Crisis Management

What is Crisis Management?

Crisis management involves dealing with crises in a manner that minimizes damage and enables the affected organization to recover quickly. Dealing properly with a crisis can be especially important for a company’s public relations. Crises come in several forms, and it is recommended that a company be prepared ahead of time with a crisis management plan.

Types of Crises

There are several types of crises that need critical attention, with crisis management in mind:

1. Accidental Disasters

Accidental disasters are those that happen unintentionally by human cause. Fire is one example of accidental disasters that can affect the workforce and leave a lot of damage to the entire organization. Especially in fields such as mining and construction, that involve physical labor and operation of large machinery, drastic accidents that can happen to the workforce in the performance of their duties can lead to serious consequences.

2. Natural Disasters

Natural disasters are generally environmental crises that are beyond human ability to prevent. Earthquakes, tornadoes, and floods are examples of natural disasters.

3. Technology Disasters

A majority of undertakings in an organization involve technology in one way or another. In some cases, a slight disruption in a company’s technology structure can cause all operations to come to a standstill. Some technology crises can happen accidentally, while others can be maliciously caused. Under technology disasters, you will find examples such as:

• Malevolence crisis – Criminal technology attack by opponents; hostile employees with malicious intentions of destabilizing the organization
• Cybercrime crisis – Intentional theft crime by technology
• Critical virus attacks – Accidental or maliciously infected

4. Conflict of Interest Crisis

A crisis involving a conflict of interest can be very tricky to manage, as it involves political factors. It does not provide a particular step-by-step guide, as such crises tend to be unique in nature each time they occur. However, that does not mean that there are no best practices and strategies that can be implemented. Some events that would fall under a conflict of interest crisis are:

• Rumors – False news regarding an organization and its products. An example is spreading rumors that a certain organization’s products are contaminated or defective. Bad news travels fast and once such a rumor is started, intensive public relations strategies may need to be implemented to calm the fire. Such a rumor can destroy an organization completely. So, in these cases, companies can spend considerable sums to keep their image clean.
• Product tampering – Opponents can buy products of a rival company in volume, tamper with them and then release them into the market. This kind of strategy happens between business rivals who are malicious. One example of product tampering happened to Pepsi Corporation in 1993 when there were claims of syringes found in Diet Pepsi cans. After a thorough investigation and arrests of culprits, Pepsi Corporation had to undertake an intense campaign to restore the public’s confidence in the company.
• Headhunting – Poaching of top executives or senior management staff can happen between companies that are neck-to-neck in competition. Business rivalry is the major reason for this kind of crisis.

Other types of crises include workforce violence and employees’ confrontation crises such as boycotting, go-slow, picketing, and sit-ins with intentions of “arm twisting” the organization into meeting demands.

These are a few of the many unforeseen problems a company can face. In all cases, the focus will be to resolve the issue at hand and introduce structured means to prevent future occurrences.

Causes of Crises

The process used in tackling the crisis can depend on how a particular emergency arises. There are two primary ways a disaster can arise – a sudden crisis or a smoldering crisis.

1. Sudden Crisis

Sudden crises are uncontrollable. They happen and catch the organization’s stakeholders off guard. The best examples of sudden crises are natural disasters that occur unexpectedly and without warning.

2. Smoldering Crisis

Just like a smoldering fire, smoldering crises start slowly and quietly with a few to no signals at all. They move in phases, and each stage must be contained and tackled in time before it develops into a greater crisis and eventually evolves into a major disaster. An illustration of such crises is that of toxic work behavior that eventually leads to turning the whole company culture sour.

Crisis Management Plan

To counter any looming crisis, a proper process and plan must be used for effective crisis management. A crisis management plan is a documented outline of a process to follow for an organization to respond effectively to a crisis.

Crisis management planning will focus mainly on building infrastructures that help the company negate possible risks and how to respond to crises should they occur. It also involves the organization’s workforce and the crisis management team in testing the methods and having regular internal training on the processes.

The following guidelines are recommended for establishing good crisis management plans:

• Identify an individual from your workforce to take over the crisis management role as a manager. Or, you can employ a professional crisis manager who can help you in planning crisis management processes.
• Initiate frequent training and refresher courses on handling crises. Drills and practice operations must frequently take place to keep refreshing stakeholders on emergency responses to crises.
• Form a crisis team to work under the leadership of a crisis manager. When a crisis occurs, this is the team that should be able to respond quickly. A veteran of several training sessions and drills for such occurrences, it is expected to be on the frontline in directing other stakeholders on what to do and where to assemble to avoid further damage.
• Planning responses and crisis management processes for various potential crises is highly recommended. It takes several approaches and processes to address different crises.
• Initiate systems that can effectively monitor or detect foreseeable crises signals early enough in order to tackle the situation before it gets out of hand. Examples of such systems are smoke detectors that can detect potential fire long before it gets out of hand.
• Provide a list of key persons in case of a crisis and their contact information. The contact information must be displayed where anyone can see it and easily access them.
• Identify the ground person to be notified immediately when a crisis occurs. Apart from a crisis manager, there must be a coordinating person among employees who possesses first-hand news on a looming crisis. This should be a person who can be trusted by his colleagues with vital information during any suspected crisis.
• Identify a central point where employees can assemble and the exit points to use in case of a crisis. Emergency exit doors with ease of opening them must be labeled well and an emergency central gathering place identified and properly labeled as well.
• Regular testing of the crisis management process and emergency equipment and updating them frequently or as needed.

Final Takeaways

In any organization, whether it is small or large, problems or dangers are bound to happen that can disrupt the smooth operations or affect it negatively. The organizational hazards, which can occur unexpectedly and drastically, are capable of causing immense harm to its workforce or stakeholders. Such occurrences can be defined as crises, and it is essential to manage them with efficiency and tact.

Additional Resources

CFI is a global provider of financial modeling courses and financial analyst certification. To help you become a world-class financial analyst, these additional CFI resources will be helpful:

• Black Swan Event
• Leadership Traits
• SMART Goal
• Time Management
• See all management & strategy resources