Crisis Management
Crisis Management
Crisis Management
com/business/crisis_management/
A crisis is an abnormal situation, or even a perception, that is beyond the scope of normal day-to-day
business and which poses threats to the operation, safety and reputation of an organisation (DBERR,
2008). Crisis management is a series of functions or processes that help to identify, study and forecast
crisis issues, and also to derive specific means that would enable an organisation to prevent or cope with
a crisis (Darling et al., 1996). It involves the systematic attempt to prevent organisational crises and/or to
manage those crises should they occur (Pearson & Clair, 1998).
http://www.siliconfareast.com/crisis-management.htm
A crisis is defined by the dictionary as a 'critical moment or turning point.' A business book, on the other
hand, might define a crisis as a substantial, unforeseen circumstance that can potentially jeopardize a
company's employees, customers, products, services, fiscal situation, or reputation. Both definitions
contain an element of urgency that requires immediate decisions and actions from people involved.
Crisis Management is the process of preparing for and responding to an unpredictable negative event to
prevent it from escalating into an even bigger problem, or worse, exploding into a full-blown, widespread,
life-threatening disaster. Crisis management involves the execution of well-coordinated actions to control
the damage and preserve or restore public confidence in the system under crisis.
In the context of corporate governance, excellent crisis management is a 'must' whenever a crisis occurs
because of the crisis' enormous potential impact on the company's reputation and financial standing.
Poor handling of a crisis situation can ruin the confidence of the customers or the public in a company
and jeopardize its survival, a situation that normally takes a long time to correct, if it still is reparable at
all. Such is the importance of public perception of a company's handling of a crisis situation thatmedia
coverage management has become an important ingredient of crisis management.
In fact, the definition given by the American Institute for Crisis Management (ICM) for the word 'crisis'
underscores the association of a crisis with media coverage by default. ICM defines 'crisis' as "a
significant business disruption which stimulates extensive news media coverage. The resulting public
scrutiny will affect the organization's normal operations and also could have a political, legal, financial,
and governmental impact on its business."
Crisis management doesn't start only when a crisis arises and ends when 'the last fire has been put out'.
Crisis management requires actions before a crisis happens, while the crisis is unfolding, and after the
crisis has ended. In fact, crisis management is divided into these three stages: 1) pre-incident stage,
which involves identification of potential crisis situations and developing contingency plans for responding
to each of them; 2)incident stage, which involves management of an ongoing actual crisis situation itself;
and 3) post-incident stage, which includes corrective and preventive actions to preclude the recurrence of
the same crisis situation and business recovery actions to restore public confidence in the brand or the
company.
There are many different ideas or theories on how to best manage a crisis situation. These differing
ideas, nonetheless, have some common elements: 1) the need to anticipate potential crisis situations
and prepare for them; 2) the need to provide accurate information during a crisis; 3) the need to react as
quickly as possible to the situation; 4) the need for a response that comes from the top; and 5) the need
for long-term solutions.
http://www.siliconfareast.com/crisis-management.htm
Crisis management is a business plan of action that is implemented quickly when a negative situation
occurs. The Institute for Crisis Management defines a business crisis as a problem that: 1) disrupts
the way an organization conducts business, and 2) attracts significant new media coverage and/or
public scrutiny. Typically, these criseshave the capacity to visit negative financial, legal, political, or
governmental repercussions on the company, especially if they are not dealt with in a prompt and
effective manner.
Over the past several years, high-profile public relations disasters (the Firestone tire problems on Ford
sport utility vehicles, various product recalls, disturbing product tampering incidents) have thrown an
intense spotlight on the issue of crisis management. Indeed, as companies have witnessed the
damage that poor crisis management canwreak on business fortunes, a growing percentage of firms
have intensified their efforts to put effective crisis management strategies in place.
Hundreds of potential threats exist for every organization. Corporate crises can take the form of plant
fires, loss of competitive secrets, workplace violence, product defects, embezzlement and extortion,
industrial accidents,sabotage, and natural disasters. Any of these events—as well as numerous others
—can cause an immediate and prolonged financial loss to a company, require an intensive
communications effort directed to investors, employees, consumers and other entities, and may
present a series of regulatory, community relations and competitive challenges.
