Crisis management
From Wikipedia, the free encyclopedia
Crisis management
is the process by which an organization deals with a major event that
threatens to harm the organization, its stakeholders, or the general
public. The study of crisis management originated with the large scale
industrial and environmental disasters in the 1980s.[1]
Three elements are common to most definitions of crisis: (a) a threat
to the organization, (b) the element of surprise, and (c) a short
decision time.[2] Venette[3]
argues that "crisis is a process of transformation where the old system
can no longer be maintained." Therefore the fourth defining quality is
the need for change. If change is not needed, the event could more
accurately be described as a failure or incident.
In contrast to risk management, which involves assessing potential threats and finding the best ways to avoid those threats, crisis management involves dealing with threats before, during, and after they have occurred. It is a discipline within the broader context of management consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start.
Crisis management is occasionally referred to as incident management, although several industry specialists such as Peter Power argue that the term crisis management is more accurate. [4]
A crisis mindset requires the ability to think of the worst-case scenario while simultaneously suggesting numerous solutions. Trial and error is an accepted discipline, as the first line of defense might not work. It is necessary to maintain a list of contingency plans and to be always on alert. Organizations and individuals should always be prepared with a rapid response plan to emergencies which would require analysis, drills and exercises.[5]
The credibility and reputation of organizations is heavily influenced by the perception of their responses during crisis situations. The organization and communication involved in responding to a crisis in a timely fashion makes for a challenge in businesses. There must be open and consistent communication throughout the hierarchy to contribute to a successful crisis communication process.
The related terms emergency management and business continuity management focus respectively on the prompt but short lived "first aid" type of response (e.g. putting the fire out) and the longer term recovery and restoration phases (e.g. moving operations to another site). Crisis is also a facet of risk management, although it is probably untrue to say that Crisis Management represents a failure of Risk Management since it will never be possible to totally mitigate the chances of catastrophes occurring.
Lerbinger[7] categorized eight types of crises
James categorises five phases of crisis that require specific crisis leadership competencies.[9] Each phase contains an obstacle that a leader must overcome to improve the structure and operations of an organization. James’s case study on crisis in the financial services sector, for example, explores why crisis events erode public trust in leadership. James's research demonstrates how leadership competencies of integrity, positive intent, capability, mutual respect, and transparency impact the trust-building process. [10]
There are 3 phases in any Crisis Management as shown below
The crisis management mantra of Lanny Davis, former counsellor to Bill Clinton is to “Tell it Early, Tell it All, Tell it Yourself”. A strategy employed at the Clinton White House 1996 – 1998, to any breaking [19]
Organisations should have a planned approach to releasing information to the media in the event of a crisis. A media reaction plan should include a company media representative as part of the Crisis Management Team (CMT). Since there is always a degree of unpredictability during a crisis, it is best that all CMT members understand how to deal with the media and be prepared to do so, should they be thrust into such a situation.[20]
In 2010 Procter & Gamble Co called reports that its new Pampers with Dry Max caused rashes and other skin irritations "completely false" as it aimed to contain a public relations threat to its biggest diaper innovation in 25 years. A Facebook group called "Pampers bring back the OLD CRUISERS/SWADDLERS" rose to over 4,500 members. Pampers denied the allegation and stated that only two complaints had been received for every one million diapers sold.[21] Pampers quickly reached out to people expressing their concerns via social media, Pampers even held a summit with four influential “mommy bloggers,” to help dispel the rumour. Pampers acted quickly and decisively to an emerging crisis, before competitors and critics alike could fuel the fire further.
There is no truth. There is only perception.[22]
When another bottle of tainted Tylenol was discovered in a store, it took only a matter of minutes for the manufacturer to issue a nationwide warning that people should not use the medication in its capsule form.[24]
The two companies committed three major blunders early on, say crisis experts. First, they blamed consumers for not inflating their tires properly. Then they blamed each other for faulty tires and faulty vehicle design. Then they said very little about what they were doing to solve a problem that had caused more than 100 deaths—until they got called to Washington to testify before Congress.[29]
One of the key conclusions of this study is that "Effective management of the consequences of catastrophes would appear to be a more significant factor than whether catastrophe insurance hedges the economic impact of the catastrophe".
