Crisis Management 2
Crisis Management 2
Crisis Management 2
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.
Contents
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"... 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% of companies will face a crisis that will negatively impact the
profitability of a company 20 and 30%, 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 institution affected, the primary aims or benefits of crisis
management would normally include:
1. Ability to assess the situation from inside and outside the Institution as all stakeholders might
perceive it. 2. Techniques to direct action(s) to contain the likely or perceived damage spread. 3.
Better institutional resilience for all stakeholders. 4. Compliance with regulatory and ethical
requirements, e.g. corporate [social responsibility]. 5. Much better management of serious
incidents or any incident that could become serious. 6. Improved staff awareness of their roles
and expectations within the institution. 7. Increased ability, confidence and morale within the
institution. 8. Enhanced risk management insofar that obvious risks will be identified, mitigated
(where possible) and through crisis and business continuity management - as prepared for. 9.
Protected and often enhanced reputation a much reduced risk of post event litigation.
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)
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. (12Manage, 2007)
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).
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).
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 (Dwyer, 1998).
[edit] 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).
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, (1995,
Templeton College, University of Oxford - commissioned by the Sedgewick Group). This
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
[edit] 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 (Shrivastava, 1987).
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).
[edit] 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 (Pauly and Hutchison, 2005).
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. [1]
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.
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).
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.[1]
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.
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.”
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)
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
[edit] References
1. ^ "Emergency Management Institute Home Page".
12Manage. "Rigor and Relevance in Management". Retrieved October 11, 2007. [2]
Boin, A., Hart, P., & Stern, E. (2005). The politics of crisis management: Public leadership under
pressure. New York: Cambridge University Press.
Borodzicz, Edward P. 2005. Risk, Crisis and Security Management. West Sussex, England: John
Wiley and Sons Ltd.
Coombs, W. T. (1999). Ongoing crisis communication: Planning, managing and responding.
Thousand Oaks, CA: Sage Publications, Inc.
Crisis Management. (2003). Crisis management. Retrieved Oct. 15, 2007, from [8]
Dwyer, S. (1998). 'Hudson, we have a problem!' - Hudson Foods' inability to handle a crisis
management program. Retrieved Oct. 12, 2007, from [11]
Goldman, A., & Reckard, E. (2007). LA Times. Retrieved Oct. 13, 2007, from [12]
Gonzalez-Herrero, A., & Pratt, C. B. (1995). How to manage a crisis before or whenever - it hits.
Public Relations Quarterly, 40, 25-30.
Hellsloot, I. (2007). The politics of crisis management: Public leadership under pressure by A.
Boin, P. ‘t Hart, E. Stern and B. Sundelius. Journal of Contingencies and Crisis Management,
15(3), 168-169.
Infante, D., Rancer, A., & Womack, D. (1997). Building communication theory (3rd ed.).
Prospect Heights, IL: Waveland Press.
Kansas City Public Schools. Kansas City, KS. (2007). Crisis management. Retrieved Oct. 15,
[13]
Knight, R., Pretty, D. (1995). The Impact of Catastrophes on Shareholder Value. The Oxford
Executive Research Briefings
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.
Quick Reference Guide for the National Response Plan. May 2006. Version 4.0 [14]
Rudolph, B. (1986). “Coping with catastrophe.” Time. Retrieved Oct. 6, 2007, from [15]
School Violence Resource Center. (2003). School violence resource center. Retrieved Oct. 14,
2007, from [16]
Seeger, M. W., Sellnow, T. L., & Ulmer, R. R. (1998). Communication, organization and crisis.
Communication Yearbook, 21, 231-275.
Trade Environmental Database Case Studies: Bhopal Disaster. American University. January
1997. [17]
Virginia Department of Education. (2002). Resource guide for crisis management in Virginia
schools. Retrieved Oct. 15, 2007, from [18]
Warner, F. (2002). “How to Stay Loose in a Tight Spot.” Fast Company. Retrieved Oct. 15,
2007, from [19]
Barton, L. (2007). Crisis leadership now: A real-world guide to preparing for threats, disaster,
sabotage, and scandal. New York, NY: McGraw-Hill.
Smith, Larry and Millar, Dan PhD,2002, Before Crisis Hits: Building a Strategic Crisis Plan,
Washington, DC, AACC Community College Press
Borodzicz, Edward P. 2005. Risk, Crisis and Security Management. West Sussex, England: John
Wiley and Sons Ltd.
Crisis Management Workbook. Office of Security and Risk Management Services. Fairfax
County Public Schools. October 2007.
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,
Second Edition. Burlington, MA: Elsevier, Inc.
Mitroff, Ian I. (2000). Managing Crises Before They Happen: What Every Executive Needs to
Know About Crisis Management. With Gus Anagnos. AMACOM, New York.
Mitroff, Ian I. (2003). Crisis Leadership: Planning for the Unthinkable. John Wiley, New York.
Mitroff, Ian I. (2005). Why Some Companies Emerge Stronger And Better From a Crisis: Seven
Essential Lessons For Surviving Disaster. AMACOM, New York.
edit
Ulmer, R. R., Sellnow, T. L., & Seeger, M. W. (2006). Effective crisis communication: Moving
from crisis to opportunity. Thousand Oaks, CA: Sage Publications.
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