To assess whether a particular company has a higher exposure than others to categories of crisis, a
company may employ a risk or crisis manager who may prepare statistical models, review industry
data, or work with consultants to understand how one or more crises could impact the organization.
Once this process of risk is completed, many companies then design a Crisis Management Plan (CMP)
to determine how negative events can be avoided or reduced in scope. But business consultants and
public relations experts counsel all companies to put CMPs in place, no matter how remote such
threats seem. Indeed, many businesses are able to secure lower insurance premiums if they have
written crisis management procedures in place, which is a sure indication of the importance of such
plans.
Sudden Crisis and Smoldering Crisis
Robert B. Irvine, president of the Institute for Crisis Management, noted in Communication World that
the Institute characterizes most business crises as one of two types: sudden crisis
or smoldering crisis. "We define a sudden crisis as a disruption in the company's business that occurs
without warning and is likely to generate new coverage," he said. Examples of such events include
business-related accidents, natural disasters, sudden death or disability of a key person, or workplace
violence.
Smoldering crises, meanwhile, are defined by the Institute as "any serious business problem that is
not generally known within or without the company, which may generate negative news coverage if or
when it goes 'public' and could result in more than U.S. $250,000 in fines, penalties, legal damage
awards, unbudgeted expenses, and other costs." Examples of smoldering business crises include
indications of significant regulatory action, government investigations, customer allegations, media
investigations. "In some instances," Irvine added, "crisis situations may be either sudden or
smoldering, depending on the amount of advance notice and the chain of events in the crisis."
According to Irvine, while companies need to make sure that they prepare as best they can for sudden
crises, it is often the slow-burning smoldering crisis that causes the most damage to a company's
image and bottom line. "You really need to be focused on the less dramatic, more complicated, and
ultimately more costly smoldering crises that are likely to be brewing in your business. The problem is
that these smoldering crises often are the result of management decisions, or indecisions. They may
be caused be shortcuts to win contracts, questionable actions by top producers or someone who has
had an unblemished record with your organization and is close to retirement. In short, they often are
tough to detect and then to resolve because they directly or indirectly involve management decisions,
and management has a tough time admitting errors because it reflects on their egos and abilities."
"A good image is a terrible thing to lose!" noted Bill Patterson in Public Relations Journal. "It has been
said that 30 years of hard work can be destroyed in just 30 seconds." This grim truth is especially
evident among small businesses that are rocked by crises, since they are less likely to have the deep
financial pockets to weatherunpleasant public relations developments. After all, business crises often
throw multiple financial blows at companies. Diminished sales as a result of unfavorable publicity,
boycotts, etc. are the most widely recognized of these blows, but others can have a
significant cumulative impact as well. Added expenses often come knocking in the areas of increased
insurance premiums, recall/collection programs, reimbursements, attorneys' fees, and the need to
retrieve lost customers through additional advertising.
But business consultants and public relations professionals agree that small business enterprises can
do a lot to minimize the damage done by sudden flare-ups of bad news, provided they adhere to
several fundamental rules of behavior.
PREPARATION BEFORE THE CRISIS. Small businesses that are faced with public relations crises
are far more likely to escape relatively unscathed if they can bring two weapons to bear: 1) a solid
record as a good citizen, and 2) an already established crisis management strategy.
"Before the crisis, it is important to build good will and good relations on a daily basis," said media
consultant Virgil Scudder in an interview with Communication World. "The way you are treated in a
crisis, by the media and the public, will be determined in part by what they think of you at the
beginning of the crisis situation." Writing in Public Relations Journal, Bill Patterson offered a similar
assessment of the importance of building a "reservoir of good will" in the community: "The most
important rule in defending, preserving, or enhancing a reputation is that you work at it all year long,
regardless of whether or not a crisis strikes."
The other vital component of crisis management preparation is the creation of an intelligent and
forceful strategy for dealing with various crises if they do occur. "For many executives, a crisis is
something that happens to someone else," wrote Patterson. "It is a distant thought that can quickly be
relegated to the back of the mind, replaced by concern for profit and productivity." But business
owners and managers who choose to put off assembling a CMP do so at significant risk. Indeed, the
hours and days immediately following the eruption of a crisis are often the most important in shaping
public perception of the event. A company that has a good CMP in hand is far more likely to make
good use of this time than one that is forced into a pattern of response by on-the-spot improvisation,
or one that offers little response at all in the hopes that the whole mess will just go away.
