CRISIS MANAGEMENT

Crisis management is the process of dealing with a major event that threatens to harm
or has already harmed the organization. Although somewhat similar to crisis
management and closely cooperating with it, risk management and business continuity
management are different concepts. Risk management assesses the probability of
threats whereas business continuity proactively plans processes aimed at ensuring the
continuity of an organization’s operations during a crisis. On the other hand, crisis
management encompasses all aspects of a crisis to protect human life, material
resources, and the image and reputation of the organization. For example, in the case
of a natural disaster, business continuity management and disaster recovery will ensure
that the business recovers quickly and continues to perform by moving its key
operations to another unaffected site. On the other hand, crisis management deals with
the ongoing crisis by controlling damage through conducting rescue operations,
evacuating the injured, informing and coordinating relevant emergency services,
informing the families of casualties, issuing press reports, and so forth. Also, in the
case of a product defect, especially concerning safety issues, a crisis management team
will manage the product recall from retailers, issue public statements, and maintain a
hotline to communicate effectively with consumers and clients. A crisis is managed by
a predefined crisis situation decision maker and the crisis management team by
maintaining the emergency chain of command and using clear lines of reporting and
communication, both internally and externally.
A Strategic Approach to Crisis Management
Crisis management requires a strategic mind-set or perspective (Chong & Park, 2010;
Preble, 1997; Somers, 2009). Therefore, understanding effective crisis management
requires that we first understand the four key distinctions of a strategic orientation
perspective.
1. It is based on a systematic, comprehensive analysis of internal attributes, also
referred to as strengths and weaknesses; and of factors external to the organization,
commonly referred to as opportunities and threats. Readers familiar with strategic
management recognize this process as the SWOT analysis. Approaching this process in
a systematic manner is important because it ensures that potential crises are not
overlooked. Thus, we must look both inside and outside the organization as we
determine the risk factors that must be confronted.
2. A strategic orientation is long term and future oriented—usually several years to a
decade into the future—but also built on knowledge of events from the past and
present.
3. A strategic orientation is distinctively opportunistic, always seeking to take
advantage of favourable situations and avoiding pitfalls that may occur either inside or
outside the organization.
4. A strategic orientation involves choices, and very important ones at that. Because
preparing for every conceivable crisis can be costly, priorities must be established. For
example, resources must be spent to ensure safety in the workplace. The expenditure
of resources, however, does take money directly off the bottom line. Because this
approach is strategic, the expenditure may ensure the overall well-being of the firm in
the long run. Therefore, some expenditures should not be viewed solely as cog items,
but as investments in the future longevity (and safety) of the company.
Because of these distinctions, the overall crisis management program most include the
top executive and members of his or her management team. The chief executive is the
individual ultimately accountable for the organization's strategic management, as well
as any crises that involve the organization. Except in the smallest companies, he or she
relies on a team of top-level executives, all of whom play instrumental roles in the
strategic management of the firm (Carpenter, 2002; pas & Teng, 1999). Strategic
decisions designed to head off crises are made within the context of the strategic
management process, which can be summarized in five steps (Parnell, 2013):
1. External analysis. Analyse the opportunities and threats or constraints that exist in
the organization's macroenvironment including industry and external forces.
2. Internal analysis. Analyse the organization's strengths and weaknesses in its internal
environment; reassess the organization's mission and its goals as necessary.
3. Strategy formulation. Formulate strategies that build and sustain competitive
advantage by matching the organization's strengths and weaknesses with the
environment's opportunities and threats.
4. Strategy execution. Implement the strategies that have been developed.
5. Strategic control. Engage in strategic control activities when the strategies are not
producing the desired outcomes.

Understanding Environmental Uncertainty

Preventing crises would probably not be so complex if the top management team
always had perfect information. Unfortunately, this is not the case. An important step
in the strategic management process—analysing the external environment—presents
one of the most critical challenge for preventing crises: understanding and managing
environmental uncertainty.
Managers most develop a systematic process to obtain information about the
organization's environment. Ideally, top managers should be aware of the multitude of
external forces that influence an organization's activities. Uncertainty occurs when
decision makers lack current, sufficient, or reliable information and cannot accurately
forecast future changes. In practice, decision makers in any organization must be able
to render decisions when environmental conditions are uncertain.
Environmental uncertainty is influenced by three key characteristics of the
organization’s environment. First, the environment can be classified along a simple–
complex continuum. Simple environments have few external factors that influence the
organization, and the strength of these factors tends to be minimal. Complex
environments are affected by numerous external factors, some of which can have a
major influence on the organization. Most organizations fall somewhere between these
two extremes.
Second, the environment can be classified along a stable–unstable continuum. Stable
environments are marked by a slow pace of change. City and county municipalities
typically fall under the category of stable environments. Unstable environments are
characterized by rapid change, such as when competitors continually modify
strategies, consumer preferences change quickly, or technological forces develop
rapidly. The computer hardware and software industries reside in unstable
environments.
Third, environmental uncertainty is a function of the quality is or in richness of
information available to decision makers (Starbuck, 1976).
Environmental Scanning
Environmental scanning refers to collecting and analysing information about relevant
trends in external environment. In addition, scanning provides decision makers with an
early warning system about the change in environment. This information is also
important for risk identification.
A key problem associated with environmental scanning is determining which available
information warrants attention. This is why developing sensitive indicators that trigger
responses is so important. Consider the December 2004 Asian tsunami. Although an
earthquake had been detected, scientists were unsure of the exact size of the resulting
tsunami and were unable to share their observations with countries that would soon be
affected because the governments in those countries lacked environmental scanning
systems (Coombs, 2006).
 Strategies at the Beginning of a Crisis
The first step in the formal response to a crisis is to convene the crisis management
team (CMT). Recall that the organization should have a preestablished team and a
crisis management plan (CMP). Activating the team may be as simple as one member
calling the team together. Alternatively, an employee in the organization may alert a
member of the CMT to the potential or developing crisis at hand. Once convened, the
team begins the process of assessing the situation.
Leadership of the CMT
Effective leadership is necessary during a crisis, both by the leader of the CMT and by
top management (Wooten & James, 2008). This team is responsible for making and
implementing decisions that help the organization resolve the crisis. Three components
of the CMT that must be present for crisis leadership to be successful are (1) the right
leadership, (2) the structure and resources necessary to accomplish crisis response and
containment, and (3) broad public support for the organisation (Cavanaugh, 2003).
In a crisis response, CMT members should not only be knowledgeable about their own
roles on the team but also willing to accept suggestions presented by members who are
experts in other areas. The CMT leader must have an array of both leadership and
management skills. Drawing from the experience of the military and the emergency
services sector, Crichton, Lauche, and Flin (2005) identified e following skills needed
for the CMT leader:
 A Situation Assessment: Being able to identify the problem accurately
 Decision making. Deciding what the CMT should do
 Team coordination: Getting the CMT and affiliated stakeholders to
work together
 Communicating: Deciding how to receive and deliver relevant
information
 Monitoring: keeping abreast of key development
 Delegating: Assigning task to individual CMT members
 Prioritizing: Determining the importance of incoming information and
what should be done next
 Planning: taking part in planning process and encouraging task
competition
The CMT leader should utilize these competencies by taking charge of the situation,
assessing the level of crisis seriousness, determining the level of resources needed and
then making the decisions that will resolve the crises. (Cavanaugh,2003) the leader
must remain calm while handling the crises management.

Strategies During the Crisis: Response and Mitigation

The mid-crisis stage represents a turning point for all affected stakeholders. Three
potential scenarios may emerge at this stage. The first is the belief that the crisis is
under control and the damage can be contained. This is a positive sign that the business
or organization may be able to continue operating in a close-to-normal capacity. In the
second scenario, however, crisis managers must continue to assess the situation and
take action to bring it under control. The third scenario suggests that the outcome is
hopeless and managers should take steps to salvage whatever they can for the
organization.
During the crises, unfolding events should be monitored to determine the following:
 Which of the three scenarios appears to be unfolding?
 What resources are available and how long will it take to deploy them?
 How long will it take to execute a decision or solution?
 Who and what are victims of crises?
Regardless of the type of crises, the organisation is usually damaged in some way.
Hence, it is important that the CMT do what is feasible to contain the damage inflicted
on people, the reputation of the organisation and its assets. This task is bottom line
goal for all crises managers.
Damage Containment
Damage containment is the effort to keep the effects of a crisis from spreading and
affecting other parts of the business (Mitroff & Anagnos, 2001). Management needs to
gather resources such as capital and physical and human resources to help contain the
damage (Pearson & Rondinelli, 1998)
With the proper information flowing to the right stakeholders at the right time, damage
to people and property can be minimized. In this regard, the main emphasis of crisis
management should be focused on three major goals:
1. Gaining complete control of the crisis
2. Conducting frequent damage assessments
3. Restoring normal operations to the organization
The End of the Crisis: Getting the Organization Back on Its Feet
After the immediate crisis, the work at picking up the pieces and going forward begins.
It is here that advanced planning, perhaps from the CMP, can help accelerate the
recovery and minimize the long-term negative effects of the disaster. During the
recovery, the CMT needs to take stock, assess the damage, and determine what
resources are readily available to the organization. In some ways the struggle is similar
to the startup phase for a business in that it must think strategically and take an
entrepreneurial approach to solving future crisis matters (Munneke & Davis, 2004).
Business continuity focuses on getting the organization back on its feet after a major
crisis. This can be viewed ma subarea of crisis management whereby the functions of
the business are restored so that day-to-day operations can continue (Herbane, 2010).
Business Continuity
Business continuity refers to the ability of the business to resume or continue activities
after a crisis occurs. Essentially, business continuity is about maintaining the important
business functions during and after a crisis. Meeting customer demand is important,
especially when a company is a key player in a supply chats network (Zsidisn,
Melnyk, & Ragatz, 2005). A crisis can affect the core functional areas of marketing,
accounting, financial management, human resource management, and manufacturing.
Two areas especially prone to an interruption are the organizations management
information system and its production operations capabilities.
Employee Needs After the Crisis
When employees are out of work because of a disaster at the business, there is a good
chance that they may not be able to return once the business is functioning again.
Employees need to support their families and are likely to secure employment
elsewhere if their economic needs are great. As a result, some companies keep
displaced employees on the payroll, but this more is feasible only if the company has
the resources to do so.