While there are technical elements to this report it is highly recommended to those who wish to engage their senior management in the value of crisis management.[31]
James contends that most executives focus on communications and public relations as a reactive strategy. While the company’s reputation with shareholders, financial well-being, and survival are all at stake, potential damage to reputation can result from the actual management of the crisis issue.[8] Additionally, companies may stagnate as their risk management group identifies whether a crisis is sufficiently “statistically significant”. [34] Crisis leadership, on the other hand, immediately addresses both the damage and implications for the company’s present and future conditions, as well as opportunities for improvement. [9]
A national study conducted by the University of Arkansas for Medical Sciences (UAMS) and Arkansas Children’s Hospital Research Institute (ACHRI) has shown that many public school districts have important deficiencies in their emergency and disaster plans (The School Violence Resource Center, 2003). In response the Resource Center has organized a comprehensive set of resources to aid schools is the development of crisis management plans.[citation needed]
Crisis management plans cover a wide variety of incidents including bomb threats, child abuse, natural disasters, suicide, drug abuse and gang activities – just to list a few.[36] In a similar fashion the plans aim to address all audiences in need of information including parents, the media and law enforcement officials.[37]
To help coordinate communication during the response phase of a crisis, the U.S. Federal Emergency Management Agency (FEMA) within the Department of Homeland Security administers the National Response Plan (NRP). This plan is intended to integrate public and private response by providing a common language and outlining a chain-of-command when multiple parties are mobilized. It is based on the premise that incidences should be handled at the lowest organizational level possible. The NRP recognizes the private sector as a key partner in domestic incident management, particularly in the area of critical infrastructure protection and restoration.[38]
The NRP is a companion to the National Incidence Management System that acts as a more general template for incident management regardless of cause, size, or complexity.[38]
FEMA offers free web-based training on the National Response Plan through the Emergency Management Institute.[39]
Common Alerting Protocol (CAP) is a relatively recent mechanism that facilitates crisis communication across different mediums and systems. CAP helps create a consistent emergency alert format to reach geographically and linguistically diverse audiences through both audio and visual mediums.[citation needed]
Crisis management has become a defining feature of contemporary governance. In times of crisis, communities and members of organizations expect their public leaders to minimize the impact of the crisis at hand, while critics and bureaucratic competitors try to seize the moment to blame incumbent rulers and their policies. In this extreme environment, policy makers must somehow establish a sense of normality, and foster collective learning from the crisis experience.[40]
In the face of crisis, leaders must deal with the strategic challenges they face, the political risks and opportunities they encounter, the errors they make, the pitfalls they need to avoid, and the paths away from crisis they may pursue. The necessity for management is even more significant with the advent of a 24-hour news cycle and an increasingly internet-savvy audience with ever-changing technology at its fingertips.[40]
Public leaders have a special responsibility to help safeguard society from the adverse consequences of crisis. Experts in crisis management note that leaders who take this responsibility seriously would have to concern themselves with all crisis phases: the incubation stage, the onset, and the aftermath. Crisis leadership then involves five critical tasks: sense making, decision making, meaning making, terminating, and learning.[40]
A brief description of the five facets of crisis leadership includes:[41]
1. Turnaround Management Society (International / Focus on Europe)
2. Institute for Turnaround (England)
3. Turnaround Management Association (International)
4. Institut für die Standardisierung von Unternehmenssanierungen (Germany)
In contrast to risk management, which involves assessing potential threats and finding the best ways to avoid those threats, crisis management involves dealing with threats before, during, and after they have occurred. It is a discipline within the broader context of management consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start.
Introduction
Crisis management consists of:- Methods used to respond to both the reality and perception of crises.
- Establishing metrics to define what scenarios constitute a crisis and should consequently trigger the necessary response mechanisms.
- Communication that occurs within the response phase of emergency management scenarios.
Crisis management is occasionally referred to as incident management, although several industry specialists such as Peter Power argue that the term crisis management is more accurate. [4]
A crisis mindset requires the ability to think of the worst-case scenario while simultaneously suggesting numerous solutions. Trial and error is an accepted discipline, as the first line of defense might not work. It is necessary to maintain a list of contingency plans and to be always on alert. Organizations and individuals should always be prepared with a rapid response plan to emergencies which would require analysis, drills and exercises.[5]
The credibility and reputation of organizations is heavily influenced by the perception of their responses during crisis situations. The organization and communication involved in responding to a crisis in a timely fashion makes for a challenge in businesses. There must be open and consistent communication throughout the hierarchy to contribute to a successful crisis communication process.
The related terms emergency management and business continuity management focus respectively on the prompt but short lived "first aid" type of response (e.g. putting the fire out) and the longer term recovery and restoration phases (e.g. moving operations to another site). Crisis is also a facet of risk management, although it is probably untrue to say that Crisis Management represents a failure of Risk Management since it will never be possible to totally mitigate the chances of catastrophes occurring.
Types of crisis
During the crisis management process, it is important to identify types of crises in that different crises necessitate the use of different crisis management strategies.[6] Potential crises are enormous, but crises can be clustered.[6]Lerbinger[7] categorized eight types of crises
- Natural disaster
- Technological crises
- Confrontation
- Malevolence
- Organizational Misdeeds
- Workplace Violence
- Rumours
- Terrorist attacks/man-made disasters
Natural crises
Natural crises, typically natural disasters considered as 'acts of God,' are such environmental phenomena as earthquakes, volcanic eruptions, tornadoes and hurricanes, floods, landslides, tsunamis, storms, and droughts that threaten life, property, and the environment itself.[6][7]- Example: 2004 Indian Ocean earthquake (Tsunami)