In an article for Entrepreneur, Kim Gordon outlined several steps small businesses can take to be
prepared in the event of a crisis. First, companies should perform an assessment to determine their
most likely sources of vulnerability. Second, they should select a company spokesperson in advance.
"Pick someone who is cool under pressure, credible, good on camera, and adept at presenting a
positive image for your business," Gordon stated. It may be helpful for this person to attend media
training in order to practice interview techniques. Third, small businesses should prepare positive
messages about their operations that can be disseminated to media contacts in the event of a crisis.
These messages may include any points you want the public to keep in mind during the negative
publicity, such as an impressive safety or environmental record. Finally, Gordon suggested that
companies prepare a list of key people to contact in case of an emergency.
In order to ensure that your company's perspective is heard, it is vital that you do all you can to make
sure that your message is accurately presented to any media providing coverage of the crisis.
"Perception is truth," wrote Patterson. "And, even though most executives don't like it, the media
establishes the perception of your organization. So, in this new public relations discipline of reputation
management, dealing with the media in an organized, aggressive, and timely fashion is mandatory."
In addition, Scudder suggested that effective interaction with various media—radio, newspaper,
television—is often predicated on realizing that representatives of those media outlets are
not infallible. "There are two things you should not assume on the part of any journalist," he said.
"Knowledge and perspective. Do not assume they know the facts. Tell them the facts. And if they
know the facts, do not assume they know what the facts add up to."
Effective communication with media, then, is an essential element of any CMP. But consultants offer
other tips as well. Following are a list of other actions that small businesses should take when
confronted with a crisis management situation:
1. Be open and honest with media and customers alike—Such a stance may well garner
sympathy with customers and consumers, particularly if the crisis is one over which the
company has little control, such asmalicious product tampering. "Take the perspective of the
people who are out there," said Scudder. "Be candid, be truthful, and give people what they
want to know."
2. React quickly—Scudder noted that a company's actions in the early stages of a crisis "will
determine how the coverage of the client and the crisis goes and whether you are perceived as
good guys who had an accident or bad guys."
3. Utilize only one spokesperson—Consultants can cite countless instances in which companies
faced with a business crisis compounded their problems by using multiple spokespeople who
gave conflicting statements. "Only one story must come from the company, and it must
always be consistent," contended Patterson. "When you have several people talking to the
media during a crisis, several versions of what happened usually end up in the various media.
This confuses the public, often leading them to believe what you are saying is untrue."
4. Arm yourself with the facts—Companies can hurt themselves terribly when they make public
statements based on incomplete knowledge of events.
5. Stay on message—Engaging in speculation and/or rambling discourses does not help your
company's cause. Spokespeople should be candid without being unduly negative.
6. Do not lie or mislead the media, the public, or investigating agencies—The discovery of one
single lie casts every statement that your company makes into doubt.
7. Establish and maintain contact with other important groups—Depending on the nature of the
crisis, communication with employee, industry, and community groups can be a valuable part
of a crisis response plan. Is the crisis likely to have an impact on the company's labor union or
general work force? If so, arrange a meeting with representatives so that they can be kept
informed and ask questions, and so that you can get your message across. Is your company
faced with an embarrassing allegation of racial discrimination orharassment? Perhaps a
meeting with local religious and/or civil leaders would help (provided, of course, that your
company signals a genuine interest in hearing their thoughts, so that they do not view the
meeting as acynical public relations ploy). Are your company's production processes arousing
the ire of local civic or environmental groups (and the growing interest of local media)?
Arranging a meeting in which they could register their concerns might relieve the situation
somewhat (again, provided that your company shows a genuine interest in hearing them out
and responding to legitimate concerns).
Further Reading:
Bryan, Jerry L. "The Coming Revolution in Issues Management: Elevate and Simplify." Communication
World. July 15,1997.
Gordon, Kim. "Under Fire: Will a Crisis Take Your Company Down? Here's How Deft Handling Can Turn
Public Opinion Around." Entrepreneur. April 2001.
Gorski, Thomas A. "A Blueprint for Crisis Management: Understanding What It Takes to Weather the
Inevitable Storm." Association Management. January 1998.
