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Cutting out the CEO coupon – Groupon founder sacked

Groupon is a deal-of-the-day service for consumers, which now operates in around 50 countries. The idea is a simple one. Groupon emails an electronic coupon for a restaurant or shop in the subscriber’s town once a day, recommending the service and offering a substantial discount. The discount is only available if enough people buy within a certain time limit. If not, the offer is withdrawn.

The company was set up by Andrew Mason, who until very recently was also its Chief Executive. Yesterday he was dismissed as a consequence of poor financial results in the last six months.

In November 2011 Group was floated on the Nasdaq, Since then its shares have lost 77% of their value. Investors have voiced concerns that the business model may be unsustainable. It is also facing greater competition from large organisations like Google and Amazon, who have been copying the approach.

At present Mr Mason seems to be fairly sanguine about the outcome. Many entrepreneurs do bow out of their own businesses at about this stage. Their skill set rests in the ideas and set-up stage (and for them that’s the fun too). Let someone else take on the very different role of building the business and consolidating early successes.

In the UK, true directors are not employees and therefore can’t complain of unfair dismissal. Mr Mason would fall into this category. But many senior officers have “director” in their job title, enjoy profit share or share ownership and do sit on the board, yet remain employees for the purposes of employment protection. If you are considering the dismissal of an employee – even a very senior one – remember that you must follow the correct process.

There are potentially five fair reasons for dismissal. These are:

  • conduct - where the employee won’t meet your standards;
  • capability - where the employee can’t meet your standards;
  • redundancy – where the job is no longer there in whole or in part or at that place;
  • statute – where to employ the person puts you in breach of the criminal law;
  • some other substantial reason – a bit of a catch all but includes, for example, third party objection to the employee.

It’s always wise to establish the facts and have supporting evidence to prove your point, whatever business steps you propose to take and that’s certainly true in the case of a conduct or capability dismissal. Employees are challenging management decisions more than ever, so disciplinary decisions have to be well-thought out, evidenced and proportionate.

If you ask yourself the following question: “do all of my employees meet all of my standards nearly all the time?” and the honest answer is “no”, then you really must do something about it or you are not managing properly.

The consequences of failing to manage properly can be enormous, depending on the circumstances. Yesterday there was an announcement that the scandal-hit Mid-Staffordshire NHS Foundation Trust is to be put into administration. Lives have been lost because standards of conduct and performance were breached and the failures weren’t addressed in a timely fashion or at all. Now jobs will be lost too. That’s an extreme case, but here’s the thing. It happens.

If you know that you need to take action, start sooner rather than later. The purpose of discipline is to correct rather than punish. You stand a much better chance of achieving it if you take early steps to manage a problem. Train your managers (we can help you there!) so they can competently follow the disciplinary process, as follows.

  • Get all the facts and underpinning evidence.
  • Explore them with the employee.
  • Take corrective action and give time to improve.
  • If the action is formal, make sure that all the procedural steps are fully followed.
  • Any disciplinary penalty must be proportionate and justifiable.
  • Provide support, but escalate in a timely fashion of the required standards aren’t met and maintained.

My experience has repeatedly shown that employees who really want to improve will make efforts to do so and you’ll turn their conduct or behaviour round quickly. That’s the result we all strive for. The rest should be given every opportunity to be rehabilitated, but if they can’t or won’t they should be managed out sooner rather than later.

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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