Given the events of the past 18 months or so — two new CEOs, a brief flirtation with a significant spinoff, the failure and then marginalization of an important consumer product and an unpopular and expensive acquisition — it’s probably no surprise that morale among employees at Hewlett-Packard has dropped significantly in recent months.

But now, many employees in HP’s mid-tier management ranks have something new to grumble about. Some 700 to 900 HP employees who have been participants in a three-year-old HP stock bonus plan learned right before the holidays that they would not be receiving the payout of shares they expected.

The program concerns what HP refers to as PRUs, or Performance-based Restricted Units, and is described in detail in HP’s 10-K and proxy filings with the Securities and Exchange Commission. It was created both as a performance-based bonus and also as a retention plan for certain HP management-level employees at the vice president level and higher.

In a Dec. 12 internal HP email obtained by AllThingsD, employees participating in the program were told that they wouldn’t be receiving a payout for 2011, and that shares accrued during HP’s fiscal years 2010 and 2009 would also be lost.

To explain:

Under the terms of the program, employees received grants representing hypothetical shares of HP stock that were to have been paid out at the end of the three-year period ending Oct. 31, 2011. Had HP met the stated cash flow and shareholder return goals, the shares would have been paid out to employees sometime in December.

Instead, employees were told that they would receive no payout from the PRU program at all, not for 2011, nor for 2010 or 2009.

This is, of course, exactly how the PRU program was to work: With HP’s goals not met, there was no payout to give. And while other equity-based bonuses and grant programs remain in force, for employees in the mid-level ranks — not those in the senior ranks already earning half-million-dollar salaries or more — PRUs represented an important benefit.

It’s not clear exactly how much HP would have been required to pay had the company met the PRU program’s requirements. The company’s most recent 10-K filing said that it had “$82 million of unrecognized pre-tax stock-based compensation expense related to PRUs with an assigned fair value,” but now that the payout has been canceled entirely, it no longer has to account for that amount, nor for any previous year’s PRUs.

Whatever the total amount involved, affected employees who stood to receive PRUs are seething about how and when they were told they wouldn’t be receiving them.

The email, delivered to certain managers on Dec. 12, contained instructions on talking with subordinates about their annual performance review and the rewards they could expect. The subject line was: “Deliver the One conversation.”

It reads, in part:

Managers with FY09 Performance-based Restrictued Unit (PRU) Award Holders

We have the final performance results for the FY09 Performance-based Restricted Unit award, which was based on HP’s performance from FY09-FY11. As you will recall, the performance metrics for the FY09 PRUs were:

1. HP’s annual cash flow from operations as a percentage of revenue for each of FY09, FY10 and FY11, and

2. HP’s Total Shareholder Return (TSR) for the FY09-FY11 period relative to the S&P 500

As a result of the change in HP’s stock price over the three-year period, the TSR requirements were not achieved, and no shares will be released from the FY09 PRU award.

Of course, we are very disappointed that there is no payout this year from this program, and you have specific management actions to communicate the final disposition of this grant for FY09 PRU award holders. The actions are:

– During the One Conversation, you will also need to address the outcome of the FY09-11 PRUs with employees on your team who are FY09 PRU Award Holders

– Please review the FY09 PRU Talking Points and PRU FAQs [Here the email contains links to internal HP documents I have not seen. -Ed] to prepare to have this discussion with your affected employees, who are listed below: [Here the printed copy of the email I received has several listed names blacked out.]

For any other questions about FPR, please ask Contact HR.

Regards,
Evan Wittenberg, VP, Global Talent

Stan Dunlap, VP, Global Rewards

And here’s some more detail about how the PRU program worked, taken from HP’s 10-K and proxy filings:

HP employees who participated in the PRU plan could track the accrued amounts of their PRUs on a Merrill Lynch Web site. I talked to two sources, both of whom had accrued PRUs worth between $100,000 and $200,000 for fiscal 2009 and 2010. Other less senior employees who received PRUs would have accrued between $20,000 and $50,000 in their accounts.

One source told me that as rumors began to circulate that PRUs would not be paid for 2011, most people assumed that the accrued amounts for 2009 and 2010 would still be paid. How wrong that assumption was became apparent on Monday, Dec. 11, as the amounts in their Merrill Lynch PRU accounts plummeted to zero. As recently as Dec. 9, the prior Friday, the value of the accrued PRUs for 2009 and 2010 were still displayed.

HP CEO Meg Whitman discussed the decision not to pay out PRUs in a conference call with HP’s top 900 executives days later. According to people who were on the conference call, Whitman primarily blamed the economy.

Despite the fact that HP followed the PRU program’s provisions correctly, affected employees are grumbling that management has “crossed a line.” As one source put it to me, revealing the decision during the weeks leading up to Christmas was “unconscionable.”

“If they will cross this line now, there’s no line they won’t cross later,” said one source, a current HP employee who asked not to be named. “They could have played straight with us and told us this was coming months ago. The way they’ve done this is not in keeping with the HP way.”

The decision is hurting morale at a time when HP needs to hold on to its people. One source, who left HP recently for another company, says he is routinely being peppered with resumes from HP employees looking to jump ship.

Update: An HP spokesman says of the PRU program that compensation is tied to performance and the 2011 fiscal year wasn’t a good one for HP. Still other bonus programs did pay out. “High-performing employees were still eligible for salary, stock and bonus awards that year.”

As to the timing of the decision, he said since HP’s fiscal year ends on Oct. 31, it’s natural that compensation decisions fall in December. “That’s the time every year that we do raises and award bonuses. That is when these things are announced.”

Of course, many of the affected employees are blaming HP’s prior generation of management for not meeting results, as well as its board of directors. HP shares fell considerably during the 11-month period that Léo Apotheker was CEO, and it was on his watch that the company shook the confidence of investors, as it missed quarterly earnings targets three times in a row.

This probably won’t make them feel any better, but Apotheker is affected by the loss of PRUs, too: Under terms of his separation agreement, Apotheker was to have received 424,000 PRUs which on paper would be worth $12 million and change, given Monday’s share price. But according to his contract on file with the SEC, his PRU grants were made under the same rules as those made to other employees. That means they’re gone, just like those of other affected HP employees.

It is now the new year, and you are faced with the rather undesirable task of hiring a new VP. Upon reflection, you realize that the SpiderNet hiring process failed. Given the issues (laziness, lack of leadership ability) surrounding the VP you just fired, you realize that your process (or lack thereof) did not properly vet prospective job candidates.

So before you move on to hiring again, you take an inventory of the current process in order to better understand how to correct things in the future. Here’s what you find:

1. You identified the requirements of the position and developed a comprehensive job specification on your own. Since the position reported to you, you did not see the need to ask for other input.
2. You hired a search firm and saw a number of good candidates. You felt that the candidate pool was adequate, but not exceptional.
3. The interview meetings were always with you, your co-founder and one or two other people from the executive team. Everyone exchanged emails on the candidates after their meetings.
4. The search firm did the bulk of the reference checks, which significantly helped your schedule and time.

What mistakes do you think you made and how can you better go about interviewing future candidates?

I have often considered the ability to hire great people as being analogous to a batting average in baseball. A player who hits .300 is near the top of their game. While I have certainly had a much better than 30 percent success rate in my hiring overall, I’m not sure that I’ve topped 30 percent for truly exceptional hires. Hiring phenomenal employees, like hitting in baseball, is difficult. I must admit that only recently did I come to realize that there is a set of steps that a company can follow that will significantly increase the hit rate.

With respect to the SpiderNet situation, there were several mistakes made with the current process. First, there was no input from either the board or the other executives on the job specifications. It is particularly important to gain agreement on the position and have the interviewing team help develop the requirements. Second, there wasn’t a defined interview team and the results of the interviews felt a bit ad hoc. Having a defined interview team should be part of the process. Finally, the CEO left reference checking to the search firm, which was a huge error in judgment, and probably the biggest mistake of the entire process.

I took the liberty of asking Jeff Stump, our partner responsible for Executive Talent at Andreessen Horowitz, and he outlined the following steps that should be taken when hiring an executive:

1. Develop the candidate profile and expected qualifications
2. Lay out the compensation framework
3. Craft a set of questions to be used in the interview process
4. Identify your interview and recruiting methodology
5. Perform reference checks

Let’s look at each of these in more detail.

Candidate Profile and Qualifications: There should be a universal understanding of what the profile is and why the company is looking for this new hire. What is the charter of this hire over the next six months to one year? What does the company/hiring manager expect this person to deliver during this timeframe and what does success look like for this hire one year out?

The focus in this phase should be on developing a set of non-negotiable attributes as input to the interview process. Make sure to include input from anyone who is going to have a say in the interview process, including the Board and the management team. There does not need to be universal alignment, but this process will help identify any differences of opinion that can be addressed up front. This first step will drive consistency in the interview process and candidates will take notice.

Compensation and Reporting Framework: Determine the title, reporting structure and compensation of the position. Not doing this up front can often lead to misalignment late in the recruiting process.

Interview Questions: Once the profile and qualifications have been identified and agreed upon, develop a set of questions that are going to be used in the interview process. These can also be used by the search firm to screen candidates. Questions should be crafted to gauge motivation, fit and expectation.

During this phase, the hiring manager also should identify the interviewing team and start the selection of a search firm. In most cases, the company’s internal network will not be sufficient to identify the absolute best candidate and a search firm is recommended. There are exceptions to this, but in most cases, thinking that the company has enough contacts often results in a substantial delay.