Smith, Stephanie, and Kim Hunter. "Virgil Scudder Tackles Crisis Tactics." Communication
World. February 1997.
Military Dictionary:
crisis management
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(DOD) Measure to resolve a hostile situation and investigate and prepare a criminal case for
prosecution under federal law. Crisis management will include a response to an incident involving a
weapon of mass destruction, special improvised explosive device, or a hostage crisis that is beyond
the capability of the lead federal agency. See also crisis; hostage; hostile.
Wikipedia:
Crisis management
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Home > Library > Miscellaneous > Wikipedia
Crisis management is the process by which an organization deals with a major unpredictable event
that threatens to harm the organization, its stakeholders, or the general public. 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.[1] Venette[2]argues that "crisis is a process of transformation where the old
system can no longer be maintained." Therefore the fourth defining quality is the need for change. If
change is not needed, the event could more accurately be described as a failure or incident.
In contrast to risk management, which 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
1 Introduction
2 Types of crisis
o 2.1 Natural crises
o 2.2 Technological crises
o 2.3 Confrontation crises
o 2.4 Crises of malevolence
o 2.5 Crises of organizational misdeeds
2.5.1 Crises of skewed management
values
2.5.2 Crises of deception
2.5.3 Crises of management
misconduct
o 2.6 Workplace violence
o 2.7 Rumors
3 Crisis Leadership
o 3.1 Sudden crises
o 3.2 Smoldering crises
o 3.3 Signal detection
o 3.4 Preparation and prevention
o 3.5 Containment and damage control
o 3.6 Business recovery
o 3.7 Learning
4 Models and theories associated with crisis
management
o 4.1 Crisis management model
o 4.2 Management crisis planning
o 4.3 Contingency planning
o 4.4 Business continuity planning
o 4.5 Structural-functional systems theory
o 4.6 Diffusion of innovation theory
o 4.7 Role of apologies in crisis management
o 4.8 Crisis leadership
o 4.9 Unequal human capital theory
5 Examples of successful crisis management
o 5.1 Tylenol (Johnson and Johnson)
o 5.2 Odwalla Foods
o 5.3 Mattel
o 5.4 Pepsi
6 Examples of unsuccessful crisis management
o 6.1 Bhopal
o 6.2 Ford and Firestone Tire and Rubber
Company
o 6.3 Exxon
7 Lessons learned in crisis management
o 7.1 Impact of catastrophes on shareholder
value
o 7.2 Crisis as Opportunity
8 Public sector crisis management
o 8.1 Schools and crisis management
o 8.2 Government and crisis management
o 8.3 Elected officials and crisis management
9 Professional Organizations
10 See also
11 References
12 Further reading
13 External links
Introduction
Establishing metrics to define what scenarios constitute a crisis and should consequently
Communication that occurs within the response phase of emergency management scenarios.
Crisis management methods of a business or an organization are called Crisis Management Plan.
specialists such asPeter Power argue that the term crisis management is more accurate. [3]
The credibility and reputation of organizations is heavily influenced by the perception of their
responses during crisis situations. 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
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.
Types of crisis
During the crisis management process, it is important to identify types of crises in that different crises
necessitate the use of different crisis management strategies. [4] Potential crises are enormous, but
1. Natural disaster
2. Technological crises
3. Confrontation
4. Malevolence
6. Crisis of deception
Natural crises
Natural crises, typically natural disasters considered as'acts of God,' are such environmental
waves, storms, and droughtsthat threaten life, property, and the environment itself. [4][5]
Technological crises are 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 crises occur when human
error causes disruptions (Human breakdowns [4]). 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 megadamage.[4] Samples include software failures, industrial accidents, and oil spills.
[4][5]
Confrontation crises
Confrontation crises occur 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 crises is boycotts, and other types are picketing, sit-ins, ultimatums to those in
Crises 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. Sample crises include product tampering, kidnapping, malicious rumors, terrorism, and
espionage.[4][5]
Crises occur when management takes actions it knows will harm or place stakeholders at risk for harm
misdeeds: crises of skewed management values, crises of deception, and crises of management
misconduct.
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.
Crises of deception
Crises of deception occur when management conceals or misrepresents information about itself and its
Some crises are caused not only by skewed values and deception but deliberate amorality and
illegality.
