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 in advance 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 occur unintentionally and are caused by humans. Fire is one example of an accidental disaster that can affect the workforce and cause significant damage to the organization. Especially in fields such as mining and construction, which involve physical labor and the operation of large machinery, serious accidents involving 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 infrastructure can bring all operations to a standstill. Some technology crises can occur accidentally, while others can be caused maliciously. 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 step-by-step guide, as such crises tend to be unique each time they occur. However, that does not mean there are no best practices and strategies to implement. 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 starts, intensive public relations strategies may be needed to put out the fire. Such a rumor can completely destroy an organization. So, in these cases, companies can spend considerable sums to keep their image clean.
• Product Tampering – Opponents can buy a rival company’s products in bulk, tamper with them, and then release them into the market. This kind of strategy is used between malicious business rivals. One example of product tampering occurred at Pepsi Corporation in 1993, when syringes were allegedly found in Diet Pepsi cans. After a thorough investigation and the arrest of the culprits, Pepsi Corporation had to undertake an intensive 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 workplace violence and employee confrontation crises, such as boycotts, go-slows, picketing, and sit-ins, with the intent 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 on resolving the issue at hand and introducing structured measures 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 or no signals at all. They move in phases, and each stage must be contained and addressed in time before it develops into a greater crisis and eventually becomes a major disaster. An illustration of such crises is toxic work behavior that eventually turns 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 the process an organization should follow to respond effectively to a crisis.

Crisis management planning will focus mainly on building infrastructures that help the company mitigate possible risks and 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 plan crisis management processes.
• Initiate frequent training and refresher courses on handling crises. Drills and practice exercises must frequently take place to keep stakeholders refreshed 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 early crisis signals 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 personnel in the event of a crisis and their contact information. The contact information must be displayed where anyone can see it and easily access it.
• Identify the ground person to be notified immediately in the event of a crisis. Apart from a crisis manager, there must be a coordinating person among employees who possesses firsthand information about a looming crisis. This should be a person his colleagues can trust with vital information during any suspected crisis.
• Identify a central assembly point and the exit points to use in case of a crisis. Emergency exit doors with ease of opening must be labeled well, and an emergency central gathering place must be 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 small or large, problems or dangers are bound to arise that can disrupt smooth operations or negatively affect them. Organizational hazards, which can occur unexpectedly and severely, can cause immense harm to the workforce or stakeholders. Such occurrences can be considered crises, and it is essential to manage them efficiently and tactfully.

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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