Interview and Recruiting Methodology: High-level items to consider:

• Decide on the appropriate team members to be involved in the search process.
• Determine who is running point on the management team. Tasks may include interview coordination, candidate follow-up, feedback collection, reference coordination, compensation, negotiation, etc.
• Who from the board of directors will be involved?
• Define the sequence of interviews and meetings. Who needs to meet when and what is the strategy/objective during a first round vs. a second round of interviews? I also recommend spending a great deal of the first meeting on determining “fit.” Can you work with this person? Nothing else matters if you can’t check this box.
• Have the team interview for different attributes to create a better experience for the candidate and to avoid overlapping questions in the interview process.
• Define the feedback loop: What info gets captured and recorded and how/when is it shared?

Reference Checking: One of the most important — and overlooked — parts of the recruiting process is reference checking. When you make an offer to a candidate, you should feel as though you really know the person, warts and all. Reference checking is the best way to really understand what a candidate is like to work with.

Often your search firm will offer to do reference checks. While it is fine for them to do some investigation, do not leave all of it to them. You need to do a large part of the reference checking yourself. Compare notes with the search firm but handing it off to someone else is a huge mistake.

In general, you should do between 10 to 15 reference checks and they should have a 360-degree approach (i.e., 1/3 bosses, 1/3 peers, 1/3 subordinates). At least one-third of these queries should be backchannel references.

Finally, when you have settled on the final two candidates, you should have the finalists come in to present a 100-day plan with your executive team at your staff meeting. This will give you a very good sense of how the person responds to an assignment and the nature of their work.

Hiring takes planning and time, and the process is often ad hoc or simply non-existent. Don’t make hiring a batting average. Take the time, develop a clear process, and you will see much better results in your overall hit rate.

Peter Levine has been a lecturer at both MIT and Stanford business schools and CEO of Xensource. Prior to Xensource, Peter was EVP of Strategic and Platform Operations at Veritas Software where he helped grow the organization from no revenue to more than $1.5 billion, and from 20 employees to over 6,000.

When you base your life on credit
and your loving days are done
checks you signed with love and kisses
later come back signed insufficient funds.
– Funkadelic

Thanks to Ward Cunningham, the metaphor “technical debt” is now a well-understood concept. While you may be able to borrow time by writing quick and dirty code, you will eventually have to pay it back — with interest. Often this trade-off makes sense, but you will run into serious trouble if you fail to keep the trade-off in the front of your mind.

There also exists a less well-understood parallel concept, which I will call management debt.

Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Also like technical debt, the trade-off sometimes makes sense, but often does not. More importantly, if you incur the management debt without accounting for it, then you will eventually go management bankrupt.

Like technical debt, management debt comes in too many different forms to elaborate entirely, but a few salient examples will help explain the concept. For this post, I chose three of the more popular types among start-ups:

• Putting two in the box
• Overcompensating a key employee because she gets another job offer
• No performance management or employee feedback process

Putting two in the box
What do you do when you have two outstanding employees who logically both fit in the exact same place on the organizational chart? Perhaps you have a world-class architect who is running engineering, but she does not have the experience to scale the organization to the next level. You also have an outstanding operational person who is not great technically. You want to keep both in the company, but you only have one position. So, you get the bright idea to put “two in the box” and take on a little management debt. The short-term benefits are clear: a) you keep both employees, b) you don’t have to develop either because they will theoretically help each other develop and c) you instantly close the skill set gap. Unfortunately, you will pay for those benefits at a very high rate of interest.

For starters, by doing this you will make every engineer’s job more difficult. If an engineer needs a decision made, which boss should she go to? If that boss decides, will the other boss be able to override it? If it’s a complex decision that requires a meeting, does she have to schedule both heads of engineering for the meeting? Who sets the direction for the organization? Will the direction actually get set if doing so requires a series of meetings?

In addition, you have removed all accountability. If schedules slip, who is accountable? If engineering throughput becomes uncompetitive, who is responsible? If the operational head is responsible for the schedule slip and the technical head is responsible for throughput, what happens if the operational head thrashes the engineers to make the schedule and kills throughput? How would you know that she did that? The really expensive part about both of these things is that they tend to get worse over time. In the very short term, you might mitigate these effects with extra meetings or by attempting to carve up the job in a clear way. However, as things get busy the mitigation will fade and the organization will degenerate. Eventually, you’ll either make a lump sum payment by making the hard decision and putting one in the box or your engineering organization will suck forever.

Overcompensating a key employee because she gets another job offer
An excellent engineer decides to leave the company because she gets a better offer. For various reasons, you were undercompensating her, but the offer from the other company pays more than any engineer in your company, and the employee in question is not your best engineer. Still, she is working on a critical project and you cannot afford to lose her. So you match the offer. You save the project, but you pile on the debt.

Here’s how the payment will come due. You probably think that your counteroffer was confidential because you’d sworn her to secrecy. Let me explain why it was not. She has friends in the company. When she got the offer from the other company, she consulted with her friends. One of her best friends advised her to take the offer. When she decided to stay, she had to explain to him why she disregarded his advice or lose personal credibility. So she told him and swore him to secrecy. He agreed to honor the secret, but was incensed that she had to threaten to quit in order to get a proper raise. Furthermore, he was furious that you overcompensated her. So, he told the story, but kept her name confidential to preserve the secret. And now everyone in engineering knows that the best way to get a raise is to generate an offer from another company then threaten to quit. It’s going to take awhile to pay off that debt.

No performance management or employee feedback process
Your company is now 25 people and you know that you should formalize the performance management process, but you don’t want to pay the price. You worry that doing so will make it feel like a “big company.” Plus, you do not want your employees to be offended by the feedback, because you can’t afford to lose anyone right now. And people are happy, so why rock the boat? Why not take on a little management debt?

The first noticeable payments will be due when somebody performs below expectations:

CEO: “He was good when we hired him, what happened?”
Manager: “He’s not doing the things that we need him to do.”
CEO: “Did we clearly tell him that?”
Manager: “Maybe not clearly …”

However, the larger payment will be a silent tax. Companies execute well when everybody is on the same page and everybody is constantly improving. In a vacuum of feedback, there is almost no chance that your company will perform optimally across either dimension. Directions with no corrections will seem fuzzy and obtuse. People rarely improve weaknesses that they are unaware of. The ultimate price you will pay for not giving feedback: systematically crappy company performance.

In the end
Every really good, really experienced CEO I know shares one important characteristic: they tend to opt for the hard answer to organizational issues. Faced with giving everyone the same bonus to make things easy or sharply rewarding performance and ruffling many feathers, they’ll ruffle the feathers. Given the choice of cutting a popular project today because it’s not in the long-term plans or keeping it around for morale purposes and to appear consistent, they’ll cut it today. Why? Because they’ve paid the price of management debt and they would rather not do it again.

Special thanks to my friend Joanne Bradford who came up with the idea for this post and coined the term “management debt.”

It’s the typically newsless time around Christmas and New Year’s, but for once there has actually been a lot going on at Yahoo.

Last week, the Silicon Valley Internet giant’s typically moribund board decided to move ahead with negotiations to sell part of its stake in China’s Alibaba Group, as well as all of its shares in Yahoo Japan.

While that is still not a done deal, it adds clarity to the Yahoo mishegas, as current leaders there seek to turn around the company’s lagging fortunes.

Now, as Yahoo continues to contemplate a pair of partial investment bids by private equity firms Silver Lake and TPG Capital into 2012, more focus will be on the selection of a CEO candidate to take over, sources said.

While I have floated some names that have been contemplated — such as Hulu CEO Jason Kilar, Juniper CEO Kevin Johnson, former aQuantive and Microsoft exec Brian McAndrews, and board member David Kenny — I have collected some more that seem to be getting the once-over and are being mentioned internally as well as externally.

Sources said that the Nominating and Corporate Governance Committee at Yahoo, which is run by independent director Patti Hart, has been looking for someone with definite public company experience, as well as expertise in large-scale management.

As to talent, candidates seem to be either good at running big platforms, or deeply knowledgeable about advertising and media as well as technology.

Another important criteria, said sources: Someone who is “collaborative” and nonconfrontational. As in, not like the former and very pugnacious CEO Carol Bartz, who was fired in September.

Thus, here’s another trio of candidates to consider, while we wait — and who knows how long that will be given that the Asian activity could have tired out for a bit this usually slow-moving board:

Chris Liddell: The former CFO of Microsoft is an interesting name that just popped up recently, and it makes some sense when you think about the possible mindset of the Yahoo board.

Liddell, who has a charming New Zealand accent, did a short stint, from January of 2010 to March of this year, as CFO at General Motors. Recently married to another former Microsoft exec, he has since been living in New York.

He apparently loves living in the Big Apple.

But when he left GM, Liddell made it clear he wanted to go for a top job next. He was among the candidates for a recent search for a CEO of Time Warner’s Time Inc. (an effort that was run by exec search firm Heidrick & Struggles, which is also conducting the Yahoo hunt).

Known as tough and decisive, he certainly is qualified to deal with complex financial situations, such as the one in which Yahoo now finds itself knee-deep. One knock: Little product or advertising experience.

Laura Desmond: While certainly a dark horse, Desmond has been queried by Heidrick, said several sources.

She is CEO of Starcom MediaVest Group, a subsidiary of Publicis, one of the largest media planning and buying agencies, making Desmond one of advertising’s most prominent players.

Well-known in Yahoo’s key market, she is considered a savvy and smart exec with a wry sense of humor.

I happen to particularly like one line from one of her bios:

“Ms. Desmond’s career has been driven by two caveats: Take intelligent risks and learn more from failure than from success.”

She could learn a lot at Yahoo. (I know, easy jab, but it works!)

David Rosenblatt: The former DoubleClick CEO, who went on to a big ad job at Google after it paid $3.2 billion for the company, is also a long shot, mostly by his own choosing.

