Yahoo Tackles Talent Needs Amid Upheaval Caused by Merger Bid, Takeover Talk

You might expect Yahoo to be suffering from recruiting and retention troubles these days, given all the turmoil at the Internet giant.

Uncertainty about Yahoo’s future rose dramatically this week, amid news of a Yahoo move to test Google’s search-related ad service and reports of possible AOL-Yahoo and Microsoft-News Corp.-Yahoo deals. These headlines followed an ultimatum Saturday, April 5, from Microsoft warning Yahoo to come to terms on a Microsoft acquisition within three weeks or face a possible fight for control of Yahoo’s board of directors.

But attrition has not increased at the Sunnyvale, California-based company since Microsoft’s initial offer in February, Yahoo said in late March. And the number of applicants actually has been growing—a trend that may owe in part to a new severance policy for all full-time employees in the event of an acquisition.

On the other hand, talent management at Yahoo is not exactly business as usual. It takes longer to walk candidates through concerns they have, says Carol Mahoney, Yahoo’s vice president of talent acquisition. Mahoney says it isn’t harder to convince candidates about Yahoo, but “it’s more time-consuming.”

Yahoo, a pioneer on the Internet, has weathered turbulent times over the past year, including the departure of CEO Terry Semel and slumping profits. As part of an effort to refocus the company, Yahoo cut 1,000 jobs this year.

Another major source of upheaval was Microsoft’s unsolicited bid to acquire Yahoo for $44.6 billion in cash and stock. Yahoo rejected the bid as too low, touting plans to make gains in the online ad market and become the “starting point” for the greatest number of consumers. The company has 1,000 job openings as it pursues its new strategy, Mahoney says.

Microsoft turned up the heat Saturday in a letter signed by Steve Ballmer, CEO of the Redmond, Washington-based software titan. “If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board,” Ballmer wrote. He also implied that Microsoft would lower its price.

Yahoo’s board on Monday again rejected Microsoft’s offer, but said it was open to a deal with Microsoft under the right conditions.

Then came word of the test with Google, which raises questions about broader collaboration between Yahoo and its Internet rival. Adding to the mix were reports about a possible AOL-Yahoo tie-up and the prospect of a partnership between media giant News Corp. and Microsoft to acquire Yahoo.

It is unclear whether a merger with Microsoft would curb Yahoo’s famed culture of fun—or lead to more layoffs. Yahoo had 14,300 employees at the end of 2007. Microsoft had 78,565 employees as of last June.

The prospect of going to work for “Microhoo” could hurt Yahoo’s recruiting, observers say.

“I hope a merger doesn’t change Yahoo’s corporate culture,” says an MBA student who recently applied for a Yahoo summer internship and asked not to be identified. “Both are good names to have on your résumé, but I would rather work for a company like Yahoo than for Microsoft, because of its culture.”

New severance plans that would be triggered by a change in control at the company help Yahoo’s recruiting, Mahoney says. Benefits under the plans include four to 24 months of severance pay and health coverage. The new policy is “an anxiety reducer” for anyone nervous about joining an acquisition target, Mahoney says.

Many companies have change-in-control agreements for executives. Yahoo’s approach stands out because it covers all full-time employees.

—Gina Ruiz and Ed Frauenheim