Technological crises
Technological crises are caused by human application of science and technology. Technological accidents inevitably occur when technology becomes complex and coupled and something goes wrong in the system as a whole (Technological breakdowns). Some technological crises occur when human error causes disruptions (Human breakdowns[6]). People tend to assign blame for a technological disaster because technology is subject to human manipulation whereas they do not hold anyone responsible for natural disaster. When an accident creates significant environmental damage, the crisis is categorized as megadamage.[6] Samples include software failures, industrial accidents, and oil spills.[6][7]- Examples: Chernobyl disaster, Exxon Valdez oil spill
Confrontation crisis
Confrontation crisis occur when discontented individuals and/or groups fight businesses, government, and various interest groups to win acceptance of their demands and expectations. The common type of confrontation crisis is boycotts, and other types are picketing, sit-ins, ultimatums to those in authority, blockade or occupation of buildings, and resisting or disobeying police.- Example: Rainbow/PUSH’s (People United to Serve Humanity) boycott of Nike
Crisis of malevolence
An organization faces a crisis of malevolence when opponents or miscreant individuals use criminal means or other extreme tactics for the purpose of expressing hostility or anger toward, or seeking gain from, a company, country, or economic system, perhaps with the aim of destabilizing or destroying it. Sample crisis include product tampering, kidnapping, malicious rumors, terrorism, and espionage.[6][7]- Example: 1982 Chicago Tylenol murders
Crises of organizational misdeeds
Crises occur when management takes actions it knows will harm or place stakeholders at risk for harm without adequate precautions.[6] Lerbinger[7] specified three different types of crises of organizational misdeeds: crises of skewed management values, crises of deception, and crises of management misconduct.Crises of skewed management values
Crises of skewed management values are caused when managers favor short-term economic gain and neglect broader social values and stakeholders other than investors. This state of lopsided values is rooted in the classical business creed that focuses on the interests of stockholders and tends to disregard the interests of its other stakeholders such as customers, employees, and the community- Example: Sears sacrifices customer trust[clarification needed]
Crisis of deception
Crisis of deception occur when management conceals or misrepresents information about itself and its products in its dealing with consumers and others.Crises of management misconduct
Some crises are caused not only by skewed values and deception but deliberate amorality and illegality.Workplace violence
Crises occur when an employee or former employee commits violence against other employees on organizational grounds.- Example: DuPont’s Lycra[clarification needed]
Rumors
False information about an organization or its products creates crises hurting the organization’s reputation. Sample is linking the organization to radical groups or stories that their products are contaminated.[6]- Example: Procter & Gamble's Logo controversy
Crisis Leadership
Erika Hayes James, an organizational psychologist at the University of Virginia’s Darden Graduate School of Business, identifies two primary types of organizational crisis.[8] James defines organizational crisis as “any emotionally charged situation that, once it becomes public, invites negative stakeholder reaction and thereby has the potential to threaten the financial well-being, reputation, or survival of the firm or some portion thereof.” [9]- Sudden crisis
- Smoldering crises
Sudden crises
Sudden crises are circumstances that occur without warning and beyond an institution’s control. Consequently, sudden crises are most often situations for which the institution and its leadership are not blamed.Smoldering crises
Smoldering crises differ from sudden crises in that they begin as minor internal issues that, due to manager’s negligence, develop to crisis status. These are situations when leaders are blamed for the crisis and its subsequent effect on the institution in question. [9]James categorises five phases of crisis that require specific crisis leadership competencies.[9] Each phase contains an obstacle that a leader must overcome to improve the structure and operations of an organization. James’s case study on crisis in the financial services sector, for example, explores why crisis events erode public trust in leadership. James's research demonstrates how leadership competencies of integrity, positive intent, capability, mutual respect, and transparency impact the trust-building process. [10]
- Signal detection
- Preparation and prevention
- Containment and damage control
- Business recovery
- Learning
Signal detection
Si Sense-making: represents an attempt to create order and make sense, retrospectively, of what occurs. Perspective-taking: the ability to consider another person's or group's point of view.Preparation and prevention
It is during this stage that crisis handlers begin preparing for or averting the crisis that had been foreshadowed in the signal detection stage. Organizations such as the Red Cross's primary mission is to prepare for and prevent the escalation of crisis events. Walmart has been described as an emergency relief standard bearer[citation needed] after having witnessed the incredibly speedy and well-coordinated effort to get supplies to the Gulf Coast of the United States in anticipation of Hurricane Katrina.Containment and damage control
Usually the most vivid stage, the goal of crisis containment and damage control is to limit the reputational, financial, safety, and other threats to firm survival. Crisis handlers work diligently during this stage to bring the crisis to an end as quickly as possible to limit the negative publicity to the organization, and move into the business recovery phase.Business recovery
When crisis hits, organizations must be able to carry on with their business in the midst of the crisis while simultaneously planning for how they will recover from the damage the crisis caused. Crisis handlers not only engage in continuity planning (determining the people, financial, and technology resources needed to keep the organization running), but will also actively pursue organizational resilience.Learning
In the wake of a crisis, organizational decision makers adopt a learning orientation and use prior experience to develop new routines and behaviors that ultimately change the way the organization operates. The best leaders recognize this and are purposeful and skillful in finding the learning opportunities inherent in every crisis situation.Models and theories associated with crisis management
Crisis Management Model
Successfully defusing a crisis requires an understanding of how to handle a crisis – before they occur. Gonzalez-Herrero and Pratt found the different phases of Crisis Management.There are 3 phases in any Crisis Management as shown below
- The diagnosis of the impending trouble or the danger signals.
- Choosing appropriate Turnaround Strategy.
- Implementation of the change process and its monitoring.
