Crisis Management is no longer a rare “in-trend” scenario that a business and their management consider unnecessary. Chances are exceptional that a crisis will happen in every business. It is, however, in today’s difficult challenges a reality that every business will go through its own unique crisis at some point in the company’s history. BCMS offers the ability to react when this need arises in the process by which an organization deals with a major unpredictable event that threatens to harm the organization, its stakeholders, or the general public.
There are four elements common to most definitions of crisis:
1. Threat to the organization
2. Element of surprise
3. A short decision time
4. Need for extraordinary change
The main argument is that crisis is a process of transformation where the old system can no longer be maintained. Therefore the fourth defining quality of need for extraordinary change, if not needed, the event could more accurately be described as a failure or incident.
In contrast, Crisis Avoidance involves assessing potential threats and finding the best ways to avoid those threats; crisis management involves dealing with threats 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 of late has become an important component of managing the business. In the current day situation no business is immune to crisis. Crisis may hit an organization in the shape of malevolence, technical/human breakdowns, theft of intellectual property, personnel sabotage, theft of trade secrets, owner disruption due to illness or death, terrorist attack, industrial accidents, product recall, organizational misdeeds, workplace violence, or natural calamity. Crisis management is closely linked to public relations where company’s image and pride are at stake.
Leadership framework for Crisis Management
A leader must institutionalize the process of crisis management to anticipate, prepare and mitigate an impending crisis. To ensure an effective crisis management mechanism leadership support and involvement is utterly essential.
Crisis management consists of:
▪ Methods used to respond to both the reality and perception of Crisis.
▪ Establishing metrics to define what constitutes a crisis.
▪ The trigger for necessary response mechanisms.
▪ Communication within the response phase of the crisis scenarios.
▪ Damage control.
▪ Remediation.
The credibility and reputation of any business or organization is heavily influenced by the perception of the response during crisis. 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.
In general, the vast majority of businesses never have a plan until an “incident” occurs. This is, of course, is costly in terms of reputation, welfare, extended disruption, and financial recovery.
The following chart illustrates the leadership framework toward a successful program:
· Draft crisis management policy
· Crisis management team
· Communication Strategy
· Partnerships
· Ensure preparedness
First step in doing so starts with leader setting the tone by clarifying the goals and purpose of crisis management plan, which essentially are based on the philosophy and values of the organization. Leadership should help the top management team draft the crisis management policy, which provides definitions for generally used terms and identifies different levels of crisis in the organization. This demonstrates leadership’s commitment and promotes an enabling environment.
Second step in the process is to identify a core crisis management team, for identifying all possible Crisis that the company or any of its units may face and develop, plans, roles and responsibility for preparing and mitigating each of the Crisis. The role of leadership at this stage is empowering the core team for studying and analyzing crisis by various attributes such as industry, location, process, marketplace pressures etc.
Third step for leadership is to ensure effective and elaborate communication strategy and infrastructure even in the case of crisis/emergency/disaster, so that timely and consistent communication with internal and external stakeholders/partners is maintained at all times.
Fourth step is establishing a partnership with external agencies. This is one of the critical leadership roles so that relevant knowledge and physical resources are available to the organization in times of crisis.
Finally, the leaders at appropriate levels should ensure that training pertaining to crisis management is imparted to the people and organizational preparedness for facing the crisis is checked time-to-time through properly designed mock drills.
Trigger Point:
Anticipating crisis is a matter of strategic planning and risk management, but leaders, who also must consolidate the lessons, must deal skillfully with each crisis that manifests in the organization.
Trigger Point Definitions:
Confrontation crisis
Confrontation Crisis occurs 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.
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.
Crisis of organizational misdeeds
Crisis occur when management takes actions it knows will harm or place stakeholders at risk for harm without adequate precautions
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, which includes product tampering, kidnapping, malicious gossip, terrorism, and espionage.
Crisis of skewed management values
Crisis 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 view the interests of its other stakeholders such as customers, employees, and the community.
Crisis of deception
Crisis of deception occurs when management conceals or misrepresents information about itself and its products in its dealing with consumers and others.
Crisis of management misconduct
Some Crisis is caused not only by skewed values and deception but deliberate amorality and illegality.
Natural Crisis
Natural Crisis, typically natural disasters considered as “acts of God”. are such environmental phenomena as earthquakes, volcanic eruptions, tornadoes and hurricanes, floods, landslides, tidal waves, storms, and droughts that threaten life, property, and the environment itself.
Technological Crisis- (Consider BP at the moment)
Technological Crisis is 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 Crisis occurs when human error causes disruptions (Human breakdowns). 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 Mega Damage. Samples include software failures, industrial accidents, and oil spills.
Crisis of organizational misdeeds
Crisis occurs when management takes actions it knows will harm or place stakeholders at risk for harm without adequate precautions.
Workplace violence
Crisis occurs when an employee or former employee commits violence against other employees on organizational grounds.
Rumors
False information about an organization or its products creates a Crisis hurting the organization’s reputation. Sample is linking the organization to radical groups or stories that their products are contaminated or harmful.
Personal crisis
The crisis of a personal nature can occur when events of an extraordinary nature create extreme tension and stress within an individual which require major decisions or actions to resolve. A crisis situation can revolve a dangerous situation such as extreme weather conditions or a medical emergency or long-term illness, even death. A crisis can also be related to a change in events that comprise the day-to-day life of a person and those in their close circle. Such situations may be loss of a job; extreme financial hardship; alcoholism or addiction and other situations that are life altering and require action that is outside the "normal" daily routine.
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). The art is to define what the crisis specifically is or could be and what has caused it or could cause it.
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, and legal and government impact. Crisis management planning deals with providing the best response to a crisis.
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 also the long-term effects of every decision.
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.
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.
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.
Summary:
While every crisis is unique to the organization under impact, there are logical steps to take to handle and avoid the confusion of how to act. Business Management Counseling Services can aid your company or organization prior and during the time of crisis. We highly recommend a pro-active approach of preparedness, however when a pro-active plan does not exist we can facilitate the least amount of collateral damage to the event.
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