The sharp exec is always on the short list of CEO candidates for a lot of big, splashy online jobs, but he seems to want to swim his own way.

Case in point: He was recently named CEO of New York-based 1stdibs, a relatively obscure online marketplace known among antique dealers and interior designers looking for one-of-a-kind furniture, art and lighting.

Yes, that’s right: Fancy lamps.

Rosenblatt also serves on the boards at Group Commerce, Twitter and IAC.

All that Internet ad and e-commerce experience is exactly why Rosenblatt would be one of the better choices for CEO of Yahoo. But, for him, I would guess taking such a job is probably in the life’s-too-short category.

More to come, obvi!

In a written statement Wednesday, the company said its board and management team “remain firmly committed” to creating value for its shareholders. “We will continue to aggressively execute on our strategy in 2012 as we continue the turnaround of AOL,” the company said. AOL added that it had cut costs, sold noncore assets and made “significant investments for our future” during the past two years.

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I was fired from my first job as a programmer after college, and I’ve agonized over terminations ever since. The day I was fired was one of the worst days of my life, and no matter how it was presented, I felt like my world had collapsed. The event had a profound impact on my career and on my actions as a manager. For me, there’s nothing easy about firing someone.

That said, I’ve had to fire many people in my years as a manager and CEO. My worst days were when I knew I had to have “the conversation.” While firing anyone is hard enough, the most difficult terminations were people whom I had recruited and hired as direct reports. I find it disappointing to see my “rock star” fail — and having a vested interest in the person makes the decision quite difficult. There is usually a long period during which the decision process loops: fire, coach, keep, fire, coach, keep, (repeat). As a result, termination day often happens long after I’ve internally decided that the person needs to go.

Industry wisdom suggests that you fire someone immediately after recognizing that a person must be let go. I agree with this — I’ve never looked back on a termination thinking, “I should have waited longer to do something” — but it is way easier said than done.

Earlier in my career, I always wanted to spend the time to work things out for my employees, especially the folks I hired and managed directly. Unfortunately, I was rarely able to change the outcome of the situation, and I would often waste precious time not moving forward with the termination and subsequent re-hire. As I tried to work things out (and inevitably put off making a decision), the impact on the organization and the reflection on me as a manager all took its toll. I’ve since learned that moving forward quickly is the best overall approach. Still, firing someone sucks.

Let’s look at the SpiderNet case and break down some of the pros and cons of each choice.

• Find him a different job in the company. It is very rare in a start-up that you will actually have a job opening for another role that can be filled by a person with a different skill set whom you also want to terminate. This may be easier in larger companies, but not at a start-up. You need to be brutally honest with yourself before making a lateral move and ask, “Is the new position needed and is this person best for that job?” If yes, then move the person. Otherwise, terminate.

  In the SpiderNet case, you are also dealing with a person who is lazy. In my experience, character flaws cannot be corrected, regardless of where you put the person. Once lazy, always lazy. There are additional downsides to creating a new position: how does the rest of the team feel when you “protect” a non-performer? Are you seen as wasting money creating a “non-job”? Are you not stepping up to deal with the problem?

• Put him on a performance plan. Performance plans are generally useless for executives. These plans are nothing more than negotiated action items that are a problem to manage and never get at the core of the issue. My philosophy is that a senior executive is expected to bring a level of expertise and job performance to where you don’t need to hand-hold them with a list of negotiated action items. Do the job or leave. At the end of the three-month plan, the executive usually makes the most of the pre-negotiated goals, but you’ve not made the person less lazy or any more competent. They’ve simply made it through a set of hoops and you still want to get rid of them. Human Resource directors in larger companies always want to put people on plans but I have never seen a three-month plan change the long-term outcome for an executive. Plans only prevent you from making an important change today.
• Fire him and re-hire. As you might imagine, this is my preferred outcome. Do it and move on. Get the new hire process going and don’t screw around. Always treat the person you are terminating with dignity, put together a respectable termination package, and never make the termination personal. In the SpiderNet case, I might ask the co-founder to step back in to run engineering on an interim basis while I searched for a new VP.

When running a software company, hiring is one of the most leveraged activities we can do. The higher the position is, the more impact and importance that hire has on the success of the company. At an executive level, hiring the wrong person can result in months or years of delay, and hiring the right person can help to accelerate the business to entirely new levels.

When a critical hire needs to be made, I have often made the mistake of focusing on managing the department that has the opening, rather than focusing on making the right hire. I have since learned that prioritizing hiring first and managing the department second yields a much more successful hire.

Finally, I’ll say it again: Firing someone sucks, so take the time to hire correctly and you’ll never have to be in a position to have “the conversation.” Let me know the secret when you achieve 100 percent success.

Peter Levine has been a lecturer at both MIT and Stanford business schools and CEO of Xensource. Prior to Xensource, Peter was EVP of Strategic and Platform Operations at Veritas Software where he helped grow the organization from no revenue to more than $1.5 billion, and from 20 employees to over 6,000.

In the previous vignette, you (as the CEO of SpiderNet) were trying to decide on how to organize the engineering unit. Your decision was to hire a new VP of engineering. Your co-founder, who previously oversaw engineering, agreed to become the CTO and chief architect. Everything seemed to have worked out with the transition and your new VP is on the job. You were certain you had a rock star on the team — references from the recruiter came back great, and he had exactly the right profile against your hiring objectives.

A few weeks later, though, at a dinner meeting with a close business associate and CEO of another company, you mention that you’ve hired an incredible new engineering VP. Your dinner friend tells you that he knows your new hire, and you’ve made a big mistake. “He’s really lazy. He has little real domain knowledge, despite the pedigree. You should have called me.” Crap.

Several months later, the laziness starts to show. Your “rock star” now becomes a “project,” and you have to manage his weekly performance and deliverables. He is just not working very hard and does not have the strategic insight into the nuances of your business. He also does not have the team’s respect. They don’t think he is a total lost cause, but they also don’t pay much attention to him. That said, he’s certainly okay — and he’s better than nobody. He puts together decent schedules, brings much-needed process to the team and always says the right things when you have your one on ones. But you don’t feel good about him, and the engineering team is not delivering at the level you’d like. You talk with your board and put together a few options: find a different job for this person and reinstate your co-founder as VP; put him on a plan and reassess in three months; or fire and re-hire.

What now?

Chime in on the comments below, and tune in Friday for Peter’s answer.

Peter Levine has been a lecturer at both MIT and Stanford business schools and CEO of Xensource. Prior to Xensource, Peter was EVP of Strategic and Platform Operations at Veritas Software where he helped grow the organization from no revenue to more than $1.5 billion, and from 20 employees to over 6,000.

Whether explicitly or not, everyone has their own answer to this question, and based on the success rates of start-ups, those answers by and large stink. I don’t have a Magic 8 Ball on the topic, but two things make this the issue I wrestle with most:

1. The often-unpredicted success or failure of “nobodies” or “sure things” respectively
2. The outsized rewards for locating great people, juxtaposed with the probability of abject failure when settling for good ones

There is no central casting for these players — many of the A+ entrepreneurs with whom I have partnered have come in unusual packages: a biology post-doc who thought about opening a microbrewery B&B; a large-animal veterinarian who went to business school in his late 30s; and an ex-EMT who was also a nephew of the President. The best VCs seem to show the same diversity of background.

I now focus on these attributes:

• Great talents find a way to win, and are relentlessly driven to do so. They follow through and complete the task at hand — after all, starting is easy, it’s finishing that takes real will. It is not that they think outside of the box, there simply is no box for them. They view ambiguity as opportunity, not risk. When things get uncertain is when they really perk up and start to pay attention, because that is when real change is possible. Most of all, they exceed expectations. They bend the space-time continuum in some fashion, and their accomplishments are extraordinary.
• Experience is overrated. By and large, the world is changed by the young and the hungry. Experience can be enabling or constraining, but it is not even close to the dealbreaker that many believe it to be. If you are seeking a VP marketing or head of sales at a 100+ person company, absolutely, look at a resume. But to find someone with the passion and uniqueness to actually create an early-stage venture, you have to take time: Watch them and see what they do, talk to them and see what they think, ask around and see how well respected they are.
• Balance exploring/driving with learning/listening. Great people have a very clear grasp of their vision, while understanding that the world has a lot to teach them. They are humble students of the game, but are very confident in their abilities, and never “do what they are told.” They don’t avoid conflict and will always bet on themselves rather than shy away from risk. They ask questions and argue on facts, balancing innumerable data streams with a gut feeling to get to what they believe is the right answer.
• Great people are magnetic. They are not only smart and driven, they attract resources when all the data suggests they should not — whether capital, people or partners — and thereby become larger than just their singular efforts.

While it’s a potentially controversial idea today, I have come to believe that great entrepreneurs and great VCs are two sides of the same coin. Both embody these attributes. They are maniacally focused on changing the way we live with innovations that others thought were not possible. They are passionate about building a great company, and put the company before themselves. Their roles are complementary, like looking down opposite ends of a telescope, but those different perspectives on a problem can be extraordinarily synergistic. Great future entrepreneurs can look like great young VCs, and vice versa — in fact, three of my recent investments are stellar companies started by folks who have crossed from one role to the other.

All venture firms are simultaneously never, and always, looking for team additions. I believe this is a direct result of how difficult it is to identify those who will be not only smart, passionate, personable and high integrity, but also successful in this ever-changing, ambiguous entrepreneurial world, in which a strategy that worked the last time is not a recipe for a future win, but more likely charts a path to mediocrity. In fact, my own difficulty in finding great new additions for our firm is what spurred putting these thoughts on paper.

