Crisis Management

Crisis management is the identification of threats to an organization and its stakeholders, and the methods used by the organization to deal with these threats. Due to the unpredictability of global events, organizations must be able to cope with the potential for drastic changes to the way they conduct business. Crisis management often requires decisions to be made within a short time frame, and often after an event has already taken place. In order to reduce uncertainty in the event of a crisis, organizations often create a crisis management plan.

Types of Crises

• Immediate crisis – often of the natural disaster or major emergency type (earthquakes, etc.).
• Emerging crisis – can be anticipated and minimized at early stages.
• Sustained crisis – involves situations that may linger for years

Essential Features of Crisis Management

• Crisis Management includes activities and processes which help the managers as well as employees to analyze and understand events which might lead to crisis and uncertainty in the organization.
• Crisis Management enables the managers and employees to respond effectively to changes in the organization culture.
• It consists of effective coordination amongst the departments to overcome emergency situations.
• Employees at the time of crisis must communicate effectively with each other and try their level best to overcome tough times. Points to keep in mind during crisis
  • Don’t panic or spread rumors around. Be patient.
  • At the time of crisis the management should be in regular touch with the employees, external clients, stake holders as well as media.
  • Avoid being too rigid. One should adapt well to changes and new situations.

Crisis Management Process - Two Models (See Figure 1.)
There are two major ways for managers to view the resolution of a crisis. They can

• 1.) ignore the warning signs and react to the crisis or
• 2.) they can prepare themselves to prevent or manage a crisis.

The decision path of the first choice has undefined outcomes while the second decision path provides many more opportunities to manage the crisis. Taking a pro-active approach may even avert the crisis completely.

Figure 1. source: roanoke.edu

Figure 1. illustrates and summarizes the stages that exist in crisis situations.

• In the reactive model the decisions about planning occur during and after the event(s) have already occurred.
• In the proactive model the managers have already anticipated some form of crises. They have completed a vulnerability analysis, which has helped them develop a plan to deal with crises eventuality. The consequences of each management decision are significant. The managers have to weigh the difference between the investments in planning for a crisis verses the losses that result from failure to plan for a crisis. This decision is integrally linked to an understanding of the types of crisis that exist.

Crisis Management Plan
A crisis management plan (CMP) is a reference tool, not a blueprint. A CMP provides lists of key contact information, reminders of what typically should be done in a crisis, and forms to be used to document the crisis response. A CMP is not a step-by-step guide to how to manage a crisis. Barton (2001), Coombs (2007a), and Fearn-Banks (2001) have noted how a CMP saves time during a crisis by pre-assigning some tasks, pre-collecting some information, and serving as a reference source. Pre-assigning tasks presumes there is a designated crisis team. The team members should know what tasks and responsibilities they have during a crisis.

Crisis Management Planning
Every organizations crisis management requirements will vary. The key to Crisis Management Planning is to have a set of processes and procedures to be used as a guideline for crisis management. Pre-developed crisis management plans and associated activities enable executives to effectively address a worst case or long-term crisis. Specifically, organizational Crisis Management Planning should focus on:

