The crisis management process - Essay Example

The crisis management process Incidences of the organizational crises are increasing rapidly since the past few decades. This has made the management personnel and researchers concerned about the meaning of this term ‘crisis’ and the fateful consequences that it might bring with it. Crisis management is an important ingredient for an organization to achieve long term success. In this process public relations and media engagement play significant roles in developing good crisis communication. There has been international news for quite some time now about the horse meat scandal involving the international retailer Tesco. This is a serious stake for the company since the company’s reputation is on risk and the company is facing a slump in sale. The company has been going through this tough time by maintaining good crisis communication and good management of crisis. This paper presents a detailed report on the crisis management process followed by Tesco and a comparison of the company measures with the different theories pertaining to crisis management and crisis communication. Introduction Industries are increasingly being hit hard with incidents of crisis since the past few decades. This has made the management personnel and researchers concerned about the meaning of this term ‘crisis’ and the fateful consequences that it might bring with it. Charles Hermann had defined crisis in the 1970s as a phenomenon that is surprising and unforeseen. It has the potential to bring abrupt change in the system by affecting one or more of its variables (Hermann, 1972; Campisi, 2011). Often one or a series of minor incidents takes the shape of a major crisis (Roux-Dufort, 2007) while in others cases the crisis is a threatening phenomenon that surfaces without any warning or signals. In the latter case organizations get very less time to respond to the situation and are equipped with inadequate resources to handle the situation (Webb, 1994). The basic principles of crisis intervention can be summarized as immediate intervention, stability, facilitating understanding, focusing on problem solving, and encouraging self-reliance (Flannery and Everly, 2000). Crisis management is an important ingredient for an organization to achieve success and following these basic principles would help in easing out its efforts. The way executives manage the communication pattern within the organization and the type of information exchanged between the organization and the stakeholders shape public perception. Public relations and media engagement are the two crucial elements of good crisis communication (Pauchant, Mitroff and Lagadec, 1991). The renowned global retailer Tesco has fallen victim to a serious scandal relating to the quality of a range of beef burgers sold by it. This is a serious stake for the company since the company’s reputation is on risk and the company is facing a slump in sale (Thomas, 2013). This article looks into the crisis communication maintained by the crisis management procedures followed by the company. Company overview Tesco had been established in the year 1919 in the East End in London (Tesco PLC, 2013a). A market stall owner, Jack Cohen, had set up the company with the vision of becoming “highly valued by the customers” (Tesco PLC, 2013b) served by the company. The business has grown successfully over the years and at present the company operates in 14 different countries in the world. Tesco is at present “the largest supermarket retailer in the United Kingdom” (Aaker and Mcloughlin, 2010). The company has always focused on bringing the most pleasing shopping experience for the customers and also taking the necessary actions to do the best for its employees and the community as a whole. The values maintained by Tesco help the employees to hold on to their core purpose of value creation and earn the lifetime loyalty of the customers (Tesco PLC, 2013c). The company strives to deliver a great shopping experience in each of its stores by focusing on service and staff, store layout, prices, range of food available, marketing and brand management and online shopping facilities (Tesco PLC, 2013d). The core business in the United Kingdom comprises more than 3000 stores and above 300,000 employees. In 2012 Tesco launched the first online shopping service of its grocery items in Prague and Slovakia (Tesco history, n.d.). This facility has increased the customers’ access to a wide range of food and non-food items. In the financial year 2011-2012 the company earned revenue of approximately £42,248 million (Tesco PLC, 2013d). Background information In the beginning of 2013 Tesco faced a serious issue over the ingredients used in the preparation of three of the frozen items of beef burgers sold by the retailer. The Tesco Everyday Value 8x Frozen Beef burgers (397g), Tesco 4x Frozen Beef Quarter Pounders (454g) and the Flamehouse Frozen Chargrilled Quarter Pounders have been found to contain horse meat after they have been tested by the Food Safety Authority of Ireland (FSAI). These products were on offer for sale in the UK and the Ireland (Marketing Week, 2013). The CEO of Tesco, Philip Clarke, has announced that in this situation it would maintain honesty and transparency in order to regain and retain the trust of its customers. He has promised that the company is taking every possible step to ensure that such events do not recur in future. Valuing the feelings of the customers and the issue of their safety, the company has publicly apologized by issuing advertisement of apology in different newspapers of the country and also by talking about this matter in the social networking channels. It is offering a refund to all the customers that claim to have bought any item of these frozen burger items from the retail stores of Tesco even without verifying the receipts. The company has withdrawn