Crisis management - Wikipedia, the free encyclopedia

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Crisis management
From Wikipedia, the free encyclopedia

Crisis management is the systematic attempt to avoid organizational crises or to manage those crises events that do occur (Pearson & Clair, 1998). A crisis is a major, unpredictable event that threatens to harm an organization and its stakeholders. Although crisis events are unpredictable, they are not unexpected (Coombs, 1999). Crises can affect all segments of society businesses, churches, educational institutions, families, non-profits and the government and are caused by a wide range of reasons. Although the definitions can vary greatly, 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 (Seeger, Sellnow & Ulmer, 1998). There are four types of organizational crises: Sudden Crises, such as fires, explosions, natural disasters, workplace violence, etc; Smoldering Crises, problems or issues that start out small and could be fixed or averted if someone was paying attention or recognized the potential for trouble; Bizarre, like the finger in the Wendy's Restaurant Chili, a one-of-a-kind crisis; and, Perceptual Crises, such as the long-running problem Proctor & Gamble used to have with their former corporate logo, that included a half-moon and stars, which critics would claim were symbols of devil-worship, calling for boycotts of P&G products. (Smith & Millar, 2002) The practice of crisis management involves attempts to eliminate technological failure as well as the development of formal communication systems to avoid or to manage crisis situations (Barton, 2001), and is a discipline within the broader context of management. Crisis management consists of skills and techniques required to assess, understand, and cope with any serious situation, especially from the moment it first occurs to the point that recovery procedures start. Crisis management consists of methods used to respond to both the reality and perception of crises such as a Crisis Management Plan. Crisis management also involves establishing metrics to define what scenarios constitute a crisis and should consequently trigger the necessary response mechanisms. It consists of the communication that occurs within the response phase of emergency management scenarios. 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. 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 [1] (http://www.continuitycentral.com/feature0447.htm)

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Contents
1 A Framework for crisis management and crisis management planning 2 Models and theories associated with crisis management 3 Crisis management success stories 4 Lessons learned in crisis management 5 Public sector crisis management 6 Examples of organizational crises 7 See also 8 References 9 Further reading 10 External links

A Framework for crisis management and crisis management planning

The United Kingdoms Department for Business, Enterprise and Regulatory Reform (2008), describes a crisis as "an abnormal situation, or even perception, which is beyond the scope of everyday business and which threatens the operation, safety and reputation of an organization. The department advocates that businesses treat crisis management planning with the same attention as other business plans. "... The crisis should be dealt with as an operational management issue that is simply being undertaken in extreme circumstances. The crisis management framework for response is normally based on existing management structures and responsibilities. It must also reflect (or improve upon) existing lines of communication, both within the company, and with other organizations which may be affected. This approach, when developed in conjunction with the operational managers, will confirm ownership of plans and prepare the proposed framework for practical implementation." (United Kingdom, 2007) During the next five years, 83 percent of companies will face a crisis that will negatively impact the profitability of a company 20 and 30 percent, according to new research by Oxford-Metrica, an independent adviser on risk, value, reputation and governance (Aon, 2006). Crisis management is the process by which the organization manages a wider impact, such as media relations, and enables it to commence recovery. Irrespective of the size of an organization affected, the primary aims or benefits of crisis management would normally include:
1. Ability to assess the situation from inside and outside the organisation as all stakeholders might perceive it. 2. Techniques to direct action(s) to contain the likely or perceived damage spread. 3. A more effective way to rapidly trigger that part or parts of business continuity management. 4. Better organizational resilience for all stakeholders.

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5. Compliance with regulatory and ethical requirements, e.g. corporate social responsibility. 6. Much better management of serious incidents or any incident that could become serious. 7. Improved staff awareness of their roles and expectations within the organisation. 8. Increased ability, confidence and morale within the organisation. 9. Enhanced risk management insofar that obvious risks will be identified, mitigated (where possible) and through crisis and business continuity management - as prepared for. 10. Protected and often enhanced reputation a much reduced risk of post event litigation.

Models and theories associated with crisis management

Crisis Management Model: Successfully diffusing a crisis requires an understanding of how to handle a crisis before it occurs. Gonzalez-Herrero and Pratt created a four-phase crisis management model process that includes: issues management, planning-prevention, the crisis, and post-crisis (Gonzalez-Herrero and Pratt, 1995). 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. (12Manage, 2007) 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 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. (12Manage, 2007) 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
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an actual crisis, the team members will act more quickly and effectively. (12 Manage, 2007) 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 (Infante, Rancer, & Womack, 1997). 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 (Infante et al., 1997).

