Case 10: When what worked didn’t work
This post is the 10th in my series looking at cases where it seems that "believing we are right" has led to bad outcomes, sometimes even spectacularly bad results, for leaders, teams and organizations.
For my upcoming book, Big Decisions: Why we make decisions that matter so poorly. How we can make them better, I have identified and categorized nearly 350 mental traps and errors that lead us into making bad decisions. The many high-profile situations that I have examined demonstrate the bad outcomes that can be produced by mental traps and errors. My premise is that, at the least, if we recognize and admit that we don't know the answer, we will put more effort into looking for better decision options and limiting the risks stemming from failure when making important decisions.
In the case at hand, past success was not a guarantee or future results: Mental traps seemingly blinded our protagonist to differing circumstances.
"DID IT BEFORE, CAN DO IT AGAIN"
Yahoo CEO and former Google executive Marissa Mayer believed that she could turn around Yahoo when many others before her could not.
Starting in 2012, as Yahoo's seventh CEO in a little over five years, "Mayer put her resources in some of the wrong places, spent a lot of money, and didn't have a lot to show for it," according to analyst Jan Dawson as quoted by CNN Money. In a fire sale, in 2016 Verizon agreed to acquire Yahoo for $4.8 billion. This price was cut to $4.48 billion this year after Yahoo was hit by two massive security breaches involving a million users. When the transaction closed this past June, Mayer left the Board and management, albeit with a $23 million golden parachute. The Yahoo brand will continue to exist alongside AOL and Huffington Post as it it folded into digital media division of Verizon, now named Oath.
Whether turning around Yahoo was possible cannot be known. But what does seem evident is that mental traps made the task even more difficult for Mayer:
Not surprisingly, Mayer applied the mentality and approach she had learned and used at Google to Yahoo, which was a very different organization in terms of mindset, focus and experience. Staying consistent with what worked at Google was a likely outcome of the Commitment Heuristic (the tendency to make decisions that are consistent with our prior beliefs, attitudes and actions, thus affirming their correctness).
One the first 25 employees at Google, Mayer ran the company's flagship search division for many years. Then, according to the New York Times, "she lost a turf battle to a powerful engineer within Google and was quietly reassigned to oversee Google Maps and other so-called local products. Mayer tried to spin the move positively, but that became harder after Larry Page, one of the company’s founders, regained the role of C.E.O. and removed Mayer from the group of executives reporting to him." Did Mayer see Google's successes as more tied to her actions than they actually were and therefore take the Yahoo job to prove that Google erred in demoting her? Whether this was consciously her intent, the evidence suggests that Mayer was afflicted by Memory Bias (when recalled memories are altered so they differ from what actually happened and therefore bias predictions of future experiences based on these altered memories).
According to the Los Angeles Times, in May last year, Yahoo valued its investment stake in China's Alibaba, a giant Google competitor, at $29.4 billion and its 35.5% stake in Yahoo Japan at $8.7 billion. Yahoo’s market capitalization that day was $34.7 billion. "In other words, the stock market valued everything other than those two holdings — that is, everything subject to Mayer’s management — at negative $3.4 billion." Yet, later in the year when Mayer wrote to employees about Yahoo's sale to Verizon, she "put lipstick on the pig" by using Reframing (changing how information is presented to elicit a different point of view). Rather than recognizing that the strategies that had been pursued under Mayer's leadership had not turned around the company, her letter cited the company's acquisition by Verizon as evidence of "the immense value we’ve created" and stated, "We set out to transform this company – and we’ve made incredible progress."
Meyer's story shows us just how extraordinarily difficult it is for us to "unlearn" what has made us successful when new circumstances demand a different approach. We are wired to stay on the path we know and adjust our perspective to keep us on that road, even when it leads us to a cliff edge. Yet, Meyer was in one sense exempted from having to jump off the cliff: Based on her personal financial gain, she succeeded wildly, leaving the now captive company with a fortune in hand.
I expect to publish my new book, Big Decisions: Why we make decisions that matter so poorly. How we can make them better, later this year. It will be an antidote for bad decision individual and organizational decision making. You can help me get it published and in the hands of decision makers whose decisions not only affect their lives but all of ours.
Learn more about Big Decisions: Why we make decisions that matter so poorly. How we can make them better and my special half-price pre-publication offer. Thank you!
