Airing your dirty laundry in public through leaked memos is probably amongst all companies’ worst nightmares, but it tends to be very insightful for observers.

Yahoo! has had exactly that happen last week: One of Yahoo!’s senior vice presidents, Brad Garlinghouse, emailed a memo on the state of the company to senior executives which got leaked. Yahoo!’s PR department is trying to interpret the memo as a sign of Yahoo!’s open culture. But the contents of the memo, dubbed the “peanut butter manifesto” due to Garlinghouse’s references of Yahoo! spreading itself too thin like peanut butter, are explosive:

• Garlinghouse laments the fact that Yahoo! does not have a focused and cohesive vision and wants to do and be everything without strategic focus
• He questions the hiring of outsiders to run the company, which he feels hinders the development of a clear vision.
• He thinks Yahoo! is spreading itself to thin.
• He accuses Yahoo! of lacking a sense of clarity, ownership and accountability.
• He singles out too much redundancy, the silo effect and a lack of decisiveness as a cause of inefficiencies.
• In Garlinghouse’s view, Yahoo! has lost the passion to win.

How does he think the company can fix its problems?

• Restore focus, accountability and clear ownership. This includes clear statements about what the core businesses are and exiting non-core businesses. Garlinghouse also wants to see a redesign of Yahoo!’s performance and incentive systems to restore true accountability.
• Radical reorganization: Move away from the current business unit structure, decentralization and reduction of workforce numbers by 15-20%.

Garlinghouse closes his memo saying “My motivation for this memo is the adamant belief that, as before, we have a tremendous opportunity ahead. I don’t pretend that I have the only available answers, but we need to get the discussion going; change is needed and it is needed soon. We can be a stronger and faster company – a company with a clearer vision and clearer ownership and clearer accountability.” The full text of the leaked memo can be found at Techcrunch.

The memo appears to be critical of CEO Terry Semel and throws up the question of how safe Semel’s job currently is – or if Brad Garlinghouse might be forced to move on if his power move doesn’t come off. Also, the specter of significant job losses might provide positive signals to finance markets, but certainly won’t be welcomed by current Yahoo! staff who might fear losing their jobs.

So, will this memo sink without leaving much of a trace or could this really be the event that triggers massive change at Yahoo? It will be interesting to see what happens next!

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