all products from shelves of one of its suppliers after the ‘beef burgers’ were found to be contaminated with 29 percent horsemeat (Eyley, 2013). Tesco is making an investigation into the fact how and why the situation happened. Tim Smith, the technical director of the company has declared that the situation is the outcome of two possible events; either gross negligence or sincere illegal actions on part of the suppliers (Guardian, 2013). Clarke has promised to reveal any information to the customers that it can learn in the course of the investigation (Marketing Week, 2013). Good communication in crisis Theories of crisis management Proper information is crucial for any business organization when faced with crisis. It is critical to efficient and professional crisis management. The structural-functional theory of organizational systems addresses this issue. It elaborately addresses the intricate details of the information networks shared by the organizations and the different ranks that makes up the system of communication in an organization both internally and with the external stakeholders (Goel, 2009). This theory identifies the flow of information within the organizations in the form of networks that are made up of members and their connections. When a company faces a disrupting crisis, the most important keystone of a company’s crisis management strategy should be prompt and upbeat communication. Proactive communication helps the organization to stay positive throughout the period of crisis while it investigates the situation. According to Kim Hunter and Stephanie Smith effective communication is the tool to retain favourable public perception while the organization is passing through the throes of crisis (Goel, 2009). By assuming the role of an effective communicator at the first instance the troubled firm can affect the perceptions of the customers and followers. Such perceptions stay on for a long period of time even after the crisis gets resolved. To make sure that the consumers and business partners listen to the company’s perspective and hold it with importance the communicator on behalf of the company has to ensure that the message gets accurately delivered to the media channels that are making the coverage of the crisis. This is a critical stage for the company since miscommunication poses a very high threat of developing wrong notion about the company and thereby creating further scam. In words of Patterson, “perception is truth”, since the consumers’ evaluation is based on the perception of truth, and any wrong perception would make the truth lost under the covers of myth. The perception is, in reality, established by the way the media portrays the organization. This calls for mandatory aggressive but well organized dealing with the media. Interaction with the different media channels, such as the radio, television, newspapers and the social networking sites should be predicated on the realization that the media representatives are not infallible. It is the responsibility of the company in crisis to let out the facts clearly to them without leaving any space for ambiguity and also to explain the consequences of these facts to them so that no undesirable inference is derived. A crisis event might turn out to be the turning point for a firm both in positive or negative sense (ARPEGE, 2012). Such situations might augment appropriate innovative ideas in the organization or might on the other hand lead to destructive behaviours within the organization and decrease its viability (Mishra, 1996). Role of good communication in Tesco crisis management The managers of Tesco also follow the faith that an honest and highly visible message from the company has the potential to resolve a highly difficult crisis. The retailer has remained focused on its vision while passing through this horsemeat scandal. The company CEO has apologized publicly and made distinct promises to remain transparent to the customers about the cause of this incident and the course of actions that it is planning to take in order to regain consumer trust. The Food Safety Authority of Ireland (FSAI) has declared after testing several frozen beef items that three of them contain horsemeat. However, it has also declared that these food items do not pose any threat to consumers’ health. But the company has showed genuine concern for the customers and has expressed that just like the customers are angry at the breach of faith owing to poor quality of the products, Tesco also considers this incident as absolutely unacceptable. It has agreed that its supplier has let down the customers and it expresses true apology for this incident (Marketing Week, 2013). Not only do the customers expect high quality standards form the company, but the retailer also has high expectation standards about the kind of products it sells. Therefore any lack in the quality standards of the products hurt the esteem of the company in the minds of both the customers and the owner (Sheehan, 2013). The technical director of Tesco, Tim Smith, has confirmed that they would continue with the investigation and complete it, after which it would decide whether Tesco would continue to use supplies from the supplier. Tesco has accepted the responsibility of the entire incident without shifting the blame to its supplier. It has admitted publicly that since the customers deal with the company and not with the supplier, it is Tesco’s responsibility that it should investigate the source of contamination, find out the root of the cause and let the customers know about the reality without hiding any information from them. This would be a good example of communication in crisis and would help in healing the scar with greater ease. Good communicating allows the customer to be aware of the actual course of events and does not leave space for any kind of misconception or misunderstanding. It also