Management Crisis Planning
No corporation looks forward to facing a situation that causes a significant disruption to their business, especially one that stimulates extensive media coverage. Public scrutiny can result in a negative financial, political, legal and government impact. Crisis management planning deals with providing the best response to a crisis.[11]Contingency planning
Preparing contingency plans in advance, as part of a crisis management plan, is the first step to ensuring an organization is appropriately prepared for a crisis. Crisis management teams can rehearse a crisis plan by developing a simulated scenario to use as a drill. The plan should clearly stipulate that the only people to speak publicly about the crisis are the designated persons, such as the company spokesperson or crisis team members. The first hours after a crisis breaks are the most crucial, so working with speed and efficiency is important, and the plan should indicate how quickly each function should be performed. When preparing to offer a statement externally as well as internally, information should be accurate. Providing incorrect or manipulated information has a tendency to backfire and will greatly exacerbate the situation. The contingency plan should contain information and guidance that will help decision makers to consider not only the short-term consequences, but the long-term effects of every decision.[11]Business continuity planning
When a crisis will undoubtedly cause a significant disruption to an organization, a business continuity plan can help minimize the disruption. First, one must identify the critical functions and processes that are necessary to keep the organization running. Then each critical function and or/process must have its own contingency plan in the event that one of the functions/processes ceases or fails. Testing these contingency plans by rehearsing the required actions in a simulation will allow for all involved to become more sensitive and aware of the possibility of a crisis. As a result, in the event of an actual crisis, the team members will act more quickly and effectively.[11]Structural-functional systems theory
Providing information to an organization in a time of crisis is critical to effective crisis management. Structural-functional systems theory addresses the intricacies of information networks and levels of command making up organizational communication. The structural-functional theory identifies information flow in organizations as "networks" made up of members and "links". Information in organizations flow in patterns called networks.[12]Diffusion of innovation theory
Another theory that can be applied to the sharing of information is Diffusion of Innovation Theory. Developed by Everett Rogers, the theory describes how innovation is disseminated and communicated through certain channels over a period of time. Diffusion of innovation in communication occurs when an individual communicates a new idea to one or several others. At its most elementary form, the process involves: (1) an innovation, (2) an individual or other unit of adoption that has knowledge of or experience with using the innovation, (3) another individual or other unit that does not yet have knowledge of the innovation, and (4) a communication channel connecting the two units. A communication channel is the means by which messages get from one individual to another.Role of apologies in crisis management
There has been debate about the role of apologies in crisis management, and some argue that apology opens an organization up for possible legal consequences. "However some evidence indicates that compensation and sympathy, two less expensive strategies, are as effective as an apology in shaping people’s perceptions of the organization taking responsibility for the crisis because these strategies focus on the victims’ needs. The sympathy response expresses concern for victims while compensation offers victims something to offset the suffering."[13]Crisis leadership
James identifies five leadership competencies which facilitate organizational restructuring during and after a crisis.- Building an environment of trust
- Reforming the organization’s mindset
- Identifying obvious and obscure vulnerabilities of the organization
- Making wise and rapid decisions as well as taking courageous action
- Learning from crisis to effect change.
Unequal human capital theory
James postulates that organizational crisis can result from discrimination lawsuits. [15] James’s theory of unequal human capital and social position derives from economic theories of human and social capital concluding that minority employees receive fewer organizational rewards than those with access to executive management. In a recent study of managers in a Fortune 500 company, race was found to be a predictor of promotion opportunity or lack thereof.[16] Thus, discrimination lawsuits can invite negative stakeholder reaction, damage the company's reputation, and threaten corporate survival.Social media and crisis management
Social media has accelerated the speed that information about a crisis can spread. The viral affect of social networks such as Twitter means that stakeholders can break news faster than traditional media - making managing a crisis harder.[17] This can be mitigated by having the right training and policy in place as well as the right social media monitoring tools to detect signs of a crisis breaking.[18] Social media also gives crisis management teams access to real-time information about how a crisis is impacting stakeholder sentiment and the issues that are of most concern to them.The crisis management mantra of Lanny Davis, former counsellor to Bill Clinton is to “Tell it Early, Tell it All, Tell it Yourself”. A strategy employed at the Clinton White House 1996 – 1998, to any breaking [19]
Organisations should have a planned approach to releasing information to the media in the event of a crisis. A media reaction plan should include a company media representative as part of the Crisis Management Team (CMT). Since there is always a degree of unpredictability during a crisis, it is best that all CMT members understand how to deal with the media and be prepared to do so, should they be thrust into such a situation.[20]
In 2010 Procter & Gamble Co called reports that its new Pampers with Dry Max caused rashes and other skin irritations "completely false" as it aimed to contain a public relations threat to its biggest diaper innovation in 25 years. A Facebook group called "Pampers bring back the OLD CRUISERS/SWADDLERS" rose to over 4,500 members. Pampers denied the allegation and stated that only two complaints had been received for every one million diapers sold.[21] Pampers quickly reached out to people expressing their concerns via social media, Pampers even held a summit with four influential “mommy bloggers,” to help dispel the rumour. Pampers acted quickly and decisively to an emerging crisis, before competitors and critics alike could fuel the fire further.
There is no truth. There is only perception.[22]
Examples of successful crisis management
Tylenol (Johnson and Johnson)
In the fall of 1982, a murderer added 65 milligrams of cyanide to some Tylenol capsules on store shelves, killing seven people, including three in one family. Johnson & Johnson recalled and destroyed 31 million capsules at a cost of $100 million. The affable CEO, James Burke, appeared in television ads and at news conferences informing consumers of the company's actions. Tamper-resistant packaging was rapidly introduced, and Tylenol sales swiftly bounced back to near pre-crisis levels.[23]When another bottle of tainted Tylenol was discovered in a store, it took only a matter of minutes for the manufacturer to issue a nationwide warning that people should not use the medication in its capsule form.[24]