Bryan Roberts is a partner at Venrock and has been the highest-ranking healthcare investor on Forbes Midas List since 2008. You can follow him on Twitter at @brobertsvc and learn more about him at Venrock.com.

Wealthfront, the Silicon Valley start-up with more than $10 million in its own kitty, finally officially launched its long-planned Online Financial Advisor product today, with a focus on attracting techies interested in more easily managing their money.

The Palo Alto, Calif.-based company, which started off as a social investing site called kaChing, shifted over to the new plan just over a year ago. Its aim now is to try to solve the thorny problem of delivering actionable and easy-to-use tools for making investments online, for those who have some money but little time or expertise.

A lot of companies offer similar tools, of course, including big ones such as Fidelity and Schwab, as well as bigger money-management firms. But Wealthfront’s CEO Andy Rachleff and founder Dan Carroll are promising lower fees and more accurate determination of risk via all kinds of online bells and whistles (see below).

Wealthfront is not charging advisory fees on a customer’s first $25,000 under management, with a fee of 0.25% on assets exceeding that.

Wealthfront is backed by DAG Ventures and well-known investors, including Marc Andreessen and Jeff Jordan.

Here’s a video Wealthfront posted about the service, as well as its official press release:

Wealthfront Unveils Automated Online Financial Advisor Service for Silicon Valley and High-Tech Hubs

Highly Sophisticated Investing Advice Finally Made Available through Simple and Low Cost Web Service

PALO ALTO, Calif., December 1, 2011 – The ability for the savvy tech community to easily access high quality, affordable financial advice is now available with the launch of the Wealthfront Online Financial Advisor. Before Wealthfront, sophisticated investment advice was available only to the wealthy, by expensive financial advisors who often can’t relate to today’s tech-savvy generation who want sound financial advice, made easy and convenient. Wealthfront’s Online Financial Advisor appeals to investors from booming tech communities who favor doing everything online, and are looking for ways to have their new wealth managed for far lower fees.

At the core of Wealthfront’s web service is the industry-standard Modern Portfolio Theory (MPT). Until now, the widely adopted investing model has been kept out of consumers’ reach, and was only accessible via expensive financial advisors. Wealthfront automates the application of this intricate investment model, putting the power of MPT directly into the hands of investors online. Moreover, Wealthfront’s pricing structure trumps all traditional financial advisor models. The online service makes it possible to receive a sophisticated, meticulously managed investment plan at a price that is 75% lower than traditional financial advisors. There are no advisory fees on a customer’s first $25,000 under management, and only a fee of 0.25% on assets exceeding $25,000.

“This is exactly what most people in the technology industry need. It’s the kind of advice you’d get if you had Goldman Sachs manage your money and it does away with the hidden fees we in tech despise,” said Piaw Na, a long time, former employee of Google and popular blogger on the topic of investing. “What’s more, the recommendation on the investment mix is provided with a full explanation of what was picked and why, making the whole experience a massive and much needed shift that is especially appealing now.”

Wealthfront’s high quality investing advice is powered by its Precision-Investing Platform™, the breakthrough software behind the service. The Platform uniquely assesses a customer’s true risk tolerance, recommends an optimized portfolio of carefully selected Exchange Traded Funds (ETFs) spanning six asset classes, and monitors and periodically rebalances the investment mix to maintain a customer’s desired risk tolerance.

Wealthfront is backed by Silicon Valley luminaries including DAG Ventures and individual investors including Marc Andreessen, Jeff Jordan, former OpenTable CEO and President of PayPal now at venture firm Andreessen Horowitz, and partners from Benchmark Capital, Index Ventures and Kleiner Perkins Caufield & Byers.

“The financial advisor world has long recognized that one day the Internet and software would pose a credible threat to their hold on the sub $5 million category of individual investors,” said Paul Pfleiderer, C.O.G. Miller Distinguished Professor of Finance at Stanford Graduate School of Business, and Wealthfront advisor. “Wealthfront has made accessible what historically had been out of reach or prohibitively costly for a large class of investors. By using a simple, yet powerful engine for accurately assessing risk and return in the MPT context, Wealthfront has established a new standard for quality financial advisement on the web.”

“With the biggest names in venture capital and the brightest minds in software development, we’re ushering in a financial advisor service that’s capable of precisely managing a customer’s investments from $5,000 to tens of millions with a pricing approach unheard of in the financial services industry,” said Andy Rachleff, CEO of Wealthfront. “Wealthfront emerges at a time when many tech companies are enjoying record earnings, initial public offerings, and strong acquisitions. This creates masses of people in tech looking to invest for the first time and who want to manage their finances in the same manner they’ve organized every other aspect of their lives, online.”

“The promise of the Internet is to disrupt incumbent providers, enabling new companies to provide high quality services at substantial savings through the innovative use of software,” said Jeff Jordan, Wealthfront board member, former CEO OpenTable and President of PayPal and now General Partner at Andreessen Horowitz. “Wealthfront embodies this promise, democratizing access to high quality financial advice. I believe this will appeal strongly to a generation that has grown up with the Net and use it to manage all facets of their life.”

For more information on Wealthfront Online Financial Advisor, or to create a free account, visit www.wealthfront.com.

Last night, Yahoo’s board gathered for a pre-meeting dinner, a precursor to a day-long meeting today to weigh several bids from private equity firms to buy part of the Silicon Valley Internet giant, including Silver Lake and TPG Capital.

Among the thorniest of issues will be the low price that the firms want to pay for a 19.9 percent stake in the company. Silver Lake has offered $16.50 and TPG a dollar more.

In the past year, Yahoo share prices have seen a low of $11.09 and a high of almost $19. It closed yesterday at $15.70 — a price that is mostly due to sale rumors — making the offers not much of a gain on current market valuation.

The transaction type being contemplated is called a PIPE — or a Private Investment in Public Equity — with the investment below 20 percent, which allows Yahoo to avoid a shareholder vote on the issue.

While the Yahoo board had hoped for bids above $20, they are not expected to be forthcoming, considering the weakness in its business over recent years and the difficulty of returning it to health and growth.

Results in its upcoming quarter, for example, are expected to be weak again, with trouble in its advertising business, largely due to uncertainty around the business.

The low price, along with the attempt to bypass shareholder approval, is sure to infuriate Yahoo’s major investors, given they have watched the value of their stakes wilt over the years under current board management.

In the last five years, due to continually muddled leadership and the missing of key Internet trends, Yahoo shares have dropped 44 percent in value, which compares with huge gains from companies like Amazon and others.

Major Yahoo stakeholders are already irked by the PIPE idea itself, which could transfer power to private equity firms at preferential terms.

Another possible bone of contention will be the preservation of at least some parts of Yahoo’s current board.

Under a plan by Silver Lake, for example, it would get three board seats, as well as another one for a CEO of its choosing. Another seat will go to Yahoo co-founder and current board member Jerry Yang. There will be six independent board members, but it is not clear if they would be new or include some current directors.

One of the Silver Lake choices would be well-known Silicon Valley legend Marc Andreessen, who is now a powerful VC. The appeal of Andreessen is important to some major shareholders who have turned sour on Yang.

Who will be CEO of the rejiggered entity will also be discussed at the meeting. Sources said Silver Lake and TPG have definite candidates in mind and Yahoo has also been conducting an official search.

In other words, there’s a lot on the plate of Yahoo’s board today, which also needs to revisit continued proposals from its Asian partners — China’s Alibaba Group and SoftBank of Japan — to sell back its stakes in Alibaba and Yahoo Japan in various tax-free schemes.

Sources said Yahoo — which has thus far rejected such efforts — might now consider selling a part of their shares back, up to half. This would allow the company to give a cash dividend to its disgruntled shareholders.

If thwarted, as has been previously reported ad nauseum, Alibaba and SoftBank are considering their own bid with the help of other U.S. private equity firms, such as Blackstone.

Other PE firms — especially ones who have not signed Yahoo’s non-disclosure agreement related to any deal — are also hanging under the hoop, so to speak, to see what happens. At least one firm hopes the Yahoo board will reject the low-priced partial bids, leaving the court wide open again.

“It’s still anyone’s game,” said one possible bidder.

Except for Yahoo’s put-upon employees and shareholders, this is anything but fun. More on that soon.

In a new filing with the Securities and Exchange Commission concerning its upcoming IPO, Zynga is expected to unveil two key management and board changes at the online gaming phenom:

Chief Business Officer Owen Van Natta — who came to the San Francisco-based start-up several years ago to help CEO Mark Pincus grow it and develop it — will step down from his job and become a strategic adviser focusing on major partnerships. He’ll still remain board member at Zynga, but will give up millions of pre-IPO shares by moving out of his operational role.

And director and venture investor Brad Feld will leave the the board, which VCs sometime do as companies move to a public offering and add members with more specific business experience.

In his place, longtime entrepreneur and investor Sunil Paul, who founded a company called FreeLoader with Pincus many moons ago, will join the board.

Zynga confirmed the changes to me in a statement by Pincus:

“Owen is a valuable business partner. He’s made great contributions to Zynga and continues to be an important part of our team.”

Sources said the changes related to Van Natta around are not part of a recent controversy around a Wall Street Journal story about clawing back of some share options grants of early Zynga employees who had become less involved in the company. While the company cannot actually take back already vested shares owned by those staffers, the article has put a lot of scrutiny on Zynga and raised questions about how to cope with the kind of hyper-growth some Internet firms experience.

That’s certainly been the kind of rocket ride Zynga has been on, as it has grown from a small social gaming company on Facebook to a high-profile public company.

Zynga is in the final stages of its IPO process, answering questions from the SEC that are typical. If all goes well, Zynga execs are expected to go on a road show after the Thanksgiving and go public by the end of the year at a market valuation of close to $20 billion.

