Crisis Situations In Organization And Its Management - Case Study Example

Introduction to Crisis Management Crisis is a critical moment. The American Institute for Crisis Management defines crisis as a significant business disruption which stimulates extensive news media coverage. The resulting public scrutiny will affect the organization's normal operations and also could have a political, legal, financial and governmental impact on its business. According to Seeger (Seeger, Sellnow & Ulmer, 1998) there are three elements common to most definitions of crisis : a) a threat to the organization b) the element of surprise and c) a short decision time. Crisis management deals with crisis not when the crisis arises and finishes but it starts well in advance before a crisis happens and when the crisis has ended. It consists of techniques of how to prepare for and respond to a negative events and it includes actions well-coordinated which will control the damage and preserve or restore public confidence to the organization. We have three stages in crisis management: a) pre- incident stage where we identify possible crisis situations and we develop plans for responding to them. b) Incident stage where we manage the actual crisis situation. c) Post- incident stage where we take corrective as well as protective measures. The theories of managing a crisis situation are many but they all have the following in common: 1) they recognize the need to anticipate potential crises and prepare for them 2) the importance of providing accurate information during a crisis 3) the immediate response to crisis 4) the response should come from the top 5) the solutions should be long term The role of the leader of the organization in handling a crisis management situation is of high importance: a) first, the leader should set with the help of his/her top management team, a crisis management plan which should be in accordance with the values and the philosophy of the organization and which identifies different levels of crisis in the organization. b) Create a crisis management team which will identify possible crises and develop plans, roles and responsibility for preparing and mitigating each of the crises. The leader should help this team in analyzing crisis by various attributes such as industry, location, process etc. c) Develop a communication strategy in order that internal and external stakeholders are effectively communicated. The leader should also establish partnerships with external agencies. d) Ensure training on crisis management and check organizational preparedness through properly designed mock drills. The benefits of crisis management are the following: a) Compliance with regulatory and ethical requirements b) Better management of incidents c) The staff will be more aware of its roles and expectations d) Increased confidence e) Enhanced risk management f) Protected and sometimes enhanced reputation a much reduced risk of post event litigation Historical crisis-tendencies From 1990 - 2007 , according to ICM, the white collar crime is still number one in the list of most common crises, followed by mismanagement, workplace violence, labor disputes and class action suits. The top executives are the ones that made the news in 2007 for mismanagement and white collar crime. Workplace violence, class action lawsuits and defects and recalls received an increased negative news coverage in 2007. Workplace violence recorded the biggest increase of any of the 16 crisis types ICM tracks. The types of crises that ICM tracks are the following: catastrophes, casualty accidents, environmental, class action lawsuits consumer activism, defects& recalls, discrimination, executive dismissal, financial damages, hostile takeover, labor disputes, mismanagement, sexual harassment, whistle blowers, white collar crime and workplace violence. It is impressive that product defects and recalls rise up to 44% over the year before. The most crisis prone industries in 2007 were: software makers, pharmaceutical companies, petroleum refining, natural gas companies, security brokers/dealers, banking, telecommunications, automobile manufacturing, airlines and computer manufacturers. It should be referred that petroleum refining and natural gas companies belong to the engineering industry. In 2007 petroleum refining and natural gas companies were ranked in the third and fourth position accordingly to the most crisis prone industries but there are no elements as to which type of crises they were more prone to. In the engineering industry belongs the construction industry. There is no evidence for construction industry crises. Nonetheless, construction industry crises are strongly related to financial crises which happen every ten years approximately. The effect is a slowdown in construction industry activities. The most recent crisis in this sector is the one that started in 2006 and continues up to now. Nine out of the ten of the above industries repeated from the previous year. The new ones are auto manufacturers. The nature of crises remains the same i.e. no new type of crisis appeared. All these organizations face the same four types of crises: sudden, smoldering, perceptual, bizarre whereas over the past ten years only a third of the all businesses faced the sudden type i.e. fires, workplace violence etc. The smoldering type is the type of crisis that starts from a minor problem within the organization that someone would have recognized its potential of becoming a public issue and should have fixed it before it became a public issue. One very important smoldering issue that was due mostly to human carelessness was the lost or theft of personal data such as credit card and Social security numbers. Crisis Portfolio (industry-specific) In general Y & A should follow the following steps in creating a crisis management plan: 1. The plan should include an operations plan, a communications plan and a continuity plan. 2. The plan should be in written form and it should include the recognition of the various type of dangers, the appraisal of the danger, the immediate reaction, the recovery and the control of the plan. There should be one person who is going to be responsible for materializing the whole plan. S/he should act as a coordinator of the crisis management team and s/he should have the authority to implement it. In the plan there should be written in details the role and responsibilities of each member of the crisis management team. 3. Creation of a crisis management team. The team should be consisted by representatives of every department. The purpose is to include executives with technical and managerial know how. 4. Train. Key personnel should be trained in crisis management skills. 5. Practice. Key personnel should practice crisis drills or simulations. The simulations will uncover any deficiencies in the crisis management plan. 6. Assign a spokesperson. This should not be the CEO. The spokesperson should be in the position to answer early and tell they public what s/he knows and what s/he can reveal. The spokesperson should not take questions and answer them later. 7. Develop and internal communication plan. The internal customers (the employees) should be informed. 8. Pay attention. Pay attention to the employees. the customers and the media. What they talk about, what they do and what they right is very important. 9. In the business / continuity plan there have to be identified all the functions necessary to keep the company running. Each one of the functions should have its own contingency plan. Then test this plan in simulations. Works cited Fink S., Crisis Management: Planning for the inevitable,2007, Backinprint.com Seeger, M., Sellow T.L, Ulmer R.R., Communication, organization and crisis. 1998,Communication Yearbook, 21, p.231-275. Smith L., Millar D., Before Crisis Hits: Building a Strategic Crisis Plan, 2002, Washington, DC, AACC, Community College press. Read More