Odwalla Foods
When Odwalla's apple juice was thought to be the cause of an outbreak of E. coli infection, the company lost a third of its market value. In October 1996, an outbreak of E. coli bacteria in Washington state, California, Colorado and British Columbia was traced to unpasteurized apple juice manufactured by natural juice maker Odwalla Inc. Forty-nine cases were reported, including the death of a small child. Within 24 hours, Odwalla conferred with the FDA and Washington state health officials; established a schedule of daily press briefings; sent out press releases which announced the recall; expressed remorse, concern and apology, and took responsibility for anyone harmed by their products; detailed symptoms of E. coli poisoning; and explained what consumers should do with any affected products. Odwalla then developed - through the help of consultants - effective thermal processes that would not harm the products' flavors when production resumed. All of these steps were communicated through close relations with the media and through full-page newspaper ads.Mattel
Mattel Inc., the toy maker, has been plagued with more than 28 product recalls and in Summer of 2007, amongst problems with exports from China, faced two product recalls in two weeks. The company "did everything it could to get its message out, earning high marks from consumers and retailers. Though upset by the situation, they were appreciative of the company's response. At Mattel, just after the 7 a.m. recall announcement by federal officials, a public relations staff of 16 was set to call reporters at the 40 biggest media outlets. They told each to check their e-mail for a news release outlining the recalls, invited them to a teleconference call with executives and scheduled TV appearances or phone conversations with Mattel's chief executive. The Mattel CEO Robert Eckert did 14 TV interviews on a Tuesday in August and about 20 calls with individual reporters. By the week's end, Mattel had responded to more than 300 media inquiries in the U.S. alone."[25]Pepsi
The Pepsi Corporation faced a crisis in 1993 which started with claims of syringes being found in cans of diet Pepsi. Pepsi urged stores not to remove the product from shelves while it had the cans and the situation investigated. This led to an arrest, which Pepsi made public and then followed with their first video news release, showing the production process to demonstrate that such tampering was impossible within their factories. A second video news release displayed the man arrested. A third video news release showed surveillance from a convenience store where a woman was caught replicating the tampering incident. The company simultaneously publicly worked with the FDA during the crisis. The corporation was completely open with the public throughout, and every employee of Pepsi was kept aware of the details.[citation needed] This made public communications effective throughout the crisis. After the crisis had been resolved, the corporation ran a series of special campaigns designed to thank the public for standing by the corporation, along with coupons for further compensation. This case served as a design for how to handle other crisis situations.[26][citation needed]Examples of unsuccessful crisis management
Bhopal
The Bhopal disaster in which poor communication before, during, and after the crisis cost thousands of lives, illustrates the importance of incorporating cross-cultural communication in crisis management plans. According to American University’s Trade Environmental Database Case Studies (1997), local residents were not sure how to react to warnings of potential threats from the Union Carbide plant. Operating manuals printed only in English is an extreme example of mismanagement but indicative of systemic barriers to information diffusion. According to Union Carbide’s own chronology of the incident (2006), a day after the crisis Union Carbide’s upper management arrived in India but was unable to assist in the relief efforts because they were placed under house arrest by the Indian government. Symbolic intervention can be counter productive; a crisis management strategy can help upper management make more calculated decisions in how they should respond to disaster scenarios. The Bhopal incident illustrates the difficulty in consistently applying management standards to multi-national operations and the blame shifting that often results from the lack of a clear management plan.[27]Ford and Firestone Tire and Rubber Company
The Ford-Firestone Tire and Rubber Company dispute transpired in August 2000. In response to claims that their 15-inch Wilderness AT, radial ATX and ATX II tire treads were separating from the tire core—leading to grisly, spectacular crashes—Bridgestone/Firestone recalled 6.5 million tires. These tires were mostly used on the Ford Explorer, the world's top-selling sport utility vehicle (SUV).[28]The two companies committed three major blunders early on, say crisis experts. First, they blamed consumers for not inflating their tires properly. Then they blamed each other for faulty tires and faulty vehicle design. Then they said very little about what they were doing to solve a problem that had caused more than 100 deaths—until they got called to Washington to testify before Congress.[29]
Exxon
On March 24, 1989, a tanker belonging to the Exxon Corporation ran aground in the Prince William Sound in Alaska. The Exxon Valdez spilled millions of gallons of crude oil into the waters off Valdez, killing thousands of fish, fowl, and sea otters. Hundreds of miles of coastline were polluted and salmon spawning runs disrupted; numerous fishermen, especially Native Americans, lost their livelihoods. Exxon, by contrast, did not react quickly in terms of dealing with the media and the public; the CEO, Lawrence Rawl, did not become an active part of the public relations effort and actually shunned public involvement; the company had neither a communication plan nor a communication team in place to handle the event—in fact, the company did not appoint a public relations manager to its management team until 1993, 4 years after the incident; Exxon established its media center in Valdez, a location too small and too remote to handle the onslaught of media attention; and the company acted defensively in its response to its publics, even laying blame, at times, on other groups such as the Coast Guard. These responses also happened within days of the incident.[30]Lessons learned in crisis management
One of the foremost recognized studies conducted on the impact of a catastrophe on the stock value of an organization was completed by Dr Rory Knight and Dr Deborah Pretty (1996, Templeton College, University of Oxford - commissioned by the Sedgewick Group). This study undertook a detailed analysis of the stock price (post impact) of organizations that had experienced catastrophes. The study identified organizations that recovered and even exceeded pre-catastrophe stock price, (Recoverers), and those that did not recover on stock price, (Non-recoverers). The average cumulative impact on shareholder value for the recoverers was 5% plus on their original stock value. So the net impact on shareholder value by this stage was actually positive. The non-recoverers remained more or less unchanged between days 5 and 50 after the catastrophe, but suffered a net negative cumulative impact of almost 15% on their stock price up to one year afterwards.
One of the key conclusions of this study is that "Effective management of the consequences of catastrophes would appear to be a more significant factor than whether catastrophe insurance hedges the economic impact of the catastrophe".