That was different from when Van Natta officially got to Zynga in the spring of last year — after a rocky experience running the doomed Myspace. At the time, he told me at the time that planned to be focused on scaling the business and did not consider himself a long-term operating executive.

Since then, he has helped Pincus hire a series of experienced gaming execs, including a chief operating officer, a chief marketing officer and others.

Zynga was Van Natta’s third high-profile Web company in recent years. He was a top early exec for Mark Zuckerberg at Facebook until early 2008, and in 2009 he took over News Corp.’s (NWS) MySpace, a job that lasted less than a year.

Early in his career, Van Natta was also was a top strategy, marketing and deal exec for Amazon, which bought an early social networking start-up called PlanetAll that he worked at.

It will now be interesting to see what Van Natta does next, but it is unlikely he will take a permanent position. He is a longtime angel investor in Silicon Valley, including in hot start-ups such as Asana and still holds a significant stake in Facebook.

But, in moving out of his job at Zynga, he will be giving up many millions of shares of a rich trove he was given when he arrived at the company. That said, Van Natta already owns millions of accelerated vested shares and will get another large grant as a board member.

Translation: Don’t cry for Mr. Van Natta, Silicon Valley — he made $42 million last year from Zynga shares alone.

Score one for Yahoo, it seems, getting some key private equity firms to sign its restrictive non-disclosure agreement to allow them a special peek at its business.

And now that includes Silver Lake, which has already had several discussions with Yahoo management and its board members, including co-founder Jerry Yang.

Silver Lake, which has perhaps been among the more aggressive of the possible bidders for Yahoo, had been a significant holdout over the NDA, because of provisions it felt were too onerous.

That included restricting “cross-talk” among the variety of suitors interested. Sources said Silver Lake had been discussing various scenarios related to Yahoo that might take a consortium of players to realize.

It seems it will agree to none of that, for now at least, joining several others who have also signed on the dotted line of secrecy. While Yahoo could have agreed to changes in the NDA, sources said the one Silver Lake agreed to was the same as others previously signed.

Those NDA-ready PE firms include TPG Capital and KKR. As of today, other bidders — such as Providence Equity Partners, Bain Capital, Blackstone and Hellman & Friedman — have not yet signed the document.

Yahoo had extended a deadline for doing to into this week, but firms can also get involved in later rounds of talks.

In addition, signing the NDA is not the end of the road for those who do not — Yahoo is a prominent public company and there are plenty of sources to talk to about its prospects.

But getting cooperation of Yahoo management could be critical, unless a bidder is contemplating making an unsolicited offer.

And that would be a tough road — just ask Microsoft.

Most of all, getting everyone to sign is important for Yahoo, which wants to control any sales or investment process and wants to avoid bidders taking control of its fate.

Thus, Silver Lake accepting the NDA is a big deal, since it had been considering hooking up with China’s Alibaba Group in a possible bid for all or part of Yahoo.

In addition, it has had success in a smaller but similar scenario around Internet telephony giant Skype, which it eventually sold to Microsoft for a lucrative upside.

As with Skype, Silver Lake is still working with Andreessen Horowitz, as I had previously reported. In fact, principal Marc Andreessen was present in a recent informational meeting Silver Lake had with Yahoo’s Yang.

I asked Silver Lake for comment about the NDA, bur it, um, deflected my swooping inquiry (inside joke alert!).

Third Point’s Daniel Loeb — the smack-tastic hedge fund manager who has bought up a 5.23 percent stake in the Silicon Valley Internet giant and has been hitting some of Yahoo’s board upside the head with those shares ever since — is now taking aim at its co-founder and director Jerry Yang. Loeb wants him to step down as a director due to conflict of interest.

Loeb also reiterated his threat of a proxy fight to get control of the board. In fact, sources in Silicon Valley said he has already been reaching out to potential alternative board members.

In a previous 13-D filing with the Securities and Exchange Commission, Loeb had backed Yang against Yahoo Chairman Roy Bostock.

But that’s all over. Reports have surfaced that Yang has been trying to get a private equity firm to back a plan that would keep him and current management in charge of the company.

In a new letter to the Yahoo board today, Loeb said that Yang’s attempt amounts to cronyism and self-dealing.

Wrote Loeb, in part:

We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so. The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008; it is now clear that he is simply not aligned with shareholders. At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller — he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company. He should also be requested by the Company to promptly leave the Board and join Mr. Filo in solely an operating capacity.

Loeb is also demanding two seats on the board; in fact, the ones he hopes will be vacated by Bostock and Yang.

While it is likely the Yahoo board will try to minimize the Loeb letter, which is below in its entirety, other shareholders hold the same opinion of the prospects of the same-old-same-old staying on at Yahoo.

“Nothing can excuse such an action, and shareholders will not be bought off with a dividend of our own money while value is destroyed,” wrote Loeb, channeling a lot of others I have spoken to about a Yang insider deal.

Here is the full letter, Yahoo’s tiresomely typical (and borderline fibbish — but I will get to that later) rejoinder, as well the the new 13-D filing by Loeb:

Third Point LLC Letter to Yahoo! Inc. Board of Directors

NEW YORK — (BUSINESS WIRE) — Third Point Requests Two Yahoo Board Seats, Demands Yang’s Resignation from Board, and Opposes Reported Negotiations for “Sweetheart” Deal with Private Equity Firms

About Third Point LLC: Third Point is an investment firm headquartered in New York, managing $8.0 billion in assets, including a London Stock Exchange listed closed-end fund. Founded in 1995, Third Point follows an event-driven approach to investing globally.

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Dear Members of the Board of Directors:

As you are aware, Third Point LLC (“Third Point”) manages investment funds that are, collectively, the second largest shareholder of Yahoo! Inc. (“Yahoo” or the “Company”).

We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so. The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008; it is now clear that he is simply not aligned with shareholders. At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller — he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company. He should also be requested by the Company to promptly leave the Board and join Mr. Filo in solely an operating capacity.

In our view, a leveraged recapitalization makes no sense and its only purpose would be to put substantial equity stakes into friendly hands to entrench management and transfer effective control without payment of a premium or even, it appears, a shareholder vote. Nothing can excuse such an action, and shareholders will not be bought off with a dividend of our own money while value is destroyed.

Moreover, such a transaction would undermine the basic tenets of free markets, including democratic voting, accountability and fairness. We do not blame our friends at the private equity firms rumored to be involved for trying to get the best deal possible for their investors; we have great respect for these firms and their leaders — Jim Coulter of Texas Pacific Group, Jonathan Nelson of Providence Equity Partners, Glenn Hutchins of Silver Lake, Henry Kravis of KKR and Stephen Schwarzman of Blackstone. However, we at Third Point are also in the value-maximizing business. We will not tolerate any transaction which appropriates for insiders opportunities that duly belong to current Yahoo shareholders. However, we would welcome the prospect of any of these firms’ presence on a reconstituted Yahoo Board of Directors and work on a long-term strategy for the Company should it be necessary for us to pursue a proxy contest next year.

If you, as board members, undertake the current course of action, Third Point will hold you personally responsible for such a flagrant violation of your duty of loyalty. Any transaction with a third party who assists members of management and the board in protecting their jobs, and/or involves the effective sale or transfer of control without payment of a control premium, will likewise be subject to scrutiny.

Given the Board’s inability — or perhaps unwillingness — to properly solicit true strategic alternative bids, let alone to negotiate them, Third Point demands that we be awarded two board seats — those created by the vacancies of Chairman Bostock and Mr. Yang, or two newly-created ones. We are prepared to assume these positions immediately.

Sincerely,

Daniel S. Loeb
Chief Executive Officer
Third Point LLC
390 Park Avenue
New York, New York 10022

Yahoo’s Board of Directors’ objective is, and always has been, to serve the best interests of all the company’s shareholders. The Board’s comprehensive strategic review is being properly managed for the benefit of all shareholders and is guided by outside counsel for the independent directors and investment bankers retained separately by the Board. The Board of Directors (eight independents and Mr. Yang) controls the strategic review process and has directed its Transactions and Strategic Planning Committee (comprised of four independent directors) to manage the process day-to-day and report regularly to the Board.

News reports based on rumor and speculation are just that. The Board’s comprehensive strategic review process is still underway, with a wide range of options under active consideration. We can assure all Yahoo shareholders that whatever the outcome of the strategic review process may be, it will serve the best interests of all the company’s shareholders.

Mr. Yang is one of 9 directors with the exact same fiduciary duties and motivation as all of his fellow directors — to serve the best interests of all the company’s shareholders. The Board and the Transactions and Strategic Planning Committee initiate, direct, and oversee any work Mr. Yang undertakes in relation to the strategic review process.

YHOO-20111104-SC13DA-0

Jared Grusd, AOL’s SVP of business development and chief of strategy, is leaving the New York Internet giant to work at Spotify, according to sources close to the situation.

At AOL, according to his bio, Grusd “oversees the organization responsible for all domestic and international strategic partnerships and commercial alliances for AOL and each of its operating units. He is also responsible for identifying and evaluating new corporate strategies and opportunities for the company.”

The marathon fiend and former Google exec — who held top legal-deal jobs there — also serves on AOL’s Executive Management Team.

It is not clear what the well-respected Grusd will be doing at the online music service, which has been expanding its executive ranks as it has moved aggressively into the U.S. market. But sources said it was a high-level position in New York.

Spotify recently hired former Clear Channel exec Gerrit Meier as GM of distribution and partnerships, reporting to U.S. head Ken Parks.

Spotify also just scooped up former AOL sales head Jeff Levick — another Google alum — as its chief advertising officer.

The departure of Grusd further thins out the exec ranks at AOL, which is still mired in a turnaround under the leadership of CEO Tim Armstrong (yes, he too is a former Googler!).

