Crisis Management

Visualizing Crisis Management

Visualize the term crisis management, and a number of images may pop into your head. Consider these possibilities:

■ Maybe you thought of a recent YouTube video of two Domino’s Pizza employees, one of whom put cheese up his nose and then placed it on a sandwich. The video received nearly one million views on YouTube before it was removed (Beaubien, 2009).

■ Perhaps you remembered stories about numerous outbreaks of violent weather, particularly tornadoes that have hit the Midwest and southern portions of the United States in recent years. These weather patterns were not only sudden, but were catastrophic the physical and human damage they inflicted.

■ On a broader level, you might have envisioned a team of managers trying to deal with a fire that has destroyed part of the production facilities at their manufacturing plant. Indeed, fires remain one of the most prominent types of crises that managers must address.

■ You might have thought of the tsunami that hit Japan in 2011, causing widespread death, destruction, and the interruption of global supply chains. This event was further complicated by the spread of nuclear fallout in the air and water.

Indeed, the term crisis management invokes a number of images in the mind of the reader. However, crisis management is not just a one-time response to an unfortunate event. It is much broader than that. We view it as a strategic process that must occur far before the first crisis ever takes place in the life of the organiza- tion. It is a process that must be planned both before and after the crisis occurs.

FOR THE USE OF SAVANT LEARNING STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

ANY AND ALL UNAUTHORIZED USE IS STRICTLY PROHIBITED. Copyright © 2014 by SAGE Publications, Inc.

R O D D Y , A N T H O N Y I S A A C 3 7 2 7 B U

2 CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE

When we view crisis management as a holistic process, a conceptual framework must be developed to understand how this process should be organized. A frame- work functions as a map that helps us see how the different parts of a process are interrelated. This book offers a framework to help you understand the field of crisis management and how you can better prepare for crisis events that may occur in your organization.

The onset of crises in organizations is a common occurrence in our contempo- rary environment. And yet many people associate a crisis with a highly dramatic event that produces mass destruction and even causalities. Most organizational crises are far less dramatic but can still have a substantial negative impact on the firm. The problem with associating only catastrophic events with a crisis is that they sound so dramatic that most organizational leaders may assume an “It can’t happen to us” mentality. But then, consider these crises that are still damaging, yet less prominent:

■ In January 2012, Coca-Cola Company encountered a problem with its orange juice products, Simply Orange and Minute Maid. Some of the prod- ucts sold in the United States contained small amounts of carbendazim, an unapproved fungicide used with oranges from Brazil. Although the fungi- cide is approved in that country, it is not in the United States, prompting Coca-Cola to move into crisis management mode (Kiernan & McKay, 2012).

■ General Motors (GM) faced a setback in late 2011 when its electricity-propelled Chevy Volt performed poorly in three crash tests that resulted in fires or sparks from the vehicle’s battery pack. GM, realizing it was facing a crisis, offered loaner cars to any of the 6,000 Chevy Volt owners while engineers worked to fix the problem (Terlep, 2011).

■ In 2008, a now-infamous online advertisement by Johnson & Johnson (J&J) promoting its pain reliever, Motrin, met resistance from young mothers. The ad stated that mothers who carry their babies in a sling are making a “fashion statement,” something that many of the moms found offen- sive (Wheaton, 2008). Johnson & Johnson quickly pulled the ad from the Internet.

As these examples illustrate, not every organizational crisis is dramatic, but each one can have a far-reaching impact if it is not managed properly.

Setting the Context

Unfortunate events will occur in the life of most organizations. We refer to these events as crises . There are two broad approaches to the managing of these events: (1) Try to keep them from occurring in the first place, and (2) mitigate or soften the impact of the crisis when it does occur. Crisis management is the discipline that addresses these two approaches.

Crisis management is a field of growing interest because many managers now realize that their firms are not immune to those sudden, unexpected events that can

FOR THE USE OF SAVANT LEARNING STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

ANY AND ALL UNAUTHORIZED USE IS STRICTLY PROHIBITED. Copyright © 2014 by SAGE Publications, Inc.

R O D D Y , A N T H O N Y I S A A C 3 7 2 7 B U

Chapter 1. A Framework for Crisis Management 3

put an organization into a tailspin, and sometimes even out of business. This book is written for managers and students of crisis management. As present or future leaders in your organizations, the key issue you will face is not whether a crisis will occur, but when, and what type. As a result, an understanding of crisis management is an essential part of your toolkit for organizational and professional success.

