Crisis Management

Basic Ideas and Concepts (Part 1)

 Crisis Management – an introduction

• Crisis Management (CM): comparatively new area of study

• Began in the 1980‘s - reasons: many industrial and
environment related accidents (→Exxon Valdez oil spill 1989,
Bhopal Disaster 1984, Chernobyl disaster 1984 etc.)
• Here are a few links that provide some basic outline of what
happened:
• Exxon Valdez, Bhopal, Chernobyl
• Particular blame on managing of crisis situation
• Extremely important process in public relations
 Crisis Management – an introduction

• How to define the word crisis?

• Word etymology: crisis originates from ancient Greek
• Original meaning of the word crisis (κριςις) was “judgment“ or

“decision“, in other words

• → the decisive moment that determines the further positive
or negative development of a thing or a situation.
• The essence of crisis is that one must decide, but that no
decision has yet been made.
 Crisis Management – an introduction

• We all use the word crisis in varying contexts.

• But: what is a crisis, what is NOT a crisis?
• Task1:
• Read through the following situations. Decide (you can
exchange ideas with your partners) which one is / which ones
are a crisis/crises, which ones not and WHY.
 Crisis Management – an introduction

• Definition of crisis not easy but necessary

• Here are some definitions from literature on the word “crisis“:
• (1) Kathleen Fearn-Banks: “A larger event with potentially
negative consequences affecting an organization, company
or industry, as well as its target public, products, services
or good name.”
• (2) Hamblin: “An urgent situation in which all the
members of a group are faced with a common threat.”
• (3) Pauchant and Mitroff: “a disruption that physically
affects the system as a whole and imperils its fundamental
premises, its autonomy and essence.”
 Crisis Management – an introduction

• Definition of crisis not easy but necessary

• Here are some definitions from literature on the word “crisis“:
• (4) Fink: “Any event that can escalate in intensity, become the focus of attention
of the media and the government, obstruct normal business operations and
negatively affect a company’s image and profit.
• (5) Barton: “A larger and unpredictable event with potentially negative
consequences. This event and its consequences may cause significant damage
to a company, its employees, products, services, financial state and reputation.”
• (6) Paul t’Hart: “An unpleasant event that represents a challenge for decision-
makers, tempts them to act under conditions of imperilment, time constraint
and unpreparedness. Crisis is a serious threat to the basic structures or
fundamental values and norms of a social system, which, under conditions of
time pressure and very uncertain circumstances, demands the bringing of
critical decisions.”
 Crisis Management – an introduction

• All of these definitions share recurring terms, such

as “unpredictable““dangerous“, “significant/large
damage“, “intense“, „“negative effect/impact“ etc.
• A working definition could look something like this:
• “An inherently abnormal, unstable and complex
situation that represents a threat to the strategic
objectives, reputation or existence of an
organization.”
 Crisis Management – an introduction

• All though all of these definitions place their

focus somewhat differently, it is safe to say
that the word crisis shares many, if not all of
the following characteristics:
 Crisis Management – an introduction

• While the words describing the event may differ, some features remain relatively
constant. A crisis:
• 4 Appears suddenly.
• 4 Escalates in intensity.
• 4 Demands quick reaction—to resolve and to communicate.
• 4 Disrupts an organization’s routine and performance.
• 4 Creates uncertainty, anxiety, and stress within and outside the organization.
• 4 Threatens the organization’s reputation.
• 4 Challenges the organization’s human, physical and financial resources.
• 4 Focuses the media and other outside audiences on the organization.
• 4 Increases government and regulatory interest in the organization.
• 4 Alters the organization permanently.
 Crisis Management – an introduction

• Difference between incident and crisis:

• Incidents are said to have ‘structure’ because they
are produced by identifiable and assessable risks
and present themselves in fairly predictable ways.”
• Even the most challenging and serious incidents
generally lend themselves to pre-prepared
responses
• In short: preparing for incident is easier than for
crisis (as crisis have element of unpredictability).
 Crisis Management – an introduction

