Yahoo and J.C. Penney Show Perils for Star CEOs

Marissa Mayer appears on NBC’s “Today” show Photograph by Peter Kramer/NBC/NBC NewsWire via Getty Images

While she might not relish the comparison, Marissa Mayer’s mission at Yahoo! is remarkably similar to Ron Johnson’s marching orders at J.C. Penney. Both were recruited to their CEO jobs by activist shareholders trying to turn around troubled companies. As stars at hot brands, both were welcomed as saviors whose hiring sent the stock of their new employers soaring. And both have discovered that leading a turnaround is a very different challenge than playing for a winning team.

There is, of course, a critical difference: Johnson was ousted from J.C. Penney on April 8; faith in Mayer’s strategy for Yahoo remains strong. But the former Google vice president got a taste of investors’ fickle ways on April 16 when Yahoo reported lower-than-expected sales of $1.07 billion in the first quarter. Although profit was up 36 percent from a year earlier and Mayer said she was pleased with the results, Yahoo’s shares slipped after the announcement. Having driven the stock up about 50 percent since Mayer was named CEO in July, investor infatuation may soon wear off.

Such is the downside of being a star CEO. High expectations also mean high stakes. With all the criticism heaped on Johnson over the past week, it’s easy to forget that the reason he was hired to run J.C. Penney was also a factor in why he got fired. Apple’s retail guru was supposed to inject some cool into the tired retail chain. That’s why investors added $1.2 billion to J.C. Penney’s market cap as soon as his hiring was announced in June 2011. With hedge fund manager Bill Ackman dubbing him the Steve Jobs of retail, and Johnson himself investing $50 million, everyone seemed eager for the revolution to start. By ditching coupons, though, he sabotaged sales and alienated customers without having anything to offer instead.

Mayer has generated her own share of buzz, from paying a reported $30 million to buy a 17-year-old’s hot app to the now infamous memo that banned working from home. For a portal that some had written off as dead, getting Yahoo back on the radar screen is an accomplishment in itself. The problem, as CEO consultant Stephen Miles points out, is that turning around a company is a long and difficult process. “Everyone references Lou Gerstner at IBM but he took five years,” Miles notes. Move too fast and you risk leaving customers and employees behind. (Tough talk on telecommuting and wooing top talent may be easier at a company that’s minting thousands of millionaires.)

Investors are especially tough to please. Mayer can talk about “a multi-year march toward growth” all she wants. In reality, anyone trying to profit from Yahoo’s renaissance wants to see Mayer work her magic without damaging the core business. Display advertising is the lifeblood of Yahoo in the same way discount-driven sales are the lifeblood for J.C. Penney. So the accelerated decline of that business in the first quarter, where revenue fell 11 percent instead of an expected 9 percent, is cause for worry. Mayer knows she’s competing in a space where death comes quickly. As management consultant Noel Tichy points out, she and Johnson came to their CEO jobs without the broad experience of having run standalone businesses before.

That doesn’t mean Mayer won’t succeed, despite the headwinds and intense scrutiny. Much like Ginger Rogers doing what Fred Astaire did, only backwards and in high heels, she has the added pressure of being a poster child for work-life balance. It’s hard enough to build traffic to a flailing tech giant, without dominating the headlines for building a nursery while banning telecommuting. Stars do bring buzz to beleaguered brands. As Johnson discovered, that attention can cut both ways.

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