She's Helping Yahoo Act Normal

It was gut-wrenching, watching the stock plunge by nearly 97%. So was slogging through six losing quarters. But for Twain Mein, a senior producer and five-year veteran at Yahoo, the darkest moment came in the spring of 2001, when 400 of his colleagues were pink-slipped. "Those layoffs were a big blow to this company's spirit," says Mein. "All of a sudden, we weren't unbeatable. And we couldn't figure it out: Who are the bad guys? Who is doing this to us? And what happens next?"

What happened was the bust, and for Yahoo's employees, it played out an unrelenting drumbeat of bad news. The losing streak started in early 2000. First there was ridicule: Critics blasted the high-flying Internet company for trying to make itself a stand-alone Web portal when its chief rival, America Online, acquired a vast empire of media properties through its purchase of Time Warner. Then the dotcoms began dying off, and Yahoo staggered into a Sahara desert of online advertising. The company's stock price began a long, ugly descent from an all-time high of $237 into the single digits. In the spring of 2001, Yahoo cofounder Jerry Yang teared up at a companywide all-hands meeting as he tried to steel people for even more turmoil. The first-ever round of layoffs came next, followed by the forced departure of Yahoo's longtime chief, Tim Koogle. Koogle's replacement, Terry Semel, the former co-CEO of Warner Bros., also drew his share of barbs. "We were all asking the same question: 'Who the hell is this Terry Semel?' " recalls one Yahoo staffer. "He was from a different planet."

If there was any question whether Yahoo has been utterly transformed by the high-tech economy's downfall, those doubts were snuffed when Semel addressed Wall Street last February. "You aren't going to see us try to do 15 different things in a week," proclaimed Semel. "We are totally focused on the 2 or 3 things that we really want to do. And we are going to build on those things slowly, cautiously, and deliberately."

Slow. Cautious. Deliberate. Not long ago, linking those words with Yahoo would have been preposterous. But the Internet wunderkind has outgrown some of its youthful exuberance and adopted a sustainable, back-to-basics style, reinventing itself as it grows up. Yahoo soared during the boom and was brutalized by the bust. Now it has arrived at a new, temperate place. Some of the company's youthful operating principles endure: Employees still move quickly, even as the executive team strategizes cautiously. But this new, sober Yahoo is also ruled by some harsher realities. The company expects its people to make prudent decisions, to be resilient and adaptable to change, and to understand that no matter how much they pine for it, they're not going to get the bubble back.

"People are over the fantasy of becoming instant Internet millionaires," says Elizabeth "Libby" Sartain, Yahoo's chief of people and VP of human resources. "They're also getting past some of their fears. We're back to generating growth and profits, and people are starting to trust that Yahoo is going to be here for the long term. Now they're looking for some clarity in their careers. They're asking, 'Where do we go from here?' " More than anyone else at Yahoo, Sartain is the person who has to answer that question.

Libby Sartain has an infectious laugh and a near-permanent, face-splitting smile. Her personality is outsize and out-front. She favors hugs over handshakes. But Sartain is no pushover. Until two years ago, she was chief of people at Southwest Airlines, where she led all of the human-resource functions for its 29,000 employees and helped the airline win world renown for its dynamic corporate culture. She arrived at Yahoo in August 2001, just when the company's performance and morale (not to mention its stock) hit bottom. Since then, she has worked tirelessly to help Yahoo's 3,500 employees endure the most wrenching period in the company's history. Her journey from Dallas (Southwest's home base) to Silicon Valley and the 20 months that she has spent rebuilding the people side of Yahoo offer hard-headed lessons in what it takes to sustain a career that matters -- for the people at Yahoo and for Sartain herself.