While there are technical elements to this report it is highly recommended to those who wish to engage their senior management in the value of crisis management.[31]
Crisis as Opportunity
To address such shareholder impact, management must move from a mindset that manages crisis to one that generates crisis leadership. [8] Research shows that organizational contributory factors affect the tendency of executives to adopt an effective "crisis as opportunity" mindset. [32] Since pressure is both a precipitator and consequence of crisis, leaders who perform well under pressure can effectively guide the organization through such crisis. [33]James contends that most executives focus on communications and public relations as a reactive strategy. While the company’s reputation with shareholders, financial well-being, and survival are all at stake, potential damage to reputation can result from the actual management of the crisis issue.[8] Additionally, companies may stagnate as their risk management group identifies whether a crisis is sufficiently “statistically significant”. [34] Crisis leadership, on the other hand, immediately addresses both the damage and implications for the company’s present and future conditions, as well as opportunities for improvement. [9]
Public sector crisis management
Corporate America is not the only community that is vulnerable to the perils of a crisis. Whether a school shooting, a public health crisis or a terrorist attack that leaves the public seeking comfort in the calm, steady leadership of an elected official, no sector of society is immune to crisis. In response to that reality, crisis management policies, strategies and practices have been developed and adapted across multiple disciplines.Schools and crisis management
In the wake of the Columbine High School Massacre, the September 11 attacks in 2001, and shootings on college campuses including the Virginia Tech massacre, educational institutions at all levels are now focused on crisis management.[35]A national study conducted by the University of Arkansas for Medical Sciences (UAMS) and Arkansas Children’s Hospital Research Institute (ACHRI) has shown that many public school districts have important deficiencies in their emergency and disaster plans (The School Violence Resource Center, 2003). In response the Resource Center has organized a comprehensive set of resources to aid schools is the development of crisis management plans.[citation needed]
Crisis management plans cover a wide variety of incidents including bomb threats, child abuse, natural disasters, suicide, drug abuse and gang activities – just to list a few.[36] In a similar fashion the plans aim to address all audiences in need of information including parents, the media and law enforcement officials.[37]
Government and crisis management
Historically, government at all levels – local, state, and national – has played a large role in crisis management. Indeed, many political philosophers have considered this to be one of the primary roles of government. Emergency services, such as fire and police departments at the local level, and the United States National Guard at the federal level, often play integral roles in crisis situations.To help coordinate communication during the response phase of a crisis, the U.S. Federal Emergency Management Agency (FEMA) within the Department of Homeland Security administers the National Response Plan (NRP). This plan is intended to integrate public and private response by providing a common language and outlining a chain-of-command when multiple parties are mobilized. It is based on the premise that incidences should be handled at the lowest organizational level possible. The NRP recognizes the private sector as a key partner in domestic incident management, particularly in the area of critical infrastructure protection and restoration.[38]
The NRP is a companion to the National Incidence Management System that acts as a more general template for incident management regardless of cause, size, or complexity.[38]
FEMA offers free web-based training on the National Response Plan through the Emergency Management Institute.[39]
Common Alerting Protocol (CAP) is a relatively recent mechanism that facilitates crisis communication across different mediums and systems. CAP helps create a consistent emergency alert format to reach geographically and linguistically diverse audiences through both audio and visual mediums.[citation needed]
Elected officials and crisis management
Historically, politics and crisis go hand-in-hand. In describing crisis, President Abraham Lincoln said, “We live in the midst of alarms, anxiety beclouds the future; we expect some new disaster with each newspaper we read.”[citation needed]Crisis management has become a defining feature of contemporary governance. In times of crisis, communities and members of organizations expect their public leaders to minimize the impact of the crisis at hand, while critics and bureaucratic competitors try to seize the moment to blame incumbent rulers and their policies. In this extreme environment, policy makers must somehow establish a sense of normality, and foster collective learning from the crisis experience.[40]
In the face of crisis, leaders must deal with the strategic challenges they face, the political risks and opportunities they encounter, the errors they make, the pitfalls they need to avoid, and the paths away from crisis they may pursue. The necessity for management is even more significant with the advent of a 24-hour news cycle and an increasingly internet-savvy audience with ever-changing technology at its fingertips.[40]
Public leaders have a special responsibility to help safeguard society from the adverse consequences of crisis. Experts in crisis management note that leaders who take this responsibility seriously would have to concern themselves with all crisis phases: the incubation stage, the onset, and the aftermath. Crisis leadership then involves five critical tasks: sense making, decision making, meaning making, terminating, and learning.[40]
A brief description of the five facets of crisis leadership includes:[41]
- Sense making may be considered as the classical situation assessment step in decision making.
- Decision making is both the act of coming to a decision as the implementation of that decision.
- Meaning making refers to crisis management as political communication.
- Terminating a crisis is only possible if the public leader correctly handles the accountability question.
- Learning, refers to the actual learning from a crisis is limited. The authors note, a crisis often opens a window of opportunity for reform for better or for worse.
Professional Organizations
There are a number of professional industry associations that provide advice, literature and contacts to turnaround professionals and academics. Some are:1. Turnaround Management Society (International / Focus on Europe)
2. Institute for Turnaround (England)
3. Turnaround Management Association (International)
4. Institut für die Standardisierung von Unternehmenssanierungen (Germany)
See also
- Common Alerting Protocol
- Contingency plan
- Crisis
- Cross-cultural communication
- Emergency services
- Emergency management
- Federal Emergency Management Agency
- ISO/TC 223 Societal Security
- Management
- Management by exception
- Risk Management
- Social Responsibility
References
- ^ Shrivastava, P. Mitroff, I.I., Miller, D. and A. Miglani, " Understanding industrial crises".Journal of Management Studies, 1988, 25, 4, 285-304.
- ^ Seeger, M. W.; Sellnow, T. L., & Ulmer, R. R. (1998). "Communication, organization and crisis". Communication Yearbook 21: 231–275.
- ^ Venette, S. J. (2003). Risk communication in a High Reliability Organization: APHIS PPQ's inclusion of risk in decision making. Ann Arbor, MI: UMI Proquest Information and Learning.
- ^ "Incident or crisis? Why the debate?".
- ^ Alan B. Bernstein and Cindy Rakowitz (2012). Emergency Public Relations: Crisis Management In a 3.0 World. p. 5. ISBN 978-1469159546
- ^ a b c d e f g h i Coombs, W. T. (1999). Ongoing crisis communication: Planning, managing, and responding. Thousand Oaks, CA: Sage.
