Groupon’s fate hinges on the boardroom

By Lucy P. Marcus
March 1, 2013

Andrew Mason, the chief executive officer of Groupon, has, in his own words, been fired. His resignation letter has been described in the press as charming, but the market seemed to think it was simply about time. Shares in Groupon went up more than 10 percent following the announcement on Thursday.

Firing Mason has taken too long, and the board has a lot of work to do. Groupon, though it might not have always acted like it, is a grown-up business with an entire ecosystem that depends on it, and with that comes responsibility. I’m not just talking about the investors, I’m talking about its more than 11,000 employees in 48 countries, its global network of businesses – from mom-and-pop stores to big organizations like Expedia ‑ that depend on a reliable service that has often in the past let them down, along with the users of Groupon coupons. All of them need to know they are dealing with a company that is reliable and will honor their purchases.

The Groupon board will have to act decisively and transparently to build some goodwill and let everyone know that, although slow to act on getting rid of Mason, it takes its obligations and relationships seriously and will act fast to repair them. In a written statement, the board conceded that “our operational and financial performance has eroded the confidence of many of our supporters, both inside and outside of the company. Now our task at hand is to win back their support,” and now they have to show that they know how to do that.

What does the board and the management team need to do?

Look inward

The board took too long to part ways with Mason, and even with their inaction, Mason should have removed himself long ago, as knowing when to go shows true leadership. The writing has been on the wall, with the financial results being poor for a very long time. Groupon’s share price has lost 75 percent of its value since its initial public offering in 2011, and the stock fell 25 percent when its fourth-quarter results were released this week.

The board made some changes recently to beef up its  audit and finance expertise in the wake of a very public rebuke about its audit committee failings, but the people around the table now need to ask themselves why it took so long and how they are going to do things differently.

Decide where the company is going

Groupon expanded fast and encountered some tough times along the way. The board and the current executive team will need to take a cold, hard look at the business and decide where they want to take it. Do they want to grow? Scale back? Put Groupon up for sale? They need to do a lot of that before they recruit a new CEO, as the person they will hire will have to be able to execute on that strategy.

Bring in a new executive team

Once the directors have decided on a path, they will need a CEO who can help them get where they want to go. They may need a whole new executive team. They can’t let the temporary arrangement of Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis working in a newly created office of the chief executive last for too long. The board notes that it has commenced a search for a CEO. The company needs someone who will signal to the markets, and to employees, partners and customers, that they understand their concerns and are acting decisively to address it.

Groupon also needs stability. In April, it hired Kal Raman, who was promoted to chief operating officer the third COO in two years. The last thing the company needs is to get into a Yahoo-like situation, with a revolving-door group of senior executives.. Board members must agree on the person they hire and support him or her.

Groupon should look to Yahoo. That company was in a tailspin, but with the robust push of activist investor Dan Loeb, it has turned things around. Loeb gave Yahoo  a hard shove in the direction it needed to go, and that gave people enough confidence to give Yahoo some breathing room. CEO Marissa Mayer may have gotten some bad press this week, but there is no doubt that people feel as if Yahoo is back in the game.

If Groupon doesn’t move quickly and sure-footedly, it risks finding itself with someone like Loeb at its doorstep, and its destiny will not be its own – though it seems to have worked out well for Yahoo so far.

PHOTO: Groupon founder and CEO Andrew Mason attends the second day of the Allen and Company Sun Valley Conference in Sun Valley, Idaho on July 7, 2011. REUTERS/Anthony Bolante

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