• Identification of the crisis management team (and others who might assist the team in certain situations)
• Predefined organizational responsibilities for the crisis management team members that include concise procedures defining a person’s functions, duties and tasks for a crisis declaration
• Sub- team composition and a notification process to bring together the appropriate internal and external individuals and organizational disciplines at the time of a crisis. (i.e Damage Assessment Team, etc).
• A process for evaluating the response after the conclusion of any event that requires activation of the Corporate Crisis Management Plan and documentation of the Lessons learned and applied.
• Contact lists for all internal and external stakeholders
• An outline for Executive Managers and their alternates to react on a consistent basis to a potential or existing crisis.
• Identification and establishment of a Crisis Management/Emergency Operations Command Center for directing the crisis event coordination with effected entities, such as the community, neighboring industries, and identified support entities (fire, police, hospitals, etc.) – This should include identification of a primary, secondary and tertiary locations for the Command Center in the event of a widespread crisis.
• The logistical details for notification and mobilization of the Crisis Management Centers and supplies/equipment needed, call notification lists and instructions, transportation options, identification of external authorities, organizations and individuals that may be required to be notified or can assist in the Crisis Management process.
• Travel logistics, such as a list of company-preferred hotels, airlines, rental cars companies, and restaurants.
• Guidelines for communicating to the public and the media, which includes who is authorized to represent the organization and what information, can/should be shared. This ensures that communication is accurate and consistent throughout all channels. Note: Make sure to consider legal liability when communicating in a crisis situation.
• Guidelines for Social Media usage which should outline policies and procedures on utilizing this method and also a plan to respond if an unauthorized individual breaks the news prior to your release and how you manage the situation.
• Guidelines for communicating crisis situations to both internal and external stakeholders.
• Guidelines to assist in supporting, overseeing and directing activities to the internal Business Units, and external business partners/suppliers during a disastrous situation.
• A process for communicating, training, and maintaining the currency of the Crisis Management Plan.
• A process for testing and verification of the processes contained in the Crisis Management Plan

Crisis Management Functions (See Figure 2.)
Crisis management encompasses five functions: team formation, assessment, strategy making, crisis response and evaluation. Understanding how the four problems interface and affect the business operation provides the knowledge base for proper direction and leadership. Crisis management requires managers to engage in active leadership that gives employees the proper direction and resources to complete their jobs. An effective crisis management plan establishes protocols for addressing the logistics needed to deal with a crisis. Typically these are the elements and resources that are commonly needed in all situations. Examples include supplies and emergency back up equipment. Having these resources in place leaves managers better able to supervise the content aspect of the crisis. The four functions discussed above operate within each of the systemic problems faced by an organization. The four problems that were discussed earlier affect all levels of the organization. To address their impact, managers should have a perspective on when, how, and to what extent he problems alter the organization. Figure 2. summarizes the relationships that exist among the four problems and the planning process.

Figure 2. source: UNCP

An organization can have all the resources, plans, and contingency arrangements; however, if it does not promote a crisis management culture and attitude, all the efforts to prevent and manage a potential crisis are wasted. It is a continuous process of persuading stakeholders to recognize the vulnerabilities that exist and identify alternatives that will best resolve the issues. Management must address the politics of denial or partial remission through insurance policies or other quick fix remedies. An organization should plan on how to use limited resources to achieve multiple goals. For example, efficient planning and coordination of human and physical resources contribute significantly to producing the desired results, instead of blindly following the “reactive path,” as shown in Figure 1.

Models and Theories Associated with Crisis Management

• Crisis Management Strategy: Crisis management strategy (CMS) is corporate development strategy designed primarily to prevent crisis for follow-up company advancement. Thus, CMS is synthesis of strategic management. It includes projection of the future based on ongoing monitoring of business internal and external environment, as well as selection and implementation of crisis prevention strategy and operating management. This is including current status control based on ongoing monitoring of the internal and external environment, as well as crisis-coping strategy selection and implementation.
• Crisis Management Model: Successfully managing a crisis requires an understanding of how to handle a crisis – beginning with before they occur. Alan Hilburg speaks about a crisis arc. The arc consists of crisis avoidance, crisis mitigation and crisis recovery. Gonzalez-Herrero and Pratt found the different phases of Crisis Management. There are 3 phases in any Crisis Management as shown below:
  • (1) The diagnosis of the impending trouble or the danger signals.
  • (2) Choosing appropriate Turnaround Strategy.
  • (3) Implementation of the change process and its monitoring
• Crisis Management 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 a crisis plan by developing a simulated scenario to use as a drill. The plan should clearly stipulate that the only people to speak to publicly about the crisis are the designated persons, such as the company spokesperson or crisis team members. Ideally it should be one spokesperson who can be available on call at any time. Cooperation with media is crucial in crisis situation, assure that all questions are answered on time and information on what was done to resolve the situation is provided. 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 and transparent. 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. This part of the planning should be conducted in the earliest stages, and is part of a business impact analysis phase that will signpost “How much does the organization stand to lose?” (Osborne, A. (2007). Practical Business Continuity Management. Business Management: Top tips for effective, real-world Business Continuity Management). Each critical function and or/process must have its own contingency plan in the event that one of the functions/processes ceases or fails, then the business/organization is more resilient, which in itself provides a mechanism to lessen the possibility of having to invoke recovery plans (Osborne, 2007). Testing these contingency plans by rehearsing the required actions in a simulation will allow those involved to become more acutely aware of the possibility of a crisis. As a result, and in the event of an actual crisis, the team members will act more quickly and effectively. A note of caution when planning training scenarios, all too often simulations can lack ingenuity, an appropriate level of realism and as a consequence potentially lose their training value. This part can be improved by employing external exercise designers who are not part of the organisational culture and are able to test an organizations response to crisis, in order to bring about a crisis of confidence for those who manage vital systems (Borodzicz, Edward P. (2005). Risk, Crisis & Security Management). Following a simulation exercise, a thorough and systematic debriefing must be conducted as a key component of any crisis simulation. The purpose of this is to create a link and draw lessons from the reality of the simulated representation and the reality of the real world. (Borodzicz, 2005). The whole process relating to business continuity planning should be periodically reviewed to identify any number of changes that may invalidate the current plan. (Osborne, 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 ". 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.

