent on the Yahoo! senior team."

  One group that Yahoo! executives were not shy about consulting in the last four years: the consultants. "There were way too many consultants and too many planning sessions. We needed more execution," said a former employee.