Twitter's turmoil has created a festering morale problem, insiders say

It's a tough time to be at Twitter.

The company's stock is getting pummeled, user growth has stagnated, a daily chorus of pundits debate what's wrong with the company, and there's no permanent CEO at the helm.

The drama is taking a toll on employee morale, a situation that could hamper the Internet company's efforts to right the ship and to rekindle its user growth.

Depending on who you talk to, the flagging morale at Twitter is anything from an unprecedented crisis to a limited and manageable issue. But most agree that the internal turmoil, along with an ongoing brain drain, represent a pressing problem that Twitter must get a grip on.

"The wheels are off the bus," said one company insider. The person compared the current atmosphere within the company to rats fleeing a burning ship. "Morale is beyond low," the person said, "so many people who I would have never guessed, now want to leave."

Another person close to the company told us, "People are getting fed up with the unknown, the uncertainty." Adding to the frustration is the fatigue from seemingly endless upheaval, with many employees having had three, four, or five different managers over the course of a couple years at Twitter.

"At a point people just kind of throw their hands up. They're just not sure where the company is going, they're not convinced that the leaders actually know where we're going," this person said. A lot of people are thinking, "You know what - I'm not going to burn another year of my life here because I don't know which direction the company is going," this person told us.

"In the public eye"

Twitter's shares have plunged roughly 25% in recent weeks, following an ugly quarterly report in which management acknowledged that user growth would continue to stagnate for a considerable period of time. The company has provide few details of a timeline or progress in its quest to find a permanent CEO after Dick Costolo announced his resignation in June. And Wall Street has put the company on takeover-target watch.

Twitter, which has a well-documented history of executive suite coups and power grabs, has had its share of drama over the years, and some say that employees are used to organizational upheaval and stock volatility.

"The company lives its life in the public eye. So for many people at Twitter even a situation like this, it's not so terrible," said another person close to the company.

The worst of the morale problems appear primarily concentrated on the product side of the company. Those who work on the company's more stable advertising business are calmer. That ad business is led by revenue boss Adam Bain, who is well-liked within the company and is a top contender for the permanent CEO job.

"A leadership vacuum"

The simultaneous high-profile defections of three product managers last week highlight a problem that's running throughout Twitter - a serious brain drain.

More than one third of the Twitter top brass who addressed investors during the company's November 2014 analyst day are no longer with the company. Of the 13 executives that took the stage to extol the company's rosy future on that day, only 8 remain with Twitter today.

Twitter co-founder Jack Dorsey, who is doing double-duty as interim Twitter CEO while also leading digital payment company Square, has acknowledged the urgency of getting the company back on track. But he is only able to provide part-time attention to an organization that requires round-the-clock care, say some. And while there is hope that Dorsey can provide the kind of bold vision needed to re-invent the company, so far he hasn't done so.

Dorsey is by all accounts engaged and passionate about his second job. During the weekly all-staff "tea time" meetings, Dorsey has spoken frankly about the company's problems and the need to take action.

"But what those actions are, or what the vision is, wasn't immediately communicated to the group," said the person familiar with the matter.

"This whole 'welcome back Jack,' it means nothing, it's a bit confusing," the person said, noting that so far there is no discernible change in vision or strategy from any of Costolo's talking points.

And while Dorsey is spending time at Twitter's Market Street headquarters, conducting weekly team meetings in the building, some wonder if it's enough.

"You need someone who is in the hallways, that's helping people recognize the fact that there is trouble and they've got the smartest people focused on it. But they're just not there yet," the person said.

CFO Anthony Noto has become an increasingly polarizing figure within the company, according to several people we spoke with. Noto's rising influence and power within Twitter during the past year has crowded out much-needed product expertise at the top, they say.

"When you have a leadership vacuum on the rest of the management team and then you add someone who is super ambitious" but doesn't have the product skills, it creates problems for a consumer Internet company, said one of the people.

Toughing it out

As Twitter's CEO search enters its third month, impatience is growing inside and outside of the company. SunTrust analyst Robert Peck recently penned a note urging the company not to drag its feet finding a new leader so as to avoid any more disruption to its business and loss of talent.

For many employees, particularly those who have been around for a few years, the decision to jump ship is simple: Pre-IPO stock grants have already netted them several million dollars; there doesn't appear to be any light at the end of Twitter's current tunnel of challenges; And there's an abundance of job opportunities at young, fast-growing tech start-ups.

In other words, there's little incentive to slog it out when so many attractive alternatives exist.

Twitter employees are passionate about the product. But turning around a consumer Internet company is no easy feat, as recent examples such as Yahoo have demonstrated. And many of the Twitter engineers and product managers are relatively young, with little experience dealing with business adversity and solving the kind of thorny problems necessary to revive a struggling company.

"These are not easy problems and none of these guys have had to face this in the past," said one of the Twitter insiders.