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.
Characteristic of contingency approach:
The central theme of the contingency approach with respect to organisational design is
that the degree of change and complexity in the task environment affects an
organisation’s hierarchy, departmental strategy, coordination mechanisms, and control
system. A firm that produces a stable product in market with a little technological
innovation and relatively few competitors confronts a different organization – design
problem than does a firm that provides a rapidly changing product or services in a
growing competitor market. The first environment is stability; the second, changing or
uncertain. The degree of change in a firm’s task environment may be thought of as a
continuum ranging from stability to instability.
The Stable Environment
A stable environment is characterized by the following;
1. products and services that have not changed much in recent years
2. lack of technological innovations
3. a stable set of competitors and customers, with a few new competitors
4. stable political, economic, and social conditions
5. consistent government policies toward regulation and taxation
Changes in a stable environment are relatively small. When they do occur, they have a
minimal impact on the internal operations of the organizations. Top management can
keep track of what is going on and make virtually all necessary policy decisions alone.
Companies in the brewing, insurance, candle-making, coal-mining, gas container, and
food-staples (e.g., flour and gelatin) industries operates in relatively stable
environments. Although there may be slight changes in the product (e.g., the
introduction of low-calorie beer in the brewing industry), these changes can be easily
incorporated into the existing organizational structure.
The Changing Environment
A changing environment is characterized by the following:
1. products and services that have been changing moderately or continually
2. major technological innovations, which may make the old technology obsolete
3.an ever-changing set of actions by competitors and customers
4. unpredictable and changing governmental actions, reflecting political interactions
between the public and various groups for consumers protection, pollution control, and
civil rights
5. rapid changes in the values of a large number of individuals
Firms in this type of environment are likely to feel an ongoing need to adapt their
internal structures to the environment.
CRISES ORGANIZATIONS
Having laid the necessary groundwork, it is now possible to suggest an organizational
process that may prevent and minimize crisis.
A Proactive Organization
Recall that a proactive organization strategy would attempt to anticipate possible
contingencies and plan accordingly. The primary concern throughout this process is
role played by possible crises.
A four-step organizational process is recommended:
1. Follow the principles of organisation design
2. Employ a contingency approach in actual design.
3. Overlay the contingency structure onto the classification matrix for
crises management
4. Recommend an organizational structure appropriate for the
contingencies identified.
Follow the principals of organization design
1. A clear structure of roles must be designed and maintained by
management. This includes a clear concept of the major activities and duties
involved, a clear understanding of relationship of the role with others, and a
mechanism that provides the needed information to carry out the duties.
 2. It is best to departmentalise the organisation based on function, place,
product and customers.
3. Organisation coordination is accomplished through a clear statement of
the unity of command and an estimate of span of control.
4. A clear authority structure makes the division of work and its
coordination possible. This includes a definition and assignment of
responsibility, accountability, delegation of authority and assessment of
centralization – decentralization deemed appropriate.

REFERENCES:
Managing Business Crises- John Burnett
Effective Crises Management- Mike Seymour, Simon Moore
Crises Management- William Rick Crandall, John A Parnell