Guidelines for Successful Social Crisis Planning
As it stands today, crisis management is very much entwined with social media. Whether you like it or not, when trouble hits you’ve got to quickly meet your stakeholders in the places they frequent in order to maintain control of your story, and that means being ready. In an article for business2community.com, David Vap provided some solid tips for getting your organization in position to handle social crises:

• Understand your organization. Review external communication processes, social capabilities, and corporate culture. This is where we recommend scenario planning. Key questions could include: how would we respond if a vocal customer complaint suddenly went viral? How would we respond to a brandjacking attack?
• Create a new social mindset in your organization. The social shift calls for a mindset characterized by transparency, accountability, employee empowerment, and planned spontaneity. Technology is certainly a crucial component of dealing with crisis communication, but preparing processes and practices must come first.
• Know your consumers. Listen to conversations unfolding on the social web about your brand, and respond/employ proactive social support. Also identify your customer advocates on the social web – they will be invaluable in the event of a crisis.
• Form a social crisis team. A successful social strategy must cross the boundaries of department and hierarchy because consumers expect a seamless experience. Build a cross-functional team, including a social media manager, a product owner, and at least one executive sponsor. Draw up a social team charter to clarify roles and responsibilities and create an internal collaboration space for this team.
• Roll out a social crisis communications plan. Develop a playbook with guidelines for the social crisis team. Define an escalation process for potential PR issues. Build feedback into every step so you can adapt. Your plan needs to think through three areas – process and culture (what / who needs to change), technologies and tools (what to use to get there), and key metrics (what to track).

Need for Crisis Management
Crisis Management prepares the individuals to face unexpected developments and adverse conditions in the organization with courage and determination.

• Employees adjust well to the sudden changes in the organization.
• Employees can understand and analyze the causes of crisis and cope with it in the best possible way.
• Crisis Management helps the managers to devise strategies to come out of uncertain conditions and also decide on the future course of action.
• Crisis Management helps the managers to feel the early signs of crisis, warn the employees against the aftermaths and take necessary precautions for the same.

See Also

Business Continuity
Business Continuity Planning (BCP)
Disaster Recovery Planning
Risk Management
Enterprise Risk Management (ERM)

Further Reading

• A Blueprint for Crisis Management Ivey Business Journal
• Every Crisis Will Have These 4 Stages! D4h Technologies
• Conquering The 3 Most Common Types Of Company Crisis Fast Company
• Crisis Control Newsletter RQA
• What Really Happens Inside a Crisis War Room wired.com
• Crisis Management: Planning for the Inevitable - Book Review - Steven Fink GGCI
• Exploring a Multi-Stage Model of Crisis Management: Utilities, Hurricanes, and Contingency Brian Boudreaux
• Crisis Management: One-on-One Interview Risk&Compliance Magazine
• The 10 Steps of Crisis Communications Jonathan Bernstein