Crisis Management.

Crisis management is the systematic attempt to avoid
organizational crises or to manage those crises events
that do occur . 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. Crises can
affect all segments of society – businesses, ,
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.

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.

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.

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 , 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.


1A 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

A Framework for crisis management and crisis
management planning.

The United Kingdom’s 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."

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 . 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.
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.



2Models 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.

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.

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 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
hasknowledge of or experience with using the
innovation,
(3) another individual or other unit that does not yet
have knowledge of the innovation,
(4) a communication channel connecting the two units.
A communication channel is the means by which messages
get from one individual to another.


3. Crisis management success stories.


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.

Johnson & Johnson was again struck by a similar crisis
in 1986 when a New York woman died on Feb.1986 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

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 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 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”.


4.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 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.

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).

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.

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.


5. 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
Children’s Hospital Research Institute (ACHRI) has
shown that many public school districts have important
deficiencies in their emergency and disaster plans .
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 . In a similar fashion the plans
aim to address all audiences in need of information
including parents, the media and law enforcement
officials.

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 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.

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.

FEMA offers free web-based training on the National
Response Plan through the Emergency Management
Institute.

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

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.

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.

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.

6. Examples of organizational crises
Extortion
Bribery
Hostile Takeover
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