I lobbed a query into AOL PR for comment, and am awaiting news of my news.

According to multiple sources close to the situation, Groupon plans to conduct its road show for investors next week, starting either on Monday or Tuesday.

While the decision to move forward could still change, it comes amid continued criticism of the Chicago-based daily deals company, which has had one of the rougher IPO processes for an Internet company in recent memory.

Just yesterday, the New York Times took aim at Groupon and its Wall Street bankers, retreading over the same list of issues, including controversial accounting, a too-large payout to its founders and issues around its marketing costs.

In addition, the social buying service has had some management turnover, with two COOs departing.

Lastly, it has amended its S-1 filing several times, for a variety of reasons, including an email to employees by its CEO Andrew Mason that struck regulatory agencies as a bit blabby.

That said, the initiation of the road show — where company execs will pitch its business to possible shareholders — might be an indication that Groupon’s results have improved in its recent quarter.

In the last quarter, the company lost $102.7 million on revenue of $878 million.

Also of concern is the stock market itself. Groupon, like several Web IPO candidates, had delayed its offering due to turbulent conditions.

Now, sources said, the company will go public on the Nasdaq exchange soon after the road show is complete and after pricing by its bankers.

That valuation will also be under scrutiny. Some had previously estimated that Groupon would have an IPO of up to $25 billion. Now it could be half that, sources said.

Well, we will presumably soon see, as Groupon plans to proceed.

Earlier this week, I flew to New York to moderate a panel on women in tech for Glamour, part of an article I did for the magazine’s recent issue.

As loyal readers know, I now and then get a bee in my bonnet about the issue of gender imbalance in tech. As in: Too many dudes and not enough ladies in key jobs.

So, along with the piece, there was also an event to talk about it all, which was held at the Times Square HQ of Glamour’s publisher, Condé Nast.

My panel included women execs from high-profile tech companies, including: Stacy Brown-Philpot, director of Google-owned and operated properties; Julie Larson-Green, corporate VP of program management for Windows at Microsoft; Kati London, director of product for Zynga; and Hilary Mason, chief scientist at Bitly.

My video interviews with them are below, as well as another of the whole session:

]]> http://allthingsd.com/20111013/tech-is-glamour-ous-mag-hosts-panel-on-women-in-tech-video/feed/ 0 http://allthingsd.com/20111005/management-quality-assurance/ http://allthingsd.com/20111005/management-quality-assurance/#comments Wed, 05 Oct 2011 20:45:46 +0000 Ben Horowitz http://allthingsd.com/?p=129078

“Better check yo self before you wreck yo self”
– Ice Cube

Everyone in the technology industry seems to agree that people are paramount, yet nobody seems to be on the same page about what the people organization — Human Resources — should look like.

The problem is that when it comes to HR, most CEOs don’t really know what they want. In theory, they want a well-managed company with a great culture. They know instinctively that an HR organization probably can’t deliver that. As a result, CEOs usually punt on the issue and implement something that’s suboptimal, if not worthless.

Interestingly, one of the first things that you learn when you run an engineering organization is that a good Quality Assurance department cannot build a high-quality product, but it can tell you when the development team builds a low-quality product. Similarly, a high-quality Human Resources organization cannot make you a well-managed company with a great culture, but it can tell you when you and your managers are not getting the job done.

The employee life cycle
The best way to approach management quality assurance is through the lens of the employee life cycle. From hire to retire, how good is your company? Is your management team world-class in all phases? How do you know?

A great HR organization will support, measure and help improve your management team. Some of the questions that they will help you answer:

Recruiting and hiring

• Do you understand the skills and talents required to succeed in every open position?
• Are your interviewers well-prepared?
• Do your managers and employees do an effective job of selling your company to prospective employees?
• Do interviewers arrive on time?
• Do managers and recruiters follow up with candidates in a timely fashion?
• Do you compete effectively for talent against the best companies?

Compensation

• Do your benefits make sense for your company demographics?
• How do your salary and stock option packages compare to the companies that you compete with for talent?
• How well do your performance rankings correspond to your compensation practices?

Training and integration

• When you hire an employee, how long does it take them to become productive from the perspective of the employee, her peers and her manager?
• Shortly after joining, how well does an employee understand what’s expected of her?

Performance management

• Do your managers give consistent, clear feedback to their employees?
• What is the quality of your company’s written performance reviews?
• Did all of your employees receive their reviews on time?
• Do you effectively manage out poor performers?

Motivation

• Are your employees excited to come to work?
• Do your employees believe in the mission of the company?
• Do they enjoy coming to work every day?
• Do you have any employees who are actively disengaged?
• Do your employees clearly understand what’s expected of them?
• Do employees stay a long time or do they quit faster than normal?
• Why do employees quit?

Requirements to be great at running HR
What kind of person should you look for to comprehensively and continuously understand the quality of your management team? Here are some key requirements:

• World-class process design skills: Much like the head of quality assurance, the head of HR must be a masterful process designer. One key to accurately measuring critical management processes is excellent process design and control.
• A true diplomat: Nobody likes a tattletale, and there’s no way for an HR organization to be effective if the management team doesn’t implicitly trust it. Managers must believe that HR is there to help them improve rather than police them. Great HR leaders genuinely want to help the managers and could not care less about getting credit for identifying problems. They will work directly with the managers to get quality up, and only escalate to the CEO when necessary. If an HR leader hoards knowledge, makes power plays or plays politics, he will be useless.
• Industry knowledge: Compensation, benefits, best recruiting practices, etc., are all fast-moving targets. The head of HR must be deeply networked in the industry and stay abreast of all the latest developments.
• Intellectual heft to be the CEO’s trusted advisor: None of the other skills matter if the CEO does not fully back the head of HR in holding the managers to a high standard of quality. In order for this to happen, the CEO must trust the HR leader’s thinking and judgment.
• Understanding of things unspoken: When management quality starts to break down in a company, nobody says anything about it, but super-perceptive people can tell that the company is slipping. You need one of those.

Acknowledgement
I would like to give a very special thanks to my head of Human Resources, Shannon Callahan, who taught me everything that I know about this subject.

]]> http://allthingsd.com/20111005/management-quality-assurance/feed/ 0 http://allthingsd.com/20110930/only-one-yahoo-fearless-leader-note-this-week-please-ignore-the-un-ignorable-rumors/ http://allthingsd.com/20110930/only-one-yahoo-fearless-leader-note-this-week-please-ignore-the-un-ignorable-rumors/#comments Sat, 01 Oct 2011 00:03:12 +0000 Kara Swisher http://allthingsd.com/?p=127145

Yahoo’s interim CEO Tim Morse penned another weekly email to staff at the Silicon Valley Internet giant today; the only one from the company’s leadership, which sent out two internal memos last week.

It’s below, and again addresses the swirl of news around Yahoo’s plans as part of its ongoing strategery over the company’s future.

“I know there was some more swirl out there this week,” wrote Morse. “You know we don’t comment on rumors or speculation and for now, everything has been just that — rumors.”

Well, not so much, which I will be weighing in on soon via an old-fangled thing called reporting, Tim!

Until then, here is the latest missive:

Short note from me today. Before we head into the weekend, I wanted to give a shout out to the Flickr team for their great work on their new mobile features. What they rolled out this week got rave reviews and tons of great buzz. We also had a nice Demos and Drinks event here in Sunnyvale that I was able to check out, so thanks to all the Yahoos involved in that.

Last but certainly not least, I want to say thank you to the teams that are working hard on Advertising Week. It kicks off on Monday, and we’ve got some big stuff in store, so stay tuned on that front.

I know there was some more swirl out there this week. You know we don’t comment on rumors or speculation and for now, everything has been just that — rumors.

Rest assured, when we have something to share, we will. In the meantime, please know how much the entire executive team appreciates your great work — and please keep it up!

Have a good weekend.

Tim

]]> http://allthingsd.com/20110930/only-one-yahoo-fearless-leader-note-this-week-please-ignore-the-un-ignorable-rumors/feed/ 0 http://allthingsd.com/20110927/after-all-its-corporate-drama-hewlett-packard-is-crazy-cheap-bernstein-says/ http://allthingsd.com/20110927/after-all-its-corporate-drama-hewlett-packard-is-crazy-cheap-bernstein-says/#comments Tue, 27 Sep 2011 21:06:13 +0000 Arik Hesseldahl http://allthingsd.com/?p=125533 While it’s true that technology giant Hewlett-Packard has suffered from an overdose of corporate drama — it’s now on its third CEO in 13 months — there’s something good to take away from it all if you’re an investor who’s been sitting on the sidelines. Toni Sacconaghi, an analyst at Bernstein Research, argues that at its current valuation, HP is trading at ridiculously cheap levels.

In a note to clients today, Sacconaghi says that HP is the “most inexpensive tech stock in the S&P 500 and the 10th most inexpensive stock overall.” There are very few precedents, he says, for large-cap technology stocks trading at HP’s current valuation. Before this month, there had not been a large-cap tech stock that traded at less than 5.5 times earnings — not in the last 20 years.

At that level, he says, HP’s current valuation implies that its annual free cash flow will decline by 9 percent a year forever or, put another way, that HP will be half its size within seven years. Usually companies that trade so low have significant structural problems. HP, for all its faults, doesn’t meet that standard. It’s not “a broken company,” he says, it’s on track to grow earnings by 6 percent this year, and it leads in three of its four key lines of business — PCs, printers and servers.

So why the crazy-low valuation? “Investor exasperation.” (There’s that word again!) Investors have discounted it too much given all the drama, making it, believe it or not, a buying opportunity for “patient investors.” He rates HP an “outperform” with a price target of $37. Investors seemed to warm to the idea. HP shares finished the day up more than 3 percent.

]]> http://allthingsd.com/20110927/after-all-its-corporate-drama-hewlett-packard-is-crazy-cheap-bernstein-says/feed/ 0 http://allthingsd.com/20110926/the-attrition-begins-yahoos-latin-america-head-departs/ http://allthingsd.com/20110926/the-attrition-begins-yahoos-latin-america-head-departs/#comments Mon, 26 Sep 2011 22:17:57 +0000 Kara Swisher http://allthingsd.com/?p=125049

According to sources close to the situation, Guilherme Ribenboim, VP and managing director of Latin America and U.S. Hispanic markets, has left Yahoo for another job at a start-up.

The 12-year Yahoo veteran, who is located in Brazil, is widely respected at the troubled Silicon Valley Internet giant and leads an area that is growing for it.

[UPDATE: A Yahoo spokeswoman confirmed the departure of Ribenboim.]

[UPDATE NO. 2: Also leaving: Connie Lee Schiefer, the well-regarded Yahoo veteran of more than eight years. She was VP of product management at Yahoo's cloud platform group.]

Sources said that attrition — already a big problem at Yahoo — is about to hit the company hard. While the board and its top leaders try to figure out a strategy — either a sale or whatev — in the wake of the firing of CEO Carol Bartz, Yahoo has yet to put in place a new plan to hold onto talent.

“The people walking out the door is about to become a flood, unless management acts,” said one employee in a common sentiment among people I have interviewed at Yahoo.

]]> http://allthingsd.com/20110926/the-attrition-begins-yahoos-latin-america-head-departs/feed/ 0 http://allthingsd.com/20110922/exclusive-dst-silver-lake-and-yunfeng-to-lead-1-6b-tender-offer-aimed-at-alibaba-employees-and-others/ http://allthingsd.com/20110922/exclusive-dst-silver-lake-and-yunfeng-to-lead-1-6b-tender-offer-aimed-at-alibaba-employees-and-others/#comments Thu, 22 Sep 2011 12:45:55 +0000 Kara Swisher http://allthingsd.com/?p=123431

Silicon Valley’s Silver Lake and DST Global of Russia, as well as Chinese private equity firm Yunfeng Capital, are leading a $1.6 billion tender offer for privately held employee and shareholder stock of China’s Alibaba Group, according to sources close to the situation.

Yunfeng, by the way, was co-founded by Alibaba Chairman and CEO Jack Ma, as well as other prominent Chinese entrepreneurs.

Along with DST, Silver Lake and Yunfeng, Singapore-based investment firm Temasek is also participating in the tender offer as an investor, but in a smaller way.

The deal, which has been discussed for some time, was signed earlier today and will be presented to its employees in an internal company blog, which will be in Chinese.

To get around persistent foreign ownership issues in China, sources said, DST and Silver Lake are ceding voting control of their stakes to Alibaba management.

If the tender is fully subscribed, that would mean a stake of just under five percent for the group, sources said, and it gives Alibaba a $32 billion enterprise valuation.

The impetus for the tender offer, which begins today, appears to be trying to address a cash-out, paper-rich issue for Alibaba employees.

There are no active secondary private markets in China, as is the case for tech start-ups in the U.S., and there is also no IPO in the foreseeable future for Alibaba. Thus, management has been looking for a way to give its employees and also other shareholders some liquidity.

This tender offer is not a capital raise by Alibaba and is only aimed at eligible employees and shareholders. The purchase of the Alibaba shares is expected to close before the end of December.

It will be done via a special investment vehicle, specifically aimed at this purchase, that includes a spate of investors. Giant Interactive Group, a Chinese online game developer, for example, said it had committed $50 million to the fund.

It’s not clear what the implications are for Alibaba’s biggest shareholder, Yahoo, which sources said is not selling shares in the tender offer. Yahoo’s fully diluted Alibaba 39 percent stake is now worth $12.5 billion in the deal.

That’s discounted due to tax issues and also the inability of the Silicon Valley Internet giant to sell its Alibaba shares.

In other words, investors will likely welcome this higher valuation, but realize a public offering is farther away than ever.

But it is interesting in that it clearly shows a strong relationship between DST and Silver Lake, which have jointly been mulling a possible bid for Yahoo along with Silicon Valley venture firm Andreessen Horowitz, as I previously reported.

Some will speculate that Silver Lake and DST now have an in with Alibaba, which is important, since a large slug of Yahoo’s market valuation is due to its Alibaba and also Yahoo Japan! assets.

If Yahoo is sold, of course, the disposition of the Alibaba asset is an important part of the deal.

More to come, including the implications for Ma, who has been under siege of late around his spinning out of Alibaba’s Alipay payments service and the noisy battle that later ensued with Yahoo. Yahoo and Alibaba, as well as its other large shareholder, Japan’s SoftBank, settled that dispute earlier this summer.

His involvement in Yunfeng, which is buying the company’s shares in a special fund that Ma is not in, will likely attract some scrutiny, anyway.

Sources said Ma is a minority investor in Yunfeng itself, has no control rights and is not a director. In addition, Yunfeng has no relationship with Alibaba.

In another interesting twist, Alibaba rival Tencent has close ties with DST’s Internet affiliate that used to share the same name, having invested $300 million last year in the affiliate that holds major Russian Internet properties.

]]> http://allthingsd.com/20110922/exclusive-dst-silver-lake-and-yunfeng-to-lead-1-6b-tender-offer-aimed-at-alibaba-employees-and-others/feed/ 0 http://allthingsd.com/20110921/former-ebay-ceo-meg-whitman-being-considered-for-hp-ceo-job-to-replace-apotheker/ http://allthingsd.com/20110921/former-ebay-ceo-meg-whitman-being-considered-for-hp-ceo-job-to-replace-apotheker/#comments Wed, 21 Sep 2011 15:05:59 +0000 Kara Swisher http://allthingsd.com/?p=122967

Former eBay CEO Meg Whitman is being considered by Hewlett-Packard directors as a possible candidate for CEO, in a move that would replace its current leader Léo Apotheker, according to several sources close to the situation.

The appointment of Whitman — a longtime and experienced Silicon Valley exec, who joined the board of Hewlett-Packard in January — to the top job at HP is by no means a done deal, sources said.

But a significant contingent on the board is keen to remove Apotheker after what some directors consider a series of management mishaps.

If it occurs, it would be the second major CEO ouster in a short time — Yahoo recently fired its CEO Carol Bartz due to lackluster performance.

[UPDATE: Wall Street seems to like the Apotheker-gone idea, with HP shares spiking almost eight percent on our news, as well as a simultaneous Bloomberg report. The rise has added almost $3 billion to HP's market valuation.]

In addition, sources said Whitman has been contemplating taking another big exec job, after a 10-year stint at eBay, which was followed by an unsuccessful run as the Republican nominee for governor of California last year. Since then, she has been a part-time consultant at top venture firm Kleiner Perkins.

Her role there — which has largely been seen as a temporary one — has included acting as a strategic adviser to start-ups and evaluating investment opportunities.

Sources said Whitman — who has also been active with her family foundation — has shown some interest in talking about taking the HP job.

Turning to Whitman would not be a surprise, given there are few execs in tech experienced enough to run such a large and complex organization as HP.

Still, her expertise has mostly been in the consumer space and she has never run what is largely a hardware company and one with major enterprise clients.

So, if appointed, Whitman would need a lot of help, especially to fix one with as many troubles as HP has seen of late.

That is why the board has been meeting by phone and in person this week to talk about a range of issues, focused in part on how to spin the company out of its current cycle of bad news and what to do about the situation.

Its most recent spate of trouble was the announcement of layoffs of hundreds of employees in its Palm division.

This inevitable move to jettison Palm employees came after HP’s sudden news in August that it was shuttering its webOS hardware business.

Add to that a proposed class action lawsuit, filed Sept. 13 in the U.S. District Court for Central California, along with another handful of law firms that are launching their own investigations of HP over the move.

In the suit, according to a report by Arik Hesseldahl, an “HP shareholder named Richard Gammel alleged that comments by CEO Léo Apotheker — concerning the company’s earnings expectations, the importance of its personal computer business and plans to move ahead with devices running the webOS operating system — gave a vastly different indication of actions HP took on Aug. 18, when it killed the webOS hardware business and announced plans to spin off the PC business and spend $10 billion to acquire Autonomy.”

In other words, lots to discuss for HP’s directors, who have been under siege, essentially, ever since the former CEO Mark Hurd resigned under pressure more than a year ago over a variety of allegations about expense reports related to a sexual harassment inquiry. The board found no evidence to support the sexual harassment claim.

In the wake of that scandal, HP appointed Apotheker to take over for Hurd.

It has been a bumpy ride, as HP’s stock has plummeted almost 43 percent in a year’s time. By comparison, rival Oracle’s shares are up more than three percent in the same period, and Apple stock has risen more than 50 percent.

That share decline, given a series of major moves and just as many gaffes, has put Apotheker — who has been trying to reposition HP largely as an enterprise company — in the hot seat.

An HP spokeswoman declined to comment. I have several calls in to reach Whitman and have not yet heard back.

More to come, obviously. But, until there is more news, here is the video of the full interview with Apotheker at the ninth D: All Things Digital conference this summer.

At D9, the former SAP chief declared that he would not ship the now-doomed TouchPad until it was perfect. Ooops!