Workplace violence
Crises occur when an employee or former employee commits violence against other employees on
organizational grounds.
Rumors
False information about an organization or its products creates crises hurting the organization’s
reputation. Sample is linking the organization to radical groups or stories that their products are
contaminated.[4]
Crisis Leadership
Erika Hayes James, an organizational psychologist at the University of Virginia’s Darden Graduate
School of Business, identifies two primary types of organizational crisis. [6] James defines organizational
crisis as “any emotionally charged situation that, once it becomes public, invites negative stakeholder
reaction and thereby has the potential to threaten the financial well-being, reputation, or survival of
2. Smoldering crises
Sudden crises
Sudden crises are circumstances that occur without warning and beyond an institution’s control.
Consequently, sudden crises are most often situations for which the institution and its leadership are
not blamed.
Smoldering crises
Smoldering crises differ from sudden crises in that they begin as minor internal issues that, due to
manager’s negligence, develop to crisis status. These are situations when leaders are blamed for the
James categorizes five phases of crisis that require specific crisis leadership competencies. [8] Each
phase contains an obstacle that a leader must overcome to improve the structure and operations of an
organization. James’s case study on crisis in the financial services sector, for example, explores why
crisis events erode public trust in leadership. James's research demonstrates how leadership
competencies of integrity, positive intent, capability, mutual respect, and transparency impact the
trust-building process. [9]
1. Signal detection
4. Business recovery
5. Learning
Signal detection
Signal detection is the stage in a crisis in which leaders should, but do not always, sense early warning
signals (red flags) that suggest the possibility of a crisis. The detection stages of a crisis include:
Sense-making: represents an attempt to create order and make sense, retrospectively, of what
occurs. Perspective-taking: the ability to consider another person's or group's point of view.
It is during this stage that crisis handlers begin preparing for or averting the crisis that had been
foreshadowed in the signal detection stage. Organizations such as the Red Cross's primary mission is
to prepare for and prevent the escalation of crisis events. Walmart has been described as an
emergency relief standard bearer after having witnessed the incredibly speedy and well-coordinated
effort to get supplies to the Gulf Coast of the United States in anticipation of Hurricane Katrina.
Usually the most vivid stage, the goal of crisis containment and damage control is to limit the
reputational, financial, safety, and other threats to firm survival. Crisis handlers work diligently during
this stage to bring the crisis to an end as quickly as possible to limit the negative publicity to the
Business recovery
When crisis hits, organizations must be able to carry on with their business in the midst of the crisis
while simultaneously planning for how they will recover from the damage the crisis caused. Crisis
handlers not only must engage in continuity planning (determining the people, financial, and
technology resources needed to keep the organization running), but will also actively pursue
organizational resilience.
Learning
In the wake of a crisis, organizational decision makers adopt a learning orientation and use prior
experience to develop new routines and behaviors that ultimately change the way the organization
operates. The best leaders recognize this and are purposeful and skillful in finding the learning
Successfully defusing 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.
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
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.[10]
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 crisisis. As a result, in the event of an actual
crisis, the team members will act more quickly and effectively. [10]
Structural-functional systems theory addresses the intricacies of information networks and levels of
Another theory that can be applied to the sharing of information is Diffusion of Innovation Theory.
Developed byEverett 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.
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
Crisis leadership
James identifies six leadership competencies which facilitate organizational restructuring during and
after a crisis. The first entails building an environment of trust. Another competency entails reforming
the organization’s mindset. A third competency includes identifying obvious and obscure vulnerabilities
of the organization. Two other competencies include making wise and rapid decisions as well as taking
courageous action. The final competency is learning from crisis to effect change. Crisis leadership
research concludes that leadership action in crisis reflects the competency of an organization, because
the test of crisis demonstrates how well the institution’s leadership structure serves the organization’s
goals and withstands crisis. [8] Developing effective human resources is vital when building
James postulates that organizational crisis can result from discrimination lawsuits. [14] James’s theory
of unequal human capital and social position derives from economic theories of human and social
capital concluding that minority employees receive fewer organizational rewards than those with
access to executive management. In a recent study of managers in a Fortune 500 company, race was
found to be a predictor of promotion opportunity or lack thereof. [15] Thus, discrimination lawsuits can
invite negative stakeholder reaction, damage the company's reputation, and threaten corporate
survival.
