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A SunEdison Case Study: Warning Signs of a Troubled Ship

If you’ve ever worked aboard a sinking ship, the continuing saga of SunEdison probably feels eerily familiar. No two organizations are exactly alike, of course, but when the problems are common, so, too are the causes.

SunEdison, a renewable-energy startup, experienced dramatic growth until hitting stormy seas last year. In fact, The Wall Street Journal reported recently that “nearly $10 billion in shareholder value has evaporated.” And last week, the company filed for Chapter 11 bankruptcy protection.

In my career as a leader, I’ve seen how good times can quickly spiral into bad times when leadership isn’t steady. This story is all-too-familiar to me. I, too, took over a company that had lost approximately $15 billion in shareholder value and leadership was one of the key reasons. SunEdison shows all the signs of an organization with leadership that lost its grip. Some examples from The Wall Street Journal article …

• SunEdison’s CEO Ahmad Chatila is described with words like “bravado” and “intensely driven,” and it notes that his ambitions are “undiminished” by the difficult times.

• The article talks about what happens when “executive overreach” meets “fizzy markets.”

• The article describes a board that didn’t heed warnings from senior executives, who, after raising the warnings, were either fired or quit.

• The article notes that the company went on a “two-year buying spree” and that as its “acquisition fever” grew, its standards slipped. “Deals were sometimes done with little planning or at prices observers deemed overly rich,” the article said. At least one bank became “uneasy” with SunEdison’s “deal-vetting practices.”

Now, I’m the first to acknowledge that there are times when a good CEO needs to demonstrate some bravado and intensity. And there are times when a so-called buying spree might be what’s best for a company in growth mode.

But one of the biggest dangers for a high-growth organization is that all its great momentum can lead to a loss of control. The basics suffer in the name of speed or in the name of the next deal. And when trouble hits – a dip in the market, a rise in something like the price of oil, an unexpected change in government policy, or, in my case, an overleveraged economy – regaining control is difficult.

Transparency is at the heart of the issue. SunEdison looks like a company that has lacked transparency for some time – within its management ranks, with its board, and with investors. In this information-driven world we live in, there’s a tremendous premium on companies that are transparent with all of their constituents. Companies just cannot operate for long the way SunEdison has operated before they get exposed and something bad happens.

I think it starts with leadership. Leaders who check their ego at the front door, are transparent and put the good of the company before themselves win in the long run.

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