Crisis Management

Introduction

Crisis management is the process by which an organization deals with a disruptive and
unexpected event that threatens to harm the organization or its stakeholders. The study of
crisis management originated with large-scale industrial and environmental disasters in the
1980s.
There are three elements that are common to a crisis:
(a) a threat to the organization,
(b) the element of surprise, and
(c) a short decision time
Venette 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 before, during, and 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 occurs to
the point that recovery procedures start.
It is a situation-based management system that includes clear roles and responsibilities and
process related organisational requirements company-wide. The response shall include
action in the following areas: Crisis prevention, crisis assessment, crisis handling and crisis
termination. The aim of crisis management is to be well prepared for crisis, ensure a rapid
and adequate response to the crisis, maintaining clear lines of reporting and communication
in the event of crisis and agreeing rules for crisis termination.
The techniques of crisis management include a number of consequent steps from the
understanding of the influence of the crisis on the corporation to preventing, alleviating,
and overcoming the different types of crisis. Crisis management consists of different aspects
including:

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  Methods used to respond to both the reality and perception of crisis.
 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.

A crisis mindset requires the ability to think of the worst-case scenario while simultaneously
suggesting numerous solutions. Though trial and error is an accepted discipline, as the first
line of defence, but might not work. It is necessary to maintain a list of contingency plans
and to be always on alert. Organizations and individuals should always be prepared with a
rapid response plan to emergencies which would require analysis, drills, and exercises.

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 communication throughout the hierarchy to contribute to a successful
crisis-communication process.

The related terms emergency management and business continuity management focus
respectively on the prompt but short lived "first aid" type of response (e.g. putting the fire
out) and the longer-term recovery and restoration phases (e.g. moving operations to
another site). Crisis is also a facet of risk management, although it is probably untrue to say
that crisis management represents a failure of risk management, since it will never be
possible to totally mitigate the chances of catastrophes' occurring.

Types of crisis

Potential crises are enormous, but crises can be clustered. Lerbinger categorized eight types
of crises:

 Natural disaster
Natural disaster related crises, typically natural disasters, are such
environmental phenomena as earthquakes, volcanic eruptions, floods, landslides,
tsunamis, storms, etc.

 Technological crisis
Technological crises are caused by human application of science and
technology. E.g. software failures, industrial accidents, and oil spills.

 Confrontation crisis

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 Confrontation crisis 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 crisis is boycotts, and
other types are picketing, sit-ins, ultimatums to those in authority, blockade or
occupation of buildings, and resisting or disobeying police.

 Crisis 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 crisis include
product tampering, kidnapping, malicious rumours, terrorism, cybercrime and
espionage.

 Organizational Misdeeds
Crises occur when management takes actions it knows will harm or place
stakeholders at risk for harm without adequate precautions. Lerbinger specified
three different types of crises of organizational misdeeds: crises of skewed
management values, crises of deception, and crises of management misconduct.

 Workplace Violence
Crises occur when an employee or former employee commits violence against
other employees on organizational grounds.

 Rumours
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.

 Terrorist attacks/man-made disasters

These crises are created by human beings. Terrorists attacks and riots can be
categorized under this type.

Crisis leadership

Alan Hilburg, a pioneer in crisis management, defines organizational crises as categorized as

either acute crises or chronic crises. Hilburg also created the concept of the Crisis Arc.
These are of two kinds:

1. Sudden crisis

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 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.

2. 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 crisis and its subsequent effect on the institution in question.

Examples of successful crisis management

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 showed surveillance from a convenience store where a woman was
caught inserting a syringe into a can. The company simultaneously publicly worked with the FDA
during the crisis. 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.

Examples of unsuccessful crisis management

The Bhopal disaster in which poor communication before, during, and after the crisis cost
thousands of lives, illustrates the importance of incorporating cross-cultural communication in
crisis management plans. According to American University's Trade Environmental Database
Case Studies (1997), local residents were not sure how to react to warnings of potential threats
from the Union Carbide plant. Operating manuals printed only in English is an extreme example
of mismanagement but indicative of systemic barriers to information diffusion. According to Union
Carbide's own chronology of the incident (2006), a day after the crisis Union Carbide's upper
management arrived in India but was unable to assist in the relief efforts because they were
placed under house arrest by the Indian government. Symbolic intervention can be counter-
productive; a crisis management strategy can help upper management make more calculated
decisions in how they should respond to disaster scenarios. The Bhopal incident illustrates the
difficulty in consistently applying management standards to multi-national operations and the
blame-shifting that often results from the lack of a clear management plan.

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References –

https://en.wikipedia.org/wiki/Crisis_management