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With Sales Force Turmoil, Groupon Can’t Get Out Of Its Own Way



Groupon is a bit of an enigma isn’t it?

It does tons of business but it has the reputation that implies that the business it does is often in spite of itself. Now, as it prepares for its third public reporting of results Monday, the news is that the lifeblood of the company, the sales force, is at best, under a ridiculous amount of pressure or, at worst, jumping ship.

The Wall Street Journal reports

Groupon Inc. is facing a new hurdle: strains on its sales force.

Such pressures are a boon to people like Mike Silagadze. The chief executive of education-software firm Top Hat Monocle Inc. said that over the past month, his Toronto start-up has received hundreds of résumés from Groupon sales representatives who may want to jump ship. Mr. Silagadze said he interviews a couple of such people each day.

A Groupon attorney last month sent Mr. Silagadze a letter saying Top Hat was improperly recruiting Groupon employees. Top Hat’s 25-person sales staff includes eight former Groupon employees.

Groupon’s turnover is “getting even worse when their best people are starting to leave,” Mr. Silagadze said, adding that he plans to continue hiring from the daily-deals company.

While that may not be a huge problem for some companies it is for Groupon. According to the Journal about 5,400 of the 12,000 employees of the company are in sales. The company’s performance is based on their sales efforts and it appears that the machine that runs Groupon may have some issues.

But this is not an unusual occurrence with Groupon either. From the sophomoric antics of its CEO Andrew Mason to not being able to figure out how real businesses do math, Groupon has been an ongoing case study in what not to do to get big and go public. Even their PR comments to papers like the Journal show that Groupon is a bit less than a real business despite real money. I am still a bit amazed at this comment given to the Journal for its story.

A Groupon spokesman declined to comment on Mr. Silagadze’s remarks but said the company “continues to professionalize everything it does, from sales, to process, to organization, to technology.”

If it is continuing to professionalize its business what in the world was it when it went public and took all of that money at $26 a share for it to have closed at $7.44 on Friday?

I am not an analyst. I don’t have insider information but I have never trusted anything that comes from Groupon. Call it a gut feeling. Having some experience in the sales world myself all I needed to hear about the company that shows it is truly in trouble is how they changed the comp plans for its sales force and essentially cut pay significantly.

Commissions shifted from a couple of percentage points of Groupon’s gross profit on each deal to a sliding scale under which employees made little on commission until they met or exceeded aggregate monthly profit targets, former employees said. Two former salespeople said Groupon wasn’t transparent about how it set the monthly gross-profit goals, which sometimes rose with little notice. For some staff who relied on commissions for the bulk of their pay, the changes meant a pay cut of thousands of dollars, former employees said.

All of this points to a company that is in real trouble. Maybe the numbers reported today will help take some of the edge off the issues but, then again, they might make them worse.