Crisis management success stories

Tylenol (Johnson & 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 (Dezenhall, 2004). Johnson & Johnson was again struck by a similar crisis in 1986 when a New York woman died on Feb. 8 after taking cyanide-laced Tylenol capsules. Johnson & Johnson was ready. Responding swiftly and smoothly to the new crisis, it immediately and indefinitely canceled all television commercials for Tylenol, established a toll-free telephone hot-line to answer consumer questions and offered refunds or exchanges to customers who had purchased Tylenol capsules. At week's end, 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 (Rudolph, 1986). Odwalla Foods: When Odwalla's apple juice was thought to be the cause of an outbreak of E. coli bacteria, 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

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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 (Dwyer, 1998). Mattel: Mattel Inc., the country's biggest 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 recall 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 (Goldman and Reckard, 2007).

Lessons learned in 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 Universitys 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 Carbides own chronology of the incident (2006), a day after the crisis Union Carbides 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. Ford and Firestone Tire and Rubber Company: The Ford-Firestone 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) (Ackman, 2001). 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 (Warner, 2002).
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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 eventin 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 (Pauly and Hutchison, 2005).

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, 2001 attacks, and shootings on college campuses including the Virginia Tech massacre, educational institutions at all levels are now focused on crisis management. A national study conducted by the University of Arkansas for Medical Sciences (UAMS) and Arkansas Childrens 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. 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 (Kansas City Public Schools, 2007). In a similar fashion the plans aim to address all audiences in need of information including parents, the media and law enforcement officials (Virginia Department of Education, 2002). A wide variety of programs have been developed that are dedicated to crisis response training for schools. Dr. John Dudley, an educational consultant, who has helped school districts across the nation prepare for and respond to school tragedies (Crisis Management, 2003) has developed such a training program. Dr. Dudley suggests that there are plans that are strategically designed to fit varying levels of crisis readiness: Level I This training is for newly organized school crisis response teams and for school staff and community members new to existing school crisis response

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teams. The focus of this training is on student and staff deaths. Level II This training is for existing school crisis response teams and focused on responding to school crisis other than deaths. Level III This training focuses on communicating and talking with students and staff during times of school tragedies. Level IV This training focuses on School Violence: Prevention and Response. Level V This training is for school crisis response teams who have responded to student or staff deaths. Level VI This training is for school crisis response team leaders and school administrators. Level VII This training is for school crisis response teams and focuses on retro-fitting crisis response protocols as well as preparing to respond to a pandemic impacting schools. (Crisis Management, 2003). 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. (Quick Reference, 2006) 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. (Quick Reference, 2006) FEMA offers free web-based training on the National Response Plan through the Emergency Management Institute ([2] (http://www.training.fema.gov/) ).

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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. 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. 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 (Boin, A., Hart, P., & Stern, E., 2005). 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-saavy audience with ever-changing technology at its fingertips. (Boin, A., Hart, P., & Stern, E., 2005). 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. (Boin, A., Hart, P., & Stern, E., 2005) A brief description of the five facets of crisis leadership includes: 1) Sense making may be considered as the classical situation assessment step in decision making. 2) Decision making is both the act of coming to a decision as the implementation of that decision. 3) Meaning making refers to crisis management as political communication. 4) Terminating a crisis is only possible if the public leader correctly handles the accountability question. 5) 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. (Hellsloot, 2007) JP

Examples of organizational crises

Extortion Bribery Hostile Takeover

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Terrorist Attack Copyright infringement Vehicular fatality Information sabotage Workplace bombing Natural disaster that destroys organizational office Computer tampering Sexual harassment Natural disaster that disrupts product/service Executive kidnapping Product/service boycott Work-related homicide Malicious rumor Hazardous material leak Plant explosion Personnel assault Assault of customers Product recall Counterfeiting Natural disaster that destroys corporate headquarters Natural disaster that eliminates key stakeholders

See also
Common Alerting Protocol Continuity Management Crisis Cross-cultural communication Emergency services Emergency management FEMA ISO/TC 223 Societal Security Management Risk Management Social Responsibility

References
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