- ^ a b c d e Lerbinger, O. (1997). The crisis manager: Facing risk and responsibility. Mahwah, NJ: Erlbaum.
- ^ a b c "Crisis Leadership". Retrieved 2010-06-22.
- ^ a b c d e James, E. (Spring 2007). "Leadership as (Un)usual: How to Display Competence InTimes of Crisis". Leadership Preview. Retrieved 2010-06-22.
- ^ James, Erika; Roberts, J (2009). "Arginine decarboxylase from a Pseudomonas species". Journal of Financial Transformation 125 (2): 601–7. PMC 236121. PMID 1382. Retrieved 2010-06-22.
- ^ a b c "Rigor and Relevance in Management". 12Manage.com. Retrieved 2007-10-11.
- ^ Infante, D.; Rancer, A., & Womack, D. (1997). Building communication theory (3rd ed.). Prospect Heights, IL: Waveland Press.
- ^ Coombs, W. T. (2007). Ongoing Crisis Communication: Planning, Managing, and Responding (2nd ed.). Thousand Oaks, CA: Sage.
- ^ James, E.; James, E. H. (Vol. 10, No. 3, 2008). "Linking Crisis Management and Leadership Competencies: The Role of Human Resource Development". Advances in Developing Human Resources 10 (3): 352. doi:10.1177/1523422308316450. Retrieved 2010-06-22.
- ^ James, Erika; Lynn Perry Wooten (2010). "Why Discrimination Lawsuits Are a Noteworthy Crisis". Leading Under Pressure. Routledge Academic.
- ^ James, Erika (Sept. – Oct. 2000, Vol. 11, No. 5). "Race-Related Differences in Promotions and Support: Underlying Effects of Human and Social Capital". Organizational Science 11 (5): 493. doi:10.1287/orsc.11.5.493.15202. Retrieved 2010-06-22.
- ^ See http://issuu.com/steelhenge/docs/socialmedia_crisis?mode=window&backgroundColor=%23222222
- ^ Lewis, Adam. "How to manage a social media crisis".
- ^ Davis, Lanny (May 1999) “Truth to Tell: Tell it Early, Tell it All, Tell it Yourself” Notes from My White House Education. New York: Free Press
- ^ Fischer, Robert. P., Halibozek, Edward., & Green, Gion, (2008) “Introduction to Security”. 8th Edition, p. 256 ISBN 978-0-7506-8432-3.
- ^ Martinne Geller Reuters, http://www.reuters.com/article/2010/05/07/us-procter-pampers-idUSTRE6457AH20100507
- ^ Gustave Flaubert. BrainyQuote.com, Xplore Inc, 2012. http://www.brainyquote.com/quotes/quotes/g/gustavefla161911.html, accessed September 26, 2012.
- ^ Dezenhall, E. (2004-03-17). USA Today http://www.usatoday.com/news/opinion/editorials/2004-03-17-dezenhall_x.html. Retrieved 2007-10-08.[dead link]
- ^ Rudolph, B. (1986-02-24). "Coping with catastrophe". Time. Retrieved 2007-10-06.
- ^ Goldman, A.; Reckard, E. (2007). LA Times http://www.latimes.com/business/printedition/la-fi-pr18aug18,0,3471349.story?page=1&coll=la-headlines-pe-business. Retrieved 2007-10-13.[dead link]
- ^ "The Pepsi Product Tampering Scandal of 1993". Retrieved 7 September 2009.
- ^ Shrivastava, P. (1987). Bhopal: Anatomy of a Crisis. Ballinger Publishing Company.
- ^ Ackman, D. (2001). Forbes. http://www.forbes.com/2001/06/20/tireindex.htm. Retrieved 2007-10-14.[dead link]
- ^ Warner, F. (2002). "How to Stay Loose in a Tight Spot". Fast Company. Retrieved 2007-10-15.
- ^ Pauly, J. J.; Hutchison, L. L. (2005). "Moral fables of public relations practice: The Tylenol and Exxon Valdez cases". Journal of Mass Media Ethics 20 (4): 231–249. doi:10.1207/s15327728jmme2004_2.
- ^ Knight, Rory F.; Pretty, Deborah (1996). The Impact of Catasrophes on Shareholder Value (Report).
- ^ James, E.; James, E. H. (Vol. 44, No. 1, 2008). "Toward an Understanding of When Executives See Crisis as Opportunity". The Journal of Applied Behavioral Science 44 (1): 94. doi:10.1177/0021886307313824. Retrieved 2010-06-22.
- ^ James, Erika; Lynn Wooten (2010). Leading Under Pressure. Routledge Academic.
- ^ "The Wall Street Journal Community". Retrieved 2010-06-22.
- ^ "Campus Security Summit" (RealMedia Streaming Video).
- ^ "Crisis management". Kansas City Public Schools. 2007.
- ^ "Resource guide for crisis management in Virginia schools" (PDF). Virginia Department of Education. 2002. Archived from the original on 2007-08-03. Retrieved 2007-10-15.
- ^ a b "Quick Reference Guide for the National Response Plan (version 4.0)" (PDF). May 2006.
- ^ "Emergency Management Institute Home Page".
- ^ a b c Boin, A.; P. Hart and E. Stern (2005). The politics of crisis management: Public leadership under pressure. New York: Cambridge University Press.
- ^ Hellsloot, I. (2007). "Review of "The politics of crisis management: Public leadership under pressure" by A. Boin, P. Hart, E. Stern and B. Sundelius". Journal of Contingencies and Crisis Management 15 (3): 168–169. doi:10.1111/j.1468-5973.2007.00519.x.
