Crisis management (20TH CENTURY)

Attempted general account of strategy in international conflict.

A middle way requires to be found between total intransigence and surrender.

Source:
Graham Evans and Jeffrey Newnham, The Dictionary of World Politics (Hemel Hempstead, 1990)

Introduction

Crisis management 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.^{[citation needed]} Crisis management consists of different aspects including:

• 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.

Crisis-management methods of a business or an organization are called a crisis-management plan. A British Standard BS11200:2014 provides a useful foundation for understanding terminology and frameworks relating to crisis, in this document the focus is on the corporate exposure to risks in particular to the black swan events that result in significant strategic threats to organisations. Currently there is work on-going to develop an International standard.

Crisis management is occasionally referred to as incident management, although several industry specialists such as Peter Power argue that the term “crisis management” is more accurate. ^[6]

A crises mindset requires the ability to think of the worst-case scenario while simultaneously suggesting numerous solutions. Trial and error is an accepted discipline, as the first line of defense 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.^[7]

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

During the crisis management process, it is important to identify types of crises in that different crises necessitate the use of different crisis management strategies.^[8] Potential crises are enormous, but crises can be clustered.^[8]

Lerbinger^[9] categorized eight types of crises

1. Natural disaster
2. Technological crisis
3. Confrontation
4. Malevolence
5. Organizational Misdeeds
6. Workplace Violence
7. Rumours
8. Terrorist attacks/man-made disasters

Natural disaster

Natural disaster related crises, typically natural disasters, are such environmental phenomena as earthquakes, volcanic eruptions, tornadoes and hurricanes, floods, landslides, tsunamis, storms, and droughts that threaten life, property, and the environment itself.^[8][9]

Example: 2004 Indian Ocean earthquake (Tsunami)

Technological crisis

Technological crises are caused by human application of science and technology. Technological accidents inevitably occur when technology becomes complex and coupled and something goes wrong in the system as a whole (Technological breakdowns). Some technological crises occur when human error causes disruptions (Human breakdowns^[8]). People tend to assign blame for a technological disaster because technology is subject to human manipulation whereas they do not hold anyone responsible for natural disaster. When an accident creates significant environmental damage, the crisis is categorized as megadamage.^[8] Samples include software failures, industrial accidents, and oil spills.^[8][9]

Examples: Chernobyl disaster, Exxon Valdez oil spill, Heartbleed security bug

Confrontation crisis

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.

Example: Rainbow/PUSH’s (People United to Serve Humanity) boycott of Nike

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 rumors, terrorism, cybercrime and espionage.^[8][9]

Crisis of organizational misdeeds

Crises occur when management takes actions it knows will harm or place stakeholders at risk for harm without adequate precautions.^[8] Lerbinger^[9] specified three different types of crises of organizational misdeeds: crises of skewed management values, crises of deception, and crises of management misconduct.

Crises of skewed management values

Crises of skewed management values are caused when managers favor short-term economic gain and neglect broader social values and stakeholders other than investors. This state of lopsided values is rooted in the classical business creed that focuses on the interests of stockholders and tends to disregard the interests of its other stakeholders such as customers, employees, and the community

Example:^{[example needed]}

It has 3 stages^{[clarification needed]} -precrisis -acute -chronic and -conflict resolution

Crisis of deception

Crisis of deception occur when management conceals or misrepresents information about itself and its products in its dealing with consumers and others.

Example: Dow Corning’s silicone-gel breast implant

Crisis of management misconduct

Some crises are caused not only by skewed values and deception but deliberate amorality and illegality.

Workplace violence

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

Example:^{[example needed]}

Rumors

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.^[8]

Example: Procter & Gamble logo myth

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. Erika Hayes James, an organizational psychologist at the University of Virginia’s Darden Graduate School of Business, identifies two primary types of organizational crisis.^[10] James defines organizational crisis as “any emotionally charged situation that, once it becomes public, invites negative stakeholder reaction and thereby has the potential to threaten the financial well-being, reputation, or survival of the firm or some portion thereof”.^[11]

1. Sudden crisis
2. Smoldering crises

Sudden crisis

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.

Smoldering crisis

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. ^[11]

James categorises five phases of crisis that require specific crisis leadership competencies.^[11] Each phase contains an obstacle that a leader must overcome to improve the structure and operations of an organization. James’s case study on crisis in the financial services sector, for example, explores why crisis events erode public trust in leadership. James’s research demonstrates how leadership competencies of integrity, positive intent, capability, mutual respect, and transparency impact the trust-building process.^[12]

1. Signal detection
2. Preparation and prevention
3. Containment and damage control
4. Business recovery
5. Learning