• Risk that is not identified, or at least not

identified with the scale and intensity it presents,
can also produce a crisis.
• Crises may also be the product of an unforeseen
combination of interdependent risk. They
develop in unpredictable ways, and the response
usually requires genuinely creative, as opposed to
prepared, solutions.
 Crisis Management – an introduction

• To make characteriziation of crises easier, one can

divide crises into 2 categories:
• Industrial and natural
• natural crises are created by acts of nature,
• whereas industrial crises are situations in which
organized industrial activities are the source of
major damage to human life and natural and
social environments
 Crisis Management – an introduction

• A different division is also sometimes made

between so-called sudden and so-called
smoldering crises:
• Sudden crises are characterized by their
immediate onset.
• They tend to be unanticipated and escalate very
quickly, often as a result of a severe triggering
event or incident that may be out of the
organization’s control…
 Crisis Management – an introduction

• … while smoldering crises are those for which the

common feature is …
• that impact on the organization and its
stakeholders grows, sometimes undetected, over
a period of time,
• whilst indicators of potential crisis are possibly
missed, denied, ignored or misunderstood.”
 Crisis Management – an introduction

• It is generally accepted in the literature of crisis management

that most crises are of the smoldering type.
• This makes a good case for developing a facility for systematic
examination of potential threats, opportunities and future
developments,
• which may have the potential to create new risk or change the
character of risk already identified, so that potential and
emerging threats may be identified, assessed and mitigated as
early as possible.
• Let‘s check out a few examples of sudden and smoldering
crises…
• Parmalat , Asbestos Crayon
 Crisis Management – an introduction

• Sometimes a crisis can be either smoldering or

sudden, depending on how it evolves.
• →There is no hard-and-fast rule on what
constitutes a smoldering or a sudden crisis.
• The next page provides a non-comprehensive list
of such crisis that can fall into either category.
Crisis Management – an introduction
 Crisis Management – an introduction

• Another way of categorizing crises is by labelling

them perceptual or bizarre.
• Perceptual crises are those in which there is no
problem, or a relatively insignificant problem, but
people think otherwise.
• Example: Intel Pentium Chips
• →Chips had a very minor flaw which hardly anybody
would notice or would have noticed.
• → Due to a hype and hysteria, Intel spent a fortune
on replacing the faulty chip.
 Crisis Management – an introduction

• Bizarre crises are so extreme that the event is almost

unbelievable.
• Example 1: “Finger in Wendy‘s chili“.
• →a finger was found in a bowl of soup.
• →it was placed there on purpose by a couple to collect a large
amount of money in an out-of-court settlement case.
• Example 2: Escalator asphyxiation
An 88-year-old woman was on her way to visit her daughter in
another part of the city, and was on the escalator at the Long
Island Railroad Lindenhurst Station when she fell and her
clothes became entangled in the escalator mechanism and
asphyxiated her.
 Crisis Management – an introduction

• In general crises occur in every area of industrial

activity.
• However, there are all together 3 areas that comprise
more than 50% of all crises.
• Check out the following statistic and try to spot
them.
• What could be the reason for these three areas
sticking out so much?
Crisis Management – an introduction
 Crisis Management – an introduction

• Yet another way category of crisis can be defined as

so-called organizational crisis.
• An organizational crisis is a
• low-probability,
• high-impact event that
• threatens the viability of the organization and is
characterized by
• ambiguity of cause, effect, and means of resolution,
as well as by a belief that decisions must be made
swiftly.
 Crisis Management – an introduction

• Organizational crises are believed to be

• (1) to be highly ambiguous situations where causes and effects are
unknown (Dutton, 1986; Quarantelli, 1988);
• (2) to have a low probability of occurring but, nevertheless, pose a major
threat to the survival of an organization (Jackson & Dutton, 1987;
Shrivastava et al., 1988) and to organizational stakeholders (Shrivastava,
1987);
• (3) to offer little time to respond (Quarantelli, 1988);
• (4) to sometimes surprise organizational members (Hermann, 1963); and
• (5) to present a dilemma in need of decision or judgment that will result in
change for better or worse (Aguilera, 1990; Slaikeu, 1990).
 Crisis Management – an introduction

• The following table shows what organizational crises can look like: