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Mason’s Wild Ride Comes to an Abrupt End

He was a great entrepreneur ... but a lousy CEO


I’m sure going to miss Andrew Mason.

The charismatic leader prone to great sound bites was relieved of his CEO duties at Groupon (NASDAQ:GRPN), and two board members — Eric Lefkofsky and Ted Leonsis — are now in charge on an interim basis while the company searches for a new leader.

At 32 years old, Mason already has accomplished more than most entrepreneurs. He built a multibillion-dollar business from scratch, took it public, engaged in aggressive acquisitions and built a global platform — in less than five years.

But as Mason has proved, a great entrepreneur will not necessarily become a great CEO.

The Right Stuff

The skillsets for both roles are often different. For example, an entrepreneur thrives on taking huge risks and even making crazy moves. (Which is why many startups fail!) CEOs, on the other hand, are about managing growth, optimizing the platform and methodically finding new opportunities.

It reminds me of something Frank Slootman — who took Data Domain and ServiceNow (NYSE:NOW) public — once said to me: “I can’t start a business, but I can run one.”

It’s really only a rare number of entrepreneurs who can do both, including the likes of Microsoft’s (NASDAQ:MSFT) Bill Gates and Amazon’s (NASDAQ:AMZN) Jeff Bezos. And many times, they still had great mentors and plenty of time to learn. Even Steve Jobs believed being booted from Apple (NASDAQ:AAPL) in the 1980s was one of the best things that ever happened to him.

But in today’s fast-paced world — especially in the tech industry — it’s vital to recognize early on whether an entrepreneur makes sense of a CEO. If not, it could lead a breakout company to implosion.

This easily could have happened at social star LinkedIn (NYSE:LNKD). However, the original mastermind of the business, Reid Hoffman, had enough self-awareness to keep himself out of the top office and instead brought in experienced operator Jeffrey Weiner to be CEO. Since taking the company public in May 2011, LNKD has returned 273% and become a $18.3 billion company as measured by market capitalization.

Groupon? Its stock is off 77% since coming public, with its market cap dwindling to $3 billion after originally being valued at more than $17 billion.

Why Did Mason Fail?

Well, there’s plenty of answers to this question.

For one, Mason seemed too concerned about making jokes and running pranks. This is evident even in his farewell letter (which admittedly is a humorous read). To open, he says:

“After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today.”

Mason also showed a lack of discipline, a la Groupon’s multiple earnings restatements. He also made strange business decisions, such as his 2011 Super Bowl commercial that essentially was to insult Tibet.

Of course, that all just served as side shows to the fatal flaw. Mason’s core issue was that he remained too focused on growth, and never showed a turn toward trying to transition Groupon into a real company.

As environmentalist Edward Paul Abbey once said, “Growth for the sake of growth is the ideology of the cancer cell.”

What’s Next

As is the case with many companies that have to boot their CEOs amid a reaving of its stock, Groupon is in a tough spot.

As I wrote yesterday, the company’s daily-deals business is deteriorating, and the goods category — which Groupon is pushing further into — has razor-thin margins. Plus, whoever helms Groupon next has to deal with sprawling operations across 48 countries. Finding a CEO that can deal with all these issues will be difficult, and the odds will be against any leader, capable or not.

In light of this, investors shouldn’t gamble on a comeback — at least unless Groupon hires a plainly strong leader with a convincing turnaround plan.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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