How to deal with key employee who didn't show up for work?

I think you are overreacting: no one was scheduled to be in the office on that day, so this key employee, who apparently is allowed to work from home sometimes, made the executive decision that he would work from home instead.

I would have done the same. The only thing you really can complain about is that he should have told you ahead of time, so you know. If you get upset about such a lapse in employee behavior, I wouldn't want to work for you much longer.

Why exactly did you think this was unacceptable behavior? It's not like that employee has been missing work regularly. It happened once and made complete sense. You are the one throwing the word "termination".

The answer is in your question:

"The employee is a critical part of the organisation, and knows I will not reprimand him to the point of termination. What is the proper way to ensure this sort of behaviour stops?"

You can't stop this behaviour since you've decided that you can't really do without him. So you just need to assume that he'll periodically do this.

This is unfortunate, but it's part of growing your business.

You need a basic HR policy to cover this, something like "You can work from home X days a week/month/year." You could make this policy whatever you like, but you need it to curb some of this.

Ideally, you need to have it written down, and get each of the employees to sign it. That's a CYA move in case some unemployment case or lawsuit gets filed against you.

If it continues to happen, you'll need to consider your options. Sending people home and not paying them (they aren't working), may work (talk w/ your attorney), or it may be illegal (depending on where you are). Chances are, if it happens after you have them sign your HR doc, they need to go.

Everyone's replaceable, remember that! (What happens when they move / get ill / get hit by a bus?)

Can you make a strong enough arguement that this person is more effective working in the office than at home? You're the boss. You can demand whatever you want, but your authority is deteriorated even more when you make rules you can't/don't enforce.

Maybe you should just decide on Wednesday being the at home day. This gets rid of the whole notify me battle.

Focus more on setting harder deadlines for work. If you allow this person to work on their own schedule and they don't deliver, they will not be able to have as many excuses.

Sorry for the length... Technology is easy. People are hard.

First Point - A Question

"If the employee isn't willing to meet your expectations of what is required for the team/business to operate properly, do you really want them on the team in the long-run?" I may be reading a bit too much into your post, but if this individual isn't committed enough to the organization to effectively communicate with the team, I'd strongly lean towards "No." Yes, this means that you are faced with a tough situation (especially for a small firm).

Second Point - My Advice

Creating a policy that in effect allows insufficient communication seems a bit backwards (IMO). It's along the lines of creating a rule such as "It's okay to yell at your client no more than three times a year." (smile) Don't validate the poor behavior (unless you want to see more of it). I've also learned that many employees just naturally push these boundaries. Thus, I'd put even money on the chance that if you set a limit, the employee would just go slightly beyond that limit (because he currently knows he can).

If your employee is a part of a team, which requires a specific level of communication, do not compromise that requirement. Granted, people make mistakes and people can fail to meet expectations, but creating a rule to validate an employees suboptimal behavior is just a bad move.

Third Point - Steps to Follow

I've used the following framework to address employee issues in the past. It's not rocket science, but you'd be amazed at how many of us gloss over different steps.

1. Clearly communicate your expectations to the employee - It's shockingly common for employees to simply not understand what you expect (even when you feel things should be crystal clear). No, this is not done in an email... this is a face-to-face, boss-to-employee discussion. It sounds like you have done this.

2. Discuss the "why" for your expectations - This is when you get to communicate (two way, ideally) about how this expectation is needed for the company to succeed. The employee should be given a real opportunity to share his/her opinion and even make a case to change your mind/expectation. Ideally, you will also be able to better understand the employee's "why" behind his/her action. It should be clear though that, in the end, the decision on how this is handled is your decision. Other than sharing that your employee knows he can get away with it, what do you feel his motivation is on this issue?

3. Set some consequences - Yes, this is the hard part, but there are always consequences to an action. Ideally, the prior steps have established a decent amount of communication so that you can be direct with your employee. The consequence may boil down to, "If you don't meet my expectation, then I will simply not be able to trust you... which means you will not, in the long-run, be a part of this organization." This is a relatively mature and honest statement, but not appropriate for all relationships. Less ideal, but certainly worth considering, are the traditional 'sticks' (a la 'carrot and stick') such as decreased bonus opportunities, more strict reporting requirements, etc.

Fourth Point - A Case From My Own Experience

At a prior employer, I had an employee that had significant issues with showing up on time. Steps #1 and #2 went quite well. We were able to communicate very openly about the situation, and I had great hope that things would improve. They did, but only for a little while (about 2 months). The consequence was that the employee was required to email me upon arriving at work (to document the arrival time). A completely annoying and arguably childish situation, but, hey, that's kind of the point. That consequence motivated the employee pretty significantly (it is a tad embarrassing). We did that for a couple months, with very real improvement. After the requirement was dropped (based on the improved performance), things slowly went back to the original, unacceptable situation. In the long-run, the employee was obviously not destined to play a key role in the organization. One could argue that it would be most efficient to recognize this upfront and simply make the tough decision. That's obviously something that is completely subjective and dependent on the person, organization, situation at hand.

Hope this helps. Best of luck.

Consider telling the employee you don't care when they are in the office or working from home at all. You say they are a key employee and getting results. If my employees and co-workers are promising results and then delivering on promises, I don't care where they are at any given time. Work from home, work from Hawaii, it's all the same to me if I am getting results.

I highly recommend reading "Why Work Sucks and How To Fix it." It is about how Best Buy went from a 9-5 company to a results only company and increase productivity 35%. http://gorowe.com/ is the website.

Consider letting go of your "boss" expectation that putting time at work is the same as getting results at work. In a start-up culture we should be able to treat employees as adults. A big step in that direction is to stop monitoring where they are at any given minute.

If you want to try a "carrot and stick" approach to getting the employee to work when you think they should, you should know that is doomed as well. Watch the Ted Talk video by Dan Pink. It summarizes the disconnect between what "everybody knows" about how to motivate employees and what scientific research has actually proved.

I don't know anyone who don't shows up for work when its properly motivated. How to motivate him is the real, and though, question...

Not sure why you'd care if he wasn't at the office when nobody else was, but remember, no employee is irreplaceable. Who does his best at work when knowing he can't get fired, anyway?

No matter how important that employee is for your company, there are RULES.

If you asked for a notification and one wasn't provided, I'd "tax" the employee with 5% of that month's salary. Usually we work 20-22 days a month, so this would mean he's not getting paid for that day.

I'd also try to re-settle the notification importance and let the man know that next time it's 10%. On the other hand, it's not 'healthy' to rely so much on one individual. This can lead to abuse and I feel we're dealing with something similar right now.