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. [16]
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. [17]
Odwalla Foods
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. [18]
Mattel
Mattel Inc., the 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." [19]
Pepsi
The Pepsi Corporation faced a crisis in 1993 which started with claims of syringes being found in cans
of diet Pepsi. Pepsi urged stores not to remove the product from shelves while it had the cans and the
situation investigated. This led to an arrest, which Pepsi made public and then followed with their first
video news release, showing the production process to demonstrate that such tampering was
impossible within their factories. A second video news release displayed the man arrested. A third
video news release showed surveillance from a convenience storewhere a woman was caught
replicating the tampering incident. The company simultaneously publicly worked with the FDA during
the crisis. The corporation was completely open with the public throughout, and every employee of
Pepsi was kept aware of the details.[citation needed] This made public communications effective throughout
the crisis. After the crisis had been resolved, the corporation ran a series of special campaigns
designed to thank the public for standing by the corporation, along with coupons for further
compensation. This case served as a design for how to handle other crisis situations. [20][citation needed]
Bhopal
The Bhopal disaster in which poor communication before, during, and after the crisis cost thousands of
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.[21]
The Ford-Firestone Tire and Rubber Company 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). [22]
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. [23]
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. [24]
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 study 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
engage their senior management in the value of crisis management. [citation needed]
Crisis as Opportunity
To address such shareholder impact, management must move from a mindset that manages crisis to
one that generates crisis leadership. [6] Research shows that organizational contributory factors affect
both a precipitator and consequence of crisis, leaders who perform well under pressure can effectively
James contends that most executives focus on communications and public relations as a reactive
strategy. While the company’s reputation with shareholders, financial well-being, and survival are all
at stake, potential damage to reputation can result from the actual management of the crisis issue.
[6]
Additionally, companies may stagnate as their risk management group identifies whether a crisis is
both the damage and implications for the company’s present and future conditions, as well as
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
In the wake of the Columbine High School Massacre, the September 11 attacks in 2001, and shootings
on college campuses including the Virginia Tech massacre, educational institutions at all levels are
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
disasters, suicide, drug abuse and gang activities – just to list a few. [29] In a similar fashion the plans
aim to address all audiences in need of information including parents, the media and law enforcement
officials.[30]
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
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
The NRP is a companion to the National Incidence Management System that acts as a more general
FEMA offers free web-based training on the National Response Plan through the Emergency
Management Institute.[32]
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. [citation needed]
“We live in the midst of alarms, anxiety beclouds the future; we expect some new disaster with each
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. [33]
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
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,
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.
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
Professional Organizations
There are a number of professional industry associations that provide advice, literature and contacts
See also
Contingency plan
Crisis
Cross-cultural communication
Emergency services
Emergency management
Management
Management by exception
Risk Management
Social Responsibility
References
1. ^ Seeger, M. W.; Sellnow, T. L., & Ulmer, R. R. (1998). "Communication, organization and
crisis".Communication Yearbook 21: 231–275.
9. ^ James, Erika; Roberts, J (2009). "In the wake of the financial crisis: rebuilding the image of
the finance industry through trust". Journal of Financial Transformation 125 (2): 601–
14. ^ James, Erika; Lynn Perry Wooten (2010). "Why Discrimination Lawsuits Are a Noteworthy
Crisis". Leading Under Pressure. Routledge Academic.
15. ^ James, Erika (Sept. – Oct. 2000, Vol. 11, No. 5). "Race-Related Differences in Promotions
and Support: Underlying Effects of Human and Social Capital". Organizational Science 11:
20. ^ "The Pepsi Product Tampering Scandal of 1993". Retrieved 7 September 2009.
21. ^ Shrivastava, P. (1987). Bhopal: Anatomy of a Crisis. Ballinger Publishing Company.
22. ^ Ackman, D. (2001). Forbes. http://www.forbes.com/2001/06/20/tireindex.htm. Retrieved
2007-10-14.[dead link]
23. ^ Warner, F. (2002). "How to Stay Loose in a Tight Spot". Fast Company. Retrieved 2007-10-
15.
24. ^ 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. doi:10.1207/s15327728jmme2004_2.
25. ^ James, E.; James, E. H. (Vol. 44, No. 1, 2008). "Toward an Understanding of When
Executives See Crisis as Opportunity". The Journal of Applied Behavioral Science 44:
26. ^ James, Erika; Lynn Wooten (2010). Leading Under Pressure. Routledge Academic.
27. ^ "The Wall Street Journal Community". Retrieved 2010-06-22.
28. ^ "Campus Security Summit" (RealMedia Streaming Video).
29. ^ "Crisis management". Kansas City Public Schools. 2007.
30. ^ "Resource guide for crisis management in Virginia schools" (PDF). Virginia Department of
Education. 2002. Retrieved 2007-10-15.[dead link]
31. ^ a b "Quick Reference Guide for the National Response Plan (version 4.0)" (PDF). May 2006.
32. ^ "Emergency Management Institute Home Page".
33. ^ a b c Boin, A.; P. Hart and E. Stern (2005). The politics of crisis management: Public
leadership under pressure. New York: Cambridge University Press.
34. ^ Hellsloot, I. (2007). "Review of "The politics of crisis management: Public leadership under
pressure" by A. Boin, P. Hart, E. Stern and B. Sundelius". Journal of Contingencies and Crisis
Management 15 (3): 168–169.doi:10.1111/j.1468-5973.2007.00519.x.
Further reading
Barton, L. (2007). Crisis leadership now: A real-world guide to preparing for threats, disaster,
Borodzicz, Edward P. (2005). Risk, Crisis and Security Management. West Sussex, England:
Freeman (Eds.), Blackwell Encyclopedic Dictionary of Business Ethics. Malden, MA: Blackwell
Publishing.
Davidson, M.N. (2004). "Leading in Black and White: Working across the Racial Divide in
Organizational Psychologist 41(3).
Davidson, M.N. (2003). "Making the Tough Calls: Negotiating Exclusion in Inclusive and
Briefings 2 (1).
Davidson, M.N. (2002). "Inclusion and Power: Reflections on Dominance and Subordination in
Organizations".Industrial-Organizational Psychologist 40 (1).
Davidson (2001). "Diversity and inclusion: What difference does it make?". Industrial-
Organizational Psychologist39 (2).
Davidson, M.N. (2001). "The impact of race on styles of dealing with conflict". Sex
Roles 45 (5/6).
Davidson, M.N. (1999). The role of emotion in negotiation: The impact of anger. In R.J. Bies,
R.J. Lewicki, B.H. Sheppard, (Eds.), Research on Negotiation in Organizations. Greenwich, CT: JAI
Press Inc..
Davidson, M.N. (1999). "The value of being included: An examination of diversity change
Dezenhall, E.; Weber, J. (2007). Damage control: Why everything you know about crisis
Organizational Psychologist39 (4).
Ferdman (2002). "Drawing the line: Are some differences too different?". Industrial-
Organizational Psychologist 39(3).
Friedman, R.A. (1999). The role of emotion in negotiation: The impact of anger. In R.J. Bies,
R.J. Lewicki, B.H. Sheppard, (Eds.), Research on Negotiation in Organizations. Greenwich, CT: JAI
Press Inc..
Mitroff, Ian I.; Gus Anagnos (2000). Managing Crises Before They Happen: What Every
Mitroff, Ian I. (2003). Crisis Leadership: Planning for the Unthinkable. New York: John Wiley.
Mitroff, Ian I. (2005). Why Some Companies Emerge Stronger And Better From a Crisis:
Review 35 (1). http://www.sciencedirect.com/science/journal/03638111. "contains a
Smith, Larry; Dan Millar, PhD (2002). Before Crisis Hits: Building a Strategic Crisis Plan.
Smith, Larry; Dan Millar, PhD (2002). Crisis Management and Communication; How to Gain
and Maintain Control (2nd ed.). San Francisco, CA: International Association of Business
Communicators.
Ulmer, R. R.; Sellnow, T. L., & Seeger, M. W. (2006). Effective crisis communication: Moving
External links
Crisis management and business continuity planning . 2007. United Kingdom Government
Business Link.
topics.
Crisis Management and Communication Entry Institute for Public Relations article
Professionals/Crisis Managers
The International Research Group on Crisis Communication Publications and crisis institutions
database
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