| Welcome to |
Crisis Management: Prevention, Diagnosis, Intervention by Toby J. Kash and John R. Darling |
|
Precis by Rajesh Kamath |
No one asks, after 40 years of strategic planning as a discipline, if a business will face a crisis; it is a question of when, what type, and how prepared a company is to deal with it. Any business will eventually have to face some form of crisis, whether it is the natural disasters of earthquakes, floods and tornados, or manmade accidents, strikes and tampering with the product. And no amount of planning can help to foresee what might happen. The MIR space station built by the Soviet Union in 1986 encountered mechanical problems which had been anticipated. What could not have possibly have been imagined was that an unmanned space ship would hit MIR, disabling its solar panels. Whereas issues analysis can alert management to emerging political, social and economic trends and to mobilize resources to deal with them, a crisis is unplanned event that can cause death or significant injuries to employees, customers or the public, shut down the business, disrupt operations, cause physical or environmental damage, or threaten the public image of an institution. It is said that there are two kinds of crisis, those you manage and those that manage you, and the paper defines crisis management as a series of functions which identify, study and forecast crisis issues, and then suggest how an organization could prevent or cope with a crisis. The authors review case studies, examine symptoms, and discuss the stages of a crisis, recommending methods for prevention and intervention. Crisis acknowledgement A survey of the CEOs of the Fortune 500 companies found that 85 per cent felt a crisis was inevitable but that only 50 per cent of them had prepared a crisis plan. Ironically, companies spend a great deal of effort planning financial growth, but fail to prepare, or prepare too late for something that could lead to their total failure. Examples are safety violations, plant in need of repair, union contracts, and management succession. However, ignoring the likelihood of a crisis won't stop it happening and planning for one can actually make it of much shorter duration when it does occur. And decisions made under stress are much harder than those where there is a pre-prepared framework. In the case of Nike, a new design on basketball shoes sparked the threat of a boycott from Muslims who complained that the logo resembles the Arabic word for Allah, or God. Nike apologized, recalled 38,000 pairs of shoes, and discontinued the line. It had spent a considerable amount of time and money on creating the brand but had no framework for dealing with an unexpected and expensive controversy. And there are symptoms which can alert an organization that a crisis is imminent - slipping market share, decreasing productivity, and trends in the external socio-economic, political and competitive environments. Crises happen more because of lack of attention to symptoms than any other factor. Stages of a crisis So what things should be watched for and dealt with? The four stages outlined by the authors are: Prodromal - A sympton of the onset of a disease. Gives a warning signal. The Baring Bank, the UK institution, had ample opportunity to detect problems but internal structures prevented this when a rogue trader acted dishonestly. McDonald's had had numerous complaints about the temperature of the coffee that eventually hurt an elderly lady who sued and won, expensively for the fast food chain in terms of money and image. So it is important to catch a crisis at this 'prodromal' stage before it becomes much more complex. Intel, largest producer of computer chips in the US, initially refused to recall faulty chips until the acute stage of the crisis when it admitted the problem, apologized, and began to sort it out. Acute - Demands immediate action which may in itself disrupt the organization by diverting funds and resources, unless it has planned for such occurrences. Chronic - Symptoms are obvious and may prompt management to take action, bringing recovery for some organisations and leading to the death of others. It was not until the Chrysler Corporation nearly became bankrupt that a management shake-up occurred. At the chronic stage however, the situation may be so bad that no attention is paid to it. It may even become such a familiar state that it is seen as tolerable. Crisis resolution - Crises could be detected at various stages of their development. Since the existing symptoms may be related to different problems or crises, there is a great possibility that they may be misinterpreted. Therefore, the people in charge may believe they have resolved the problem. However, in practice the symptom is often neglected. In such situations, the symptom will offer another chance for resolution when it becomes acute, thereby demanding urgent care. Preventive efforts Prevention is the least expensive step but the one that is often overlooked in dealing with a crisis. It is only sensible to identify the processes necessary for assessing and dealing with future disasters. At the heart of these are information, planning and decision-making systems, including strategic forecasting, contingency planning, issues analysis, and scenario analysis. Strategic forecasting - Involves predictions based on the assumption that an organization can adapt to change. Contingency planning - Provides alternative actions if the unexpected happens. Can help to safeguard against a crisis and also to resolve situations as they occur. Issues analysis - Similar to contingency planning. Alerts managers to external trends which the business must try to turn to its advantage. Automotive manufacturers are, for example searching for alternatives to the internal combustion engine. Scenario analysis - Considers favourable and unfavourable situations which might arise, and the company's alternatives in preventing, facilitating or thwarting these scenarios. Crisis intervention Acknowledging and communicating about the crisis are important steps, and a company that does that has the best chance of weathering the crisis. When a crisis plan goes into action at US Air, the company's leadership co-ordinates the aid and information to families. Communications should be also be handled with a view to how they might affect the company in the future. Honesty is critical, since a survey in New York found that 95 per cent of respondents were more offended by a company lying about a crisis than about the crisis itself. Pepsi-Cola, faced with a syringe discovered in a bottle, ensured that its sales force had accurate information to communicate to customers. Companies need to have a main spokesperson who is credible, and can convey care, confidence and control. Almost every crisis has the seeds within it of success, as well as the roots of failure, and Johnson & Johnson emerged from a tragedy involving the deaths of customers with an enhanced image. Customers had taken cyanide-laced Tylenol products and Johnson & Johnson acted quickly to recall the capsules, and repackage with greater safety for the customer in mind. A basic tenet of crisis management is that a company must demonstrate that it cares. Establishing a crisis management team Needs a clear chain of command and should meet every six months to discuss how to respond to crises. Teams should be cross-functional to identify every possible disaster that might threaten. A full crisis plan should be developed focusing on protecting people, communication, and mitigating damage to facilities. All participants must be informed and it must be regularly updated and tested. Appointing strategic teams for scenario analysis Allows personnel to gain the expertise to deal with a crisis which can offer significant payback when one occurs. Conclusion Companies that prepare for a crisis handle them better. Prevention, preparation, and intervention are the key tools to success. This is a précis of an article entitled "Crisis management: prevention, diagnosis and intervention" originally published in the Journal of Leadership & Organizational Development Vol 19 Issue 4, 1998. The authors are Toby J. Kash and John R. Darling of Pittsburg State University, Pittsburg, Kansas, USA. Precis prepared by Rajesh Kamath, |
||||
| Reference | : | Visit http://hrera.tripod.com Subscribe free email magazine for Human Resource Professionals by sending email to HREra-subscribe@yahoogroups.com |
||