What is Crisis management?

Articles — 27 June 2011

Crisis management is the process by which an organization deals with a major event that threatens to harm the organization, its stakeholders, or the general public. Three elements are common to most definitions of 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 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.

Crisis management consists of:

Methods used to respond to both the reality and perception of crises.
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 Crisis Management Plan.

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.

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.

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.[4] Potential crises are enormous, but crises can be clustered.

Lerbingercategorized seven types of crises

1.Natural disaster
2.Technological crises
3.Confrontation
4.Malevolence
5.Organizational Misdeeds
6.Workplace Violence
7.Rumours

Natural crisesNatural crises, typically natural disasters considered as ‘acts of God,’ are such environmental phenomena as earthquakes, volcanic eruptions, tornadoes and hurricanes, floods, landslides, tsunamis, storms, and droughths that threaten life, property, and the environment itself.

Example: 2004 Indian Ocean earthquake (Tsunami)

[edit] Technological crisesTechnological 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. 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.Samples include software failures, industrial accidents, and oil spills.

Examples: Chernobyl disaster, Exxon Valdez oil spill
Confrontation crisesConfrontation crises 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 crises 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
Crises of malevolenceAn 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 crises include product tampering, kidnapping, malicious rumors, terrorism, and espionage.

Example: 1982 Chicago Tylenol murders
Crises of organizational misdeedsCrises 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.

Crises of skewed management valuesCrises 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 view the interests of its other stakeholders such as customers, employees, and the community.

Sears sacrifices customer trust
[edit] Crises of deceptionCrises of deception occur when management conceals or misrepresents information about itself and its products in its dealing with consumers and others.

Dow Corning’s silicone-gel breast implant

Crises of management misconductSome crises are caused not only by skewed values and deception but deliberate amorality and illegality.

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

DuPont’s Lycra

RumorsFalse 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.

Example: Procter & Gamble’s Logo controversy

Crisis Management Services