Further reading
- Barton, L. (2007). Crisis leadership now: A real-world guide to preparing for threats, disaster, sabotage, and scandal. New York, NY: McGraw-Hill.
- Borodzicz, Edward P. (2005). Risk, Crisis and Security Management. West Sussex, England: John Wiley and Sons Ltd.
- Coombs, W. T. (2006). Code Red in the Boardroom: Crisis Management as Organizational DNA. Westport, CT: Praeger.
- Office of Security and Risk Management Services (October 2007). "Crisis Management Workbook". Fairfax County Public Schools.
- Davidson, M.N. (2005). Ethics in Human Resource Management, in P.H. Werhane, R. E. Freeman (Eds.), Blackwell Encyclopedic Dictionary of Business Ethics. Malden, MA: Blackwell Publishing.
- Davidson, M.N. (2004). "Leading in Black and White: Working across the Racial Divide in Corporate America". Personnel Psychology 75 (2).
- Davidson, M.N. (2004). "Here and There: A Conversation about Identity". Industrial-Organizational Psychologist 41 (3).
- Davidson, M.N. (2004). "Diversity that matters". Batten Briefings 3 (1).
- Davidson, M.N. (2003). "Making the Tough Calls: Negotiating Exclusion in Inclusive and Diverse Organizations". Industrial-Organizational Psychologist 41 (1).
- Davidson, M.N. (2003). "Leveraging Difference for Organizational Excellence". Batten Briefings 2 (1).
- Davidson, M.N. (2002). "Inclusion and Power: Reflections on Dominance and Subordination in Organizations". Industrial-Organizational Psychologist 40 (1).
- Davidson (2001). "Diversity and inclusion: What difference does it make?". Industrial-Organizational Psychologist 39 (2).
- Davidson, M.N. (2001). "The impact of race on styles of dealing with conflict". Sex Roles 45 (5/6).
- Davidson, M.N. (2001). "Mentoring in the preparation of ethnically diverse graduate students". Review of Educational Research 71 (4).
- Davidson, M.N. (1999). The role of emotion in negotiation: The impact of anger. In R.J. Bies, R.J. Lewicki, B.H. Sheppard, (Eds.), Research on Negotiation in Organizations. Greenwich, CT: JAI Press Inc..
- Davidson, M.N. (1999). "The value of being included: An examination of diversity change initiatives in organizations". Performance Improvement Quarterly 12 (1).
- Dezenhall, E. (2003). Nail 'em!: Confronting high-profile attacks on celebrities & businesses. Amherst, New York: Prometheus Books.
- Dezenhall, E.; Weber, J. (2007). Damage control: Why everything you know about crisis management is wrong. Portfolio Hardcover.
- Erickson, Paul A. (2006). Emergency Response Planning for Corporate and Municipal Managers (2nd ed.). Burlington, MA: Elsevier, Inc..
- Feltus, Christophe; Djamel Khadraoui, Cedric Bonhomme (April 6–9). "Electric Blackout Prevention: Toward a Computer-Mediated Weather Alert Broadcasting Solution". International Conference on Society and Information Technologies.
- Ferdman (2002). "Inclusion: What can I and my organization do about it?". Industrial-Organizational Psychologist 39 (4).
- Ferdman (2002). "Drawing the line: Are some differences too different?". Industrial-Organizational Psychologist 39 (3).
- Fink, S. (2007). Crisis management: Planning for the inevitable. Backinprint.com.
- Friedman, R.A. (2001). "Managing diversity and second-order conflict". Journal of Conflict Management 12 (2).
- Friedman, R.A. (1999). The role of emotion in negotiation: The impact of anger. In R.J. Bies, R.J. Lewicki, B.H. Sheppard, (Eds.), Research on Negotiation in Organizations. Greenwich, CT: JAI Press Inc..
- Mitroff, Ian I.; Gus Anagnos (2000). Managing Crises Before They Happen: What Every Executive Needs to Know About Crisis Management. New York: AMACOM.
- Mitroff, Ian I. (2003). Crisis Leadership: Planning for the Unthinkable. New York: John Wiley.
- Mitroff, Ian I. (2005). Why Some Companies Emerge Stronger And Better From a Crisis: Seven Essential Lessons For Surviving Disaster. New York: AMACOM.
- Public Relations Review 35 (1). http://www.sciencedirect.com/science/journal/03638111. "contains a collection of articles on crisis management."
- Department of Homeland Security, Federal Emergency Management Agency (September 2007). "National Response Plan".
- Shrivastava, Paul (1987). Bhopal:Anatomy of a crisis. New York: Ballinger.
- Smith, Larry; Dan Millar, PhD (2002). Before Crisis Hits: Building a Strategic Crisis Plan. Washington, DC: AACC Community College Press.
- Smith, Larry; Dan Millar, PhD (2002). Crisis Management and Communication; How to Gain and Maintain Control (2nd ed.). San Francisco, CA: International Association of Business Communicators.
- Ulmer, R. R.; Sellnow, T. L., & Seeger, M. W. (2006). Effective crisis communication: Moving from crisis to opportunity. Thousand Oaks, CA: Sage Publications.
External links
- Crisis management and business continuity planning. 2007. United Kingdom Government Business Link.
- Crisis Manager Newsletter, a free collection of 600+ articles on crisis management-related topics.
- Crisis Management and Communication Entry Institute for Public Relations article
- CRISIS MANAGEMENT AND BUSINESS CONTINUITY A short program offered at MIT
- TURNAROUND MANAGEMENT ASSOCIATION Certifying Body for Certified Turnaround Professionals/Crisis Managers
- The International Research Group on Crisis Communication Publications and crisis institutions database
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