As several readers observed, the Yahoo shake-up hasn't "fixed" anything yet--it has just shown that the company has finally recognized that there is a problem and (possibly) held some people accountable for it. Whether the re-org can actually restore Yahoo's competitiveness will depend on two factors:
First, Sue Decker must immediately be given CEO-level authority. She doesn't need to be CEO to make the necessary changes, but she does need to be able to act as if she were. As reader SI points out, creating separate "audience" and "advertising" groups could actually turn out to be just as much of a bureaucratic nightmare as the old situation, if Sue has to waste time lobbying for changes.
As group head, for example, Sue won't be able to singlehandedly fire 20% of the audience group--if that, in fact, is what's needed. Because the company has merely "launched a search" for the person who will lead the Audience Group, moreover, the potential gridlock could remain for months. Any high-powered executive being recruited to run the group will want to understand exactly where he/she sits in the pecking order. If the answer is, "On the same level with Sue and Farzad (head of the third group, Technology"), the company will be frozen until the executive arrives. (And, then, it will be locked in a power-struggle for another year, while the executive tries to show Semel that he/she, and not Sue, should be in line for the CEO job.) If the answer is "Somewhere below Sue," no one who wants to eventually be CEO will be interested.
(If we dissect the re-org, in fact, it seems as though the "big opportunity" that Dan Rosensweig is said to have passed on was probably the "Audience Group." If this is so, the three-group structure was probably designed in part to keep him happy, but it was also clearly a demotion. So Dan said "no, thanks," but the group remained. And now, at best, Yahoo has to waste another couple of months trying to find someone to lead it.)
The answer? If Terry really is grooming Sue for the CEO role, he should just make her "president" tomorrow and then gracefully fade away. If he isn't grooming her for the role, he should consider doing so. Given the rate at which Google is pulling away from Yahoo, the company can't afford another six months of status quo.
The second success-factor is that, yes, assuming she has the authority to do so, Decker has to figure out a way to attract and retain top engineering talent. Contrary to the opinion of many observers, she does not, herself, need to be an engineer. She just needs to develop the right environment and incentives to compete with Google for the best people. Given how much money, star-power, and buzz Google has these days, this won't be easy, but it is critical to Yahoo's success.
The re-org was a fine initial step. Now the company needs to make it a decisive one.