CRISIS MANAGEMENTCRISIS MANAGEMENT

Key issuesKey issues

Crisis ManagementCrisis Management

Crisis managementCrisis management is the process by which is the process by which an organization deals with a major an organization deals with a major unpredictable event that threatens to harm unpredictable event that threatens to harm the organization, its stakeholders, or the the organization, its stakeholders, or the general public general public

Elements of a CrisisElements of a Crisis

Three elements are common to most definitions Three elements are common to most definitions of crisis: of crisis:

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

Crisis management - 1Crisis management - 1Crisis management consists of:Crisis management consists of:• Methods used to respond to both the reality Methods used to respond to both the reality

and perception of crises and perception of crises • Establishing Establishing metricsmetrics to define what scenarios to define what scenarios

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

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

Crisis Management - 2Crisis Management - 2

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

Crisis Management - 3Crisis Management - 3

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

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

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

Crisis ManagementCrisis ManagementTechnological 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)

Crisis ManagementCrisis ManagementCrises of organizational misdeedsCrises of organizational misdeeds

- when management takes actions it knows will - when management takes actions it knows will harm or place stakeholders at risk for harm harm or place stakeholders at risk for harm without adequate precautions without adequate precautions

Crisis ManagementCrisis Management

Types of crises of organizational Types of crises of organizational misdeeds:misdeeds:

- crises of skewed management valuescrises of skewed management values- crises of deceptioncrises of deception- crises of management misconduct.crises of management misconduct.

Crisis ManagementCrisis ManagementCrisis management model Crisis management model - - Gonzalez-Herrero and Gonzalez-Herrero and

Pratt 95Pratt 95

• Successfully diffusing a crisis requires an Successfully diffusing a crisis requires an understanding of how to handle a crisis – before it understanding of how to handle a crisis – before it occursoccurs

- issues managementissues management- planning-preventionplanning-prevention- the crisisthe crisis- post-crisis post-crisis

Contingency PlanningContingency Planning

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

makers deal with long-term effects of decisionsmakers deal with long-term effects of decisions

Role of apologies in crisis Role of apologies in crisis managementmanagement

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

are effective are effective • True contrition includes sympathy for victims and True contrition includes sympathy for victims and

offers of compensation to offset losses or sufferingoffers of compensation to offset losses or suffering

TOYOTA – TOYOTA – CRISIS MANAGEMENT FAILURECRISIS MANAGEMENT FAILURE

Toyota’s communication Toyota’s communication strategy: strategy:

““Too little, too late”Too little, too late”

Beyond the quality problemBeyond the quality problemToyota mismanaged the crisis Toyota mismanaged the crisis

TOYOTATOYOTABasic Rules ViolatedBasic Rules Violated

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

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

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

TOYOTATOYOTABasic Rules violatedBasic Rules violated

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

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

the real problems are – open to speculation and the real problems are – open to speculation and rumorsrumors

TOYOTA TOYOTA Basic rules violatedBasic rules violated

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

maintain trust with a recallmaintain trust with a recallWhat Toyota did: What Toyota did:

hushed problem and hoped it go awayhushed problem and hoped it go away