Enjoy:

]]> http://allthingsd.com/20110921/former-ebay-ceo-meg-whitman-being-considered-for-hp-ceo-job-to-replace-apotheker/feed/ 0 http://allthingsd.com/20110915/loeb-on-yahoo-board-ive-looked-at-clowns-from-both-sides-now/ http://allthingsd.com/20110915/loeb-on-yahoo-board-ive-looked-at-clowns-from-both-sides-now/#comments Thu, 15 Sep 2011 09:17:16 +0000 Kara Swisher http://allthingsd.com/?p=121095

And you thought former Yahoo CEO Carol Bartz could lay into the Yahoo board with some zingers, including the not-used-enough “doofuses” insult.

Time to meet Third Point’s Daniel Loeb, the smack-tastic hedge fund manager who has bought up a 5.1 percent stake in the Silicon Valley Internet giant and has been hitting the company upside the head with those shares since last week, on a seemingly daily basis.

Actually, twice yesterday — in a morning letter he filed with regulators, and then at an afternoon investor conference.

After trying to entice Yahoo co-founder Jerry Yang into throwing Chairman Roy Bostock under the bus, and noting in the letter that Bostock hung up on him in a recent phone call, Loeb told the attendees at the Delivering Alpha conference in New York that “no one wants to work with these clowns on the [Yahoo] board.”

Also that “Yahoo had one of the most horrendous management teams” that Loeb had “seen in 16 years.”

Also that Yahoo “has the same crappy interface and the same stupid logo” since 2004.

Other than that, Mr. Loeb, how is the Internet site?

Here is Loeb’s latest filing to see for yourself:

loebsec

]]> http://allthingsd.com/20110915/loeb-on-yahoo-board-ive-looked-at-clowns-from-both-sides-now/feed/ 0 http://allthingsd.com/20110914/yahoo-for-sale-big-bidders-circling-including-marc-andreessen-as-board-pressure-mounts/ http://allthingsd.com/20110914/yahoo-for-sale-big-bidders-circling-including-marc-andreessen-as-board-pressure-mounts/#comments Wed, 14 Sep 2011 19:28:49 +0000 Kara Swisher http://allthingsd.com/?p=120518

A range of major players interested in acquiring all or a large piece of Yahoo have been prepping possible bids and have been in touch with the Internet giant’s board over the last several days.

While Yahoo has publicly said it was not for sale, according to numerous sources both inside and outside the company, it has been receptive to the interest and its Chairman Roy Bostock and Co-founder Jerry Yang have spoken to several.

Among the possible players: Silicon Valley venture firm Andreessen Horowitz, which is working with private equity firm Silver Lake, in a deal that also might include Russia’s DST Global and Yahoo’s Japanese partner Masa Son; former News Corp. exec Peter Chernin, who is partnered with Providence Equity Partners; and the possibility that Yahoo’s Chinese partner, Alibaba Group, might consider entering the fray in what could be a reverse merger of sorts.

Also being rung up by some of the parties: Microsoft — Yahoo’s advertising and search partner — which is being seen as a possibly moneybags in any deal.

The movement among these investors is against a backdrop of increasing pressure for Yahoo’s board, after it fired CEO Carol Bartz last week. In the wake of the dramatic move, shareholders have upped criticism of Bostock and the board and have been looking hard for alternatives.

Today, that included hedge fund investor Daniel Loeb of Third Point, which has a 5.1 percent stake in Yahoo. In a filing this morning, he said he might increase that amount, and described a testy hour-long phone call he had earlier this week with Bostock that ended abruptly with a hang-up from Yahoo.

Sources said Loeb called Bostock a “fool,” among other not-so-nice names, on the call and asked for Yang’s help in dumping him.

This comes as exactly no surprise, given his previously strong letter in which Loeb called for Bostock’s ouster.

Loeb has been calling out Bostock — who is also on the boards of Morgan Stanley and Delta Airlines — for a series of gaffes at Yahoo since he became chairman in 2008 (he’s been on the board since 2003).

Those have included: Yahoo’s bungled effort to stave off a takeover by Microsoft several years ago; the too-long enthusiasm for Bartz, who was hired in early 2009 and fired last week; sitting unusually still as competitors such as Facebook, Google and more have out-innovated and outgrown Yahoo; and, of course, the falling knife of a stock, which has dropped precipitously since Bostock has been in charge of the board.

As Loeb wrote in a letter he sent to the company last week:

“It is time that certain members of this Board were held accountable for its past failures and their individual roles. Accordingly, we insist that Mr. Bostock, who championed Ms. Bartz’s hiring and led the charge against the Microsoft deal, promptly resign from the Board.”

Loeb is likely to add to that later today at a high-profile investor conference in New York, where the colorful but tough-talking investor is sure to add more logs to the fire.

But it not only him. Other major shareholders of Yahoo are also in touch with possible outside buyers, seeking a change at the long-troubled company, after its shares have remained in the doldrums, its attrition rate of employees has spiked and its product pipeline has slowed to drip.

This has all been taking place — of course — during one of tech biggest and most innovative booms, in which Yahoo competitors have grown strongly.

Enter Marc Andreessen, the well-known entrepreneur who has transformed himself into one of Silicon Valley’s most powerful venture capitalists.

He and his partner Ben Horowitz recently pulled off another similar deal — with Silver Lake — to take control of a then-troubled Skype. They later flipped it to Microsoft for a large return.

Sources familiar with the situation said the pair have become increasingly intrigued by the situation at Yahoo and believe that its assets and brand are still strong, despite its management turmoil in recent years.

One problem is the huge cost of almost any kind of takeover and also the complexity, given much of Yahoo’s $18.5 billion valuation is due to its Asian assets.

The sale of those shares, as well as the selling off of some of Yahoo’s less core properties, makes for a very complicated situation for anyone.

Said one person looking at the company: “It is one of the more massive hairballs around.”

That is a common sentiment among many of those looking at Yahoo, which has hired Allen & Co. to manage the process.

Also of worry is a bid that would include too many players. Yahoo has long been plagued by indecisiveness on the part of its execs and, mostly, its board.

But one thing all the possible buyers of Yahoo, as well as an increasing number of its shareholders, agree on: The Yahoo board needs a major shake-up.

As Loeb wrote last week, which many I interviewed also echoed:

“This letter details our principled demands for sweeping changes in both the Board of Directors (the “Board”) and Company leadership, and outlines the hidden value of Yahoo, which has been severely damaged — but not irreparably — by poor management and governance.”

]]> http://allthingsd.com/20110914/yahoo-for-sale-big-bidders-circling-including-marc-andreessen-as-board-pressure-mounts/feed/ 0 http://allthingsd.com/20110906/as-yahoo-continues-to-wobble-investors-and-board-eye-options/ http://allthingsd.com/20110906/as-yahoo-continues-to-wobble-investors-and-board-eye-options/#comments Tue, 06 Sep 2011 18:09:11 +0000 Kara Swisher http://allthingsd.com/?p=116902

When Yahoo announced on January 13, 2009, that it had hired longtime Silicon Valley tech veteran Carol Bartz to replace outgoing CEO and co-founder Jerry Yang and turn around the company, there was a sigh of relief.

At the time, she presented a take-no-prisoners image and was touted as someone with a reputation as a professional manager who could clean up the place.

Not so, as it has turned out.

While Bartz has streamlined certain areas and made some strong management hires, her performance has been decidedly bumpy and mostly downhill. (Update: And this afternoon that ride took her straight out the door.)

Consider: The share price has settled in at about $12.50 (just about where it was when Bartz took over), Yahoo’s recent financial results have been weak, its key advertising business is struggling, its attrition rate among engineers and others is startlingly high and its product innovation cycle seems stopped up. Add to that: Weak relationships with key Asian partners, a pricey but failed marketing effort and a proclivity for verbal gaffes by Bartz.

Still, given that Yahoo’s Internet traffic, top media sites and brand remain huge, the going-sideways situation has again caused some investors — including powerful private equity firms and other monied investors — to pull out their spreadsheets about a variety of scenarios related to Yahoo.

The players who have sniffed around of late are powerful, sources said, including Silver Lake Partners, Andreessen Horowitz, former News Corp. exec Peter Chernin and Providence Equity Partners, among others. Also in the Wall Street rumor mill recently are large companies: AT&T, News Corp. and Verizon.

“It’s hard to ignore all that value sitting there and not being managed properly,” said one person who is considering a variety of investing options related to Yahoo. “And it’s not like AOL, whose assets are so weak, so it seems like an opportunity.”

All the schemes are different — ranging from taking it private to making a large investment to splitting it into parts — although they all seem to require cooperation with Yahoo to get done.

And while there is no serious effort afoot as yet, there are increasing signs that Yahoo’s board is ready to listen to any serious offers, said multiple sources, especially as the company has continued to drift under the leadership of Bartz.

While board chairman Roy Bostock has publicly backed Bartz — after all, he was her biggest champion at the time of her hiring — multiple sources said he has started to become more involved at looking at the management issues at the company and its challenges.

Yang — still a key figure at Yahoo — has also become more active, said sources, and tensions between him and Bartz have increased over the last few months.

While this might, as often happens at Yahoo, lead nowhere, what’s clear is the increasing pressure on the directors of the company from its major shareholders to act.

“You watch an asset like that degrade and it makes you furious,” said one investor. “After a while, you hope it makes the board at Yahoo feel the same.”

Yahoo declined to comment (but so would I).

Related posts

• As Yahoo Continues to Wobble, Investors (And Board) Eye Options
• Exclusive: Carol Bartz Out at Yahoo; CFO Tim Morse Named Interim CEO
• Carol Bartz’s Last F%*& You — Now Aimed at Yahoo Board
• Yahoo’s Statement on Bartz Ouster
• Wall Street Likes Bartz’s Firing — Yahoo Stock Spikes on News
• My Picks for Yahoo’s Next CEO — Maybe Snoop Dogg, Ya Digg?

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