prevents the possibility of any scams by fraudsters that might make use of this opportunity to further defame the brand name of the company and make some easy profit for their own self. In a period of crisis, proper communication with customers is absolutely indispensible for any kind of business organization. This is because customers are an important stake holder in the business. They have the right to have complete information because such incidents influence customer perception about the company to a great extent. However formal the contracts might be, between the customers and the firms, effective and long term relationships are essentially based on mutual trust (Sako, 1992). The customers would be willing to depend on the firms only if they are assured that the firms are reliable and concerned with customer well being and that they are competent enough to be one of the top market players as well as open and transparent (Moorman, Zaltman and Deshpande, 1992). These are four central dimensions that concern a firm’s relationship with its customers and must be considered while adopting crisis management strategies. Crisis management by Tesco The process of crisis management involves a series of events or actions that are aimed at crisis intervention so as to minimize the probability of causing debilitating effects on the shareholders and stake holders of an organization and to ensure that such crises do not affect the growth prospects of the firm (Slaikeu, 1990). Good management of catastrophic situations might convert a tough situation by acting on the harmful effects on the organization and discovering new outlooks of business and unseen avenues to prosperity. Two phases can be recognized in this process; first order invention and second order invention. The first phase relates to the process of providing psychological support and the second phase of intervention relates to the full fledged crisis therapy. Both these phases are important in determination of the eventual resolution to the crisis. Psychological assistance allows handling the immediate business necessities and taking care of the emergencies. In a big organization it amounts to the management of the feelings of the employees and handling the media channels to reach out to the customers. Crisis therapy is a more elaborate process that aims to facilitate the “psychological resolution of the crisis” (Slaikeu, 1990, p. 103). This process consumes a lot of time and it requires specific realization of the situation of crisis. Crisis intervention takes place in an organization following a disconcerting happening, but much before the ultimate resolution, either positive or negative, is reached. Technological advancements and modern channels of communication are making corporate reputation vulnerable and more exposed to criticism than ever. Organizations are facing attacks from anti-corporate groups and forums. These forums are powered by such technological revolutions and are increasingly gaining the capability to establish a global platform and reach the global audience. With the power to communicate with the consumers around the world these groups can mobilize common consumers’ demands and protests at the multinational level and unite them according to their expectations from different companies (Tucker and Melewar, 2005). This subject organizational crisis has various areas of research and although quite a lot of studies have been conducted in the past several decades, the studies understandably have not been able to cover all the aspects of the topic cohesively (Clair, 1998). Organizational crises are mostly of cross disciplinary nature, due to which there is lack of adequate integration among the research conducted by the different researchers (Shrivastava, 1993). Different aspects have to be considered explicitly while an organization is developing a policy of crisis management; such as, the psychological, technological and structural aspect of the firm and the socio-economic scenario of the country in which the company is operating (Pauchant and Douville, 1994). Tesco has followed the rules laid down on the books in its crisis management process since the first day. It has made public apology, has recognised the gravity of the trouble, and adequate communication with the media channels to convey the most transparent message to the customers. The technical director of the company has declared that the quality and safety of their food products is one of the most important concerns for the company. While it is not illegal to sell horsemeat in the United Kingdom, legitimate selling of the product requires of the sellers to mention all the ingredients on the package. Since the burgers were labelled as beef burgers, but contained horse meat, it is a case of presence of illegal meat in the food, and the company is considering this instance as a serious fault. The act of removing the contaminated products from the stores’ shelves initiates the task of launching a crisis management programme. It is followed by the next duty that the company is going to carry out; Tesco would seriously investigate into this incident and would not compromise on the quality of their products (Eyley, 2013). However, the company has not revealed whether it had faced any prior symbols regarding the occurrence of this contamination. According to Smith, the company does not have knowledge about the time since when this incidence has been occurring (Guardian, 2013). The announcement made by Clarke to tighten the supply chain is leading to increasing concern among the supermarkets about the loss of assurance of the customers on the processed food sold by Tesco. However, the good news is that sales figures, although low, is showing a rise since December 2011, when significant fall in sales had forced the organization to issue profit warnings for the first time in 20 years. These good signs symbolize that the company has been able to strike a good understanding with the customers (Ruddick, 2013). Conclusion Management of crisis is critical to long term success of the organization. As the case of Tesco horse meat crisis reflects, the issue has moved a huge customer base of the company in the European market. In this situation the company has been putting best efforts to manage the situation with utmost professionalism and transparency. However, public reaction is not easy to predict. Although the sales figures are showing signs of improvement, the incident has taken a toll on consumers’ trust on the retailer’s processed foods. Public trust on Tesco has declined by almost 24 percent, according to a report published by ‘Which?’ based on a survey conducted on a group of more than 2000 UK customers (Thomas, 2013). 30 percent of the population is buying lesser amount of processed meat and a significant number of customers are choosing vegetarian meals. 68 percent of the customers have also expressed doubt about the correctness of the ingredient information. According to public opinion, level of food safety is falling in the country. This is the reason behind the lack of confidence among the shoppers about the item that they are buying. Tesco has to put right such failings in order to win back consumer trust and pull back consumers’ confidence to the pre-scandal level. The company should immediately make a public declaration, over and above the promises to make investigation and refunding, that it would employ more sincere surveillance over the entire process starting from receiving supply form the suppliers, the process of production, packaging and distribution of the products to the stores. It should also set new product standards for all the supermarkets not only in UK but around the world (Ford, 2013). This should be done in order to prevent tampering with the product in raw material stage to fully processed stage. It should also strictly follow the UK legislation of food legislation to account for all the ingredients that have been used in the product. Tesco should tighten its policies to take criminal action against the guilty that would be found responsible for breaking the law. References Aaker, D. A. and Mcloughlin, D., 2010. Strategic market management. United Kingdom: John Wiley & Sons. ARPEGE, 2012. Crisis Management: Theories and Methods. [pdf] Available at: [Accessed 10 April 2013]. Campisi, J., 2011. EU Crisis. [pdf] Available at: [Accessed 10 April 2013]. Clair, J. A., 1998. Reframing Crisis Management. The Academy of Management Review, 23(1), pp. 59-76. Eyley, H., 2013. Crisis Management Launched as Horse Meat Found In Beef Burgers. [online] Available at: [Accessed 10 April 2013]. Flannery, R. B. and Everly, G. S., 2000. Crisis Intervention: A Review. International Journal of Emergency Mental Health, 2(2), pp. 119-125. Ford, R., 2013. Tesco releases new public statement on horse meat scandal. [online] Available at: [Accessed 10 April 2013]. Goel, S., 2009. Crisis Management: Master the Skills to Prevent Disasters. New Delhi: Global India Publications. Guardian, 2013. Tesco and the horsemeat scandal: answers needed quickly. [online] Available at: [Accessed 10 April 2013]. Hermann, C., 1972. International crises: Insights from behavioural research. New York: Free Press Marketing Week, 2013. Tesco apologises for horse meat row in ads. [online] Available at: [Accessed 10 April 2013]. Mishra, A. K., 1996. Organizational response to crisis: the centrality of trust. In Kramer, R. M. and Tyler, T. R., 1996 (eds.). Trust In Organizations: Frontiers of Theory and Research. California: Sage. 1996. Moorman, C., Zaltman, G. and Deshpande, R., 1992. Relationships between providers and users of market research: The dynamics of trust within and between organizations. Journal of Marketing Research, 29(3), pp. 314-328. Pauchant, T. C., and Douville, R. 1994. Recent research in crisis management: A study of 24 authors’ publications from 1986 to 1991. Organization & Environment, 7(1), pp. 43-66. Pauchant, T. C., Mitroff, I. I. and Lagadec, P., 1991. Toward a Systemic Crisis Management Strategy: Learning from the Best Examples in the US, Canada and France. Industrial Crisis Quarterly, 5(3), pp. 209–232. Roux-Dufort, C., 2007. Is Crisis Management (Only) a Management of Exceptions? Journal of Contingencies and Crisis Management, 15(2), pp. 105-114. Ruddick, G., 2013. Tesco protects market share as pressure increases on Morrisons. [online] Available at: [Accessed 10 April 2013]. Sako, M., 1992. Prices, quality, and trust: Inter-firm relations in Britain & Japan. New York: Cambridge University Press. Sheehan, 2013. Tesco pulls another product in horse meat scandal. [online] Available at: [Accessed 10 April 2013]. Shrivastava, P., 1993. Crisis theory/practice: Towards a sustainable future. Industrial and Environmental Crisis Quarterly, 7(1): 23–42. Slaikeu, K. A., 1990. Crisis intervention: A handbook for practice and research. Boston: Allyn and Bacon. Tesco history, n.d. Tesco-history. [online] Available at: [Accessed 10 April 2013]. Tesco PLC, 2013a. Our History. [online] Available at: [Accessed 10 April 2013]. Tesco PLC, 2013b. Our vision. [online] Available at: [Accessed 10 April 2013]. Tesco PLC, 2013c. Our values. [online] Available at: [Accessed 10 April 2013]. Tesco PLC, 2013d. Our businesses. [online] Available at: [Accessed 10 April 2013]. Thomas, C., 2013. Horse Meat Scandal Sees Public Trust in Food Industry Fall. [online] Available at: [Accessed 10 April 2013]. Tucker, L. and Melewar,T. C., 2005. Corporate Reputation and Crisis Management: The Threat and Manageability of Anti-corporatism. Corporate Reputation Review, 7(4), pp. 377-387. Webb, E., 1994. Trust and Crisis. In Kramer, R. M. and Tyler, T. R., 1996 (eds.). Trust In Organizations: Frontiers of Theory and Research. California: Sage. 1996. Read More