Getting to the bottom of Yahoo! - Marissa Mayer should trust her staff

When Yahoo! CEO Marissa Mayer announced a complete ban on working at home last month, she sparked uproar in the media. And, if the anonymous (of course!) leaked emails are to be believed, within Yahoo! itself as well.

At first glance, Mayer’s decree seems to go against the grain. It was described by one disgruntled employee as "outrageous and a morale killer." It sounds like the kind of thing an insurance company might say – certainly not the kind of pronouncement one would expect from a Silicon Valley pioneer.

"Our experience in this field is that one-size-fits-all policies just don't work," noted Stewart Friedman, Wharton practice professor of management and director of the business school's Work/Life Integration Project. "You want to have as many tools as possible available to you as an executive to be able to tailor the work to the demands of the task. The fewer tools you have available, the harder it is to solve the problem." What Friedman is alluding to, I think, is an inflexibility at odds with the kind of fleet-footed adaptability which helped Yahoo! establish itself in the first place.

So what is Mayer trying to accomplish by requiring all employees to show up at the office each day? Yahoo said in a statement, "this isn't about an industry view on working from home - this is about what's right for Yahoo right now."

According to the original memo sent by the company's HR department to employees (and later leaked to the media), the idea of the new policy is to improve communication and collaboration. "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," the memo said.

There have also been rumours that Mayer was unhappy about the number of start-ups originating from Yahoo! staff – it was as if they were using time and resources, paid for by their employer, to set up their own ventures. That’s undoubtedly true – but it’s part of the nature of business today. An ever-growing pool of “entrepreneurs” are by their very nature ambitious, with itchy feet – even if they are being handsomely rewarded for their endeavours. Maybe it’s an issue. But it seems like a clumsy decision, which may drive some of the company’s talent away – in an ideal world, an employee’s entrepreneurial energy would be naturally and instinctively focused inside the company; there should be no need to forcibly corral it.

To a degree I can see where Mayer is coming from. For a number of years Yahoo! has floundered. One of the original digital pioneers, it has struggled to carve out an identity for itself for the past decade. In a world dominated by Facebook, Google, apple and Amazon, the question most asked of Yahoo! in recent years has been; “What is it for?”

Yahoo's annual revenues have fallen more than 20% in the last two years to $5bn, and in 2012 the company's operating profit plummeted 30% to $566m. Mayer, a veteran of Google, was viewed as a saviour by investors, who have pushed the company's stock up 45% to $22.70 a share since she took over last July. If anyone can turn the company round, she can. In many ways, her “come into work” pronouncement should surprise no-one. She is a very hands-on manager with a sharp eye for important detail. And at struggling companies strong interpersonal communication, and an “us against the world” culture, can often aid turnaround.

As Mayer's memo suggests, being in the office can also enhance the “water-cooler effect” - those chance meetings and unexpected conversations that can generate new ideas. Humans are social creatures, and interpersonal interaction usually makes us more productive.

That said, proximity doesn't necessarily lead to better collaboration or ideas because the rise of e-mail and platforms such as Yammer have lessened the need for face-to-face encounters. And any time you have individuals trying to work together, there is potential for a communication breakdown, or argument or enmity, as much as there is for collaboration and co-operation.

Consider this as well: over the years there has been plenty of research on the value of everyone being in the office, and it has always produced mixed results, suggesting that the answer to the conundrum of how to improve productivity may need to be decided in a nuanced way that takes into account the needs of individuals. It’s all about context.

Having everyone in the same physical space is most valuable when there are new projects being launched or a defined set of problems a company is trying to solve. But there comes a point when everyone knows what they need to do, and when to do it by. If it can be done at home, then why not work from home?

Critics of flexible and home working often say that employees spend their time faffing about - watching daytime TV, checking in on Facebook or playing on an Xbox – rather than working. This to me is old-school management, which is about control, rather than ensuring people are empowered, accountable, know what they have to do and supplying them with the means to do it, which is what progressive, successful managers seek to achieve.

This is why Mayer’s decree sounds oddly old-fashioned. Yahoo! did have a problem – it had around 200 employees (not, it should be noted, freelancers, but full-time employees) who worked permanently from home. One could feel justified in wondering what they bought to the table, especially in a company attempting to haul itself out of the doldrums. But they should have been dealt with on an individual basis, each employee’s case assessed on its merits; a blanket ban seems unnecessarily prescriptive. I’m sure Mayer has the energy and talent to turn Yahoo! around, but she’ll find the task harder if morale is low and discontent is high. Setting up a free canteen is no substitute for trusting her employees with freedom and flexibility – because that’s where great ideas really come from; not from conversations around the water cooler.

Barry Dudley is a partner at Green Square, corporate finance advisors to the media and marketing sector.