Developing a Framework for Studying Crisis Management

A starting point for understanding crisis management is to view it in terms of a framework. Frameworks group or organize what we experience in organizational life. In this book, we develop a framework that looks at crisis management in four distinct phases. In addition, each phase is divided into its internal and external dimensions, a distinction we call landscapes . Our framework begins with a defini- tion of the term, presented in the next section.

Definition of Crisis

The word crisis has been used interchangeably with a number of other terms, including disaster, business interruption, catastrophe, emergency, or contingency (Herbane, 2010). Hence, the definition of a crisis must be established before a suit- able framework can be developed. Numerous definitions have been offered, and most synthesize previous definitions to some extent. Pearson and Clair (1998) have offered the most widely used definition of an organizational crisis:

An organizational crisis is a low-probability, high-impact event that threatens the viability of the organization and is characterized by ambiguity of cause, effect, and means of resolution, as well as by a belief that decisions must be made swiftly. (p. 60)

The following implications of this definition should be highlighted:

■ A crisis is a “low-probability” event. This characteristic makes the planning for a crisis even more troublesome. Events that are not perceived to be immi- nent are hard to plan for. In addition, it is often difficult for management to find the motivation to plan for such an event. The notion is, “Why plan for something bad if it may not occur?” (Spillan & Crandall, 2002). Many managers have asked that same question until they were confronted with a major crisis.

■ A crisis can have a high-damage impact. A crisis can devastate an organiza- tion, even kill it, or at best, leave it badly wounded.

■ The reference to “ambiguity of cause” means that the origins and effects of the crisis might not be known initially. As humans, we instinctively like to point to simple causes. We especially seek to look for human stakeholders

FOR THE USE OF SAVANT LEARNING STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

ANY AND ALL UNAUTHORIZED USE IS STRICTLY PROHIBITED. Copyright © 2014 by SAGE Publications, Inc.

R O D D Y , A N T H O N Y I S A A C 3 7 2 7 B U

4 CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE

such as management or company owners who might have contributed to negligence, ultimately causing a crisis. However, as we will see throughout this book, multiple interrelated factors can lead to a certain trigger event that can initiate a crisis.

■ The ambiguity in this definition also implies that the means of resolving the crisis are often debatable. In other words, several viable options may be available for the crisis management team to use in its goal of mitigating the crisis.

■ Certain aspects of managing a crisis may require swift decision making. The failure to act decisively during the acute stage of the crisis can often intensify the ordeal.

All of these definitions provide a starting point for understanding crisis manage- ment. As more understanding of crisis management has emerged, more contempo- rary ideas and interpretations of crisis and crisis management have been developed.

Timothy Coombs’s (2007) has developed one of the most recent conceptualiza- tions of a crisis:

A crisis is the perception of an unpredictable event that threatens important expectancies of stakeholders and can seriously impact an organization’s per- formance and generate negative outcomes. (pp. 2–3)

This definition emphasizes perception. A crisis is generally perceived to be a threat by the organization’s stakeholders, various groups that have an interest in the organization. Employees, customers, and the community in which the organization resides are considered stakeholders. Coombs infers that not all stakeholders will perceive that a crisis is occurring. A product defect that is detected by consumers, but not individuals inside the company, is an example of the incongruity that can take place. Nonetheless, a crisis has occurred, because the perceptions of at least one group of stakeholders have been affected in a negative manner by the event. Recognizing this distinction is important because there are occasions when man- agement has gone into denial, proclaiming that no crisis has occurred (or could ever occur, for that matter), when in fact one has transpired (Sheaffer & Mano- Negrin, 2003). Textbooks are full of examples of this type of denial, such as General Motors’ denial that anything was wrong with its Corvair automobile (Nader, 1965). In this early 1960s example of a corporate crisis, consumers and the media claimed that the Corvair automobile was subject to instability when going into a turn. Indeed, several accidents involving fatalities had occurred as a result of this structural problem. GM maintained that the problem of instability was caused by driver error, not a defect in the car. This denial by GM that a crisis existed resulted in a huge public image problem for the company.

This book follows these crisis definition guidelines. We build on the definition offered by Pearson and Clair in 1998 (which is the most frequently cited in the crisis management literature), but we also include the perspective offered by Coombs. To paraphrase Pearson, Clair, and Coombs, we offer the following definition to serve as our reference point throughout the book:

FOR THE USE OF SAVANT LEARNING STUDENTS AND FACULTY ