Lecture 11

Elements of Crisis &Comprehensive Crisis Management

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Elements of a CrisisElements of a Crisis

Three elements are common to most definitions of crisis:

(a)a threat to the organization, (b) the element of surprise, (c)a short decision time (d)a need for change

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Crisis management - 1Crisis management - 1

Crisis management consists of:• Methods used to respond to both the reality

and perception of crises • Establishing metrics to define what scenarios

constitute a crisis and should consequently trigger the necessary response mechanisms.

• Communication that occurs within the response phase of emergency management scenarios

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Crisis Management - 2

The credibility and reputation of organizations is heavily influenced by the perception of their responses during crisis situations

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Crisis Management - 3

* respond to a crisis in a timely fashion makes for a challenge in businesses.

* must be open and consistent communication throughout the hierarchy to contribute to a successful crisis communication process.

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Types of CrisesTypes of Crises• Natural disastersNatural disasters• MalevolenceMalevolence• Technical breakdownsTechnical breakdowns• Human breakdownsHuman breakdowns• ChallengesChallenges• Mega-damageMega-damage• Organizational misdeedsOrganizational misdeeds• Workplace violenceWorkplace violence• RumorsRumors

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Crisis ManagementCrisis Management

Technological crisesTechnological crises- caused by human application of science and caused by human application of science and

technology technology - when technology becomes complex and when technology becomes complex and

coupled and something goes wrong in the coupled and something goes wrong in the system as a whole (Technological system as a whole (Technological breakdowns) breakdowns)

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Crisis Management

Crises of organizational misdeeds- when management takes actions it knows will

harm or place stakeholders at risk for harm without adequate precautions

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Crisis Management

Types of crises of organizational misdeeds:- crises of skewed management values- crises of deception- crises of management misconduct.

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Crisis ManagementCrisis Management

Crisis management model Successfully diffusing a crisis requires an

understanding of how to handle a crisis – before it occurs

- issues management- planning-prevention- the crisis- post-crisis

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Contingency Planning

• Plan in advance• Rehearse via simulation• Stipulate who the spokesperson is• Speed and efficiency in response to crisis• Offer accurate information or it will backfire• Plan offers info and guidance to help decision

makers deal with long-term effects of decisions

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Role of apologies in crisis management

• Controversial - for fear of legal outcomes• Evidence says that a compensation and

sympathy are effective • True contrition includes sympathy for victims

and offers of compensation to offset losses or suffering

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TOYOTA – CRISIS MANAGEMENT FAILURE

Toyota’s communication strategy: “Too little, too late”

Beyond the quality problemToyota mismanaged the crisis

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TOYOTATOYOTABasic Rules ViolatedBasic Rules Violated

• For senior Manager: crises must become their #1 priority immediately.

• Integrity of firm threatened - immediate hands-on control of CEO/team

• Sticking accelerators in 2008 - not treated as a serious matter

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TOYOTATOYOTABasic Rules violatedBasic Rules violated

Find facts & solutions fast: - Toyota managers at first in denial - accepted a ‘patch’ (remove floor mats), not

solution - when crisis exploded -- engineering

solution/stopped production- Even today no one outside of Toyota knows what

the real problems are – open to speculation and rumors

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TOYOTA TOYOTA Basic rules violatedBasic rules violated

Communicate fully and accurately: - to all constituents to sustain trust - err on side of protecting consumers &

maintain trust with a recallWhat Toyota did:

hushed problem and hoped it go away

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Comprehensive Crisis Management

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Before During Before During After After

1. Crisis Types1. Crisis Types

2. Crisis 2. Crisis MechanismsMechanisms

3. Crisis 3. Crisis SystemsSystems

4. Crisis 4. Crisis StakeholdersStakeholders

Expose Expose WeaknesseWeaknesses s

BuildBuild CapabilitCapabilitiesies

EnactEnact CapabilitCapabilitiesies

Learn Learn RedesignRedesign

To Enact Is NOT To To Enact Is NOT To ReactReact

To Enact Is To Be To Enact Is To Be ProactiveProactive

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The Manager’s Crisis Index :The Lukaszewski Group

Potential Crisis Situations

AAbortion

Accidents

Adverse Government Actions

AIDS

Anonymous Accusers

WWhistleblowers

Over 120 items & the list seems endless!!

Situation Hopeless??

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CRISIS FAMILIES

EXT ECON ATTACKS

EXT INFO

HR / REP

PSYCHO

OCCUP-HEALTH

MEGA-DAMAGE

ORG / SOC

TECH / ECON

BREAKS

CRIMINAL

LEGAL

NATURAL DISASTERS

GOVT REGULATORY

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Breaks

Loss of Key Equipment, Plants, SuppliesBreakdown of Key Equipment, PlantsLoss of Key FacilitiesMajor Plant Disruption

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Psycho/Criminal

Product TamperingKidnappingHostage TakingTerrorismWorkplace Violence

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Economic

Labor StrikesLabor UnrestLabor ShortageMajor Decline in Stock Price and FluctuationsMarket CrashDecline in Major Earnings

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Human Resource

Loss of Key Executives, Personnel Rise in AbsenteeismRise in Vandalism and AccidentsWorkplace Violence

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Informational

Loss of Proprietary and Confidential Information

False InformationTampering with Computer RecordsLoss of Key Stakeholder Information

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Natural

EarthquakesFiresFloodsExplosionsTyphoonsHurricanes

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Reputation

SlanderGossipSick JokesRumorsDamage to Corporate ReputationTampering with Corporate Logos

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CRISIS FAMILIES

EXT ECON ATTACKS

EXT INFO

HR / REP

PSYCHO

OCCUP-HEALTH

MEGA-DAMAGE

ORG / SOC

TECH / ECON

BREAKS

CRIMINAL

LEGAL

NATURAL DISASTERS

GOVT REGULATORY

TT

FFNORMALNORMALABNORMALABNORMAL 28

CRISIS FAMILIES

EXT ECON ATTACKS

EXT INFO

HR / REP

PSYCHO

OCCUP-HEALTH

MEGA-DAMAGE

ORG / SOC

TECH / ECON

BREAKS

CRIMINAL

LEGAL

NATURAL DISASTERS

GOVT REGULATORY

TT

FFNORMALNORMALABNORMALABNORMAL

NN SS

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Which Family Is Planned For Most and Why?

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CRISIS FAMILIES

EXT ECON ATTACKS

EXT INFO

HR / REP

PSYCHO

OCCUP-HEALTH

MEGA-DAMAGE

ORG / SOC

TECH / ECON

BREAKS

CRIMINAL

LEGAL

NATURAL DISASTERS

GOVT REGULATORY

TT

FF

BREAKS

NORMALNORMALABNORMALABNORMAL

NN SS

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Which Family Is Planned For Least and Why?

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CRISIS FAMILIES

EXT ECON ATTACKS

EXT INFO

HR / REP

PSYCHO

OCCUP-HEALTH

MEGA-DAMAGE

ORG / SOC

TECH / ECON

BREAKS

LEGAL

NATURAL DISASTERS

GOVT REGULATORY

TT

FF

PSYCHO

NORMALNORMALABNORMALABNORMAL

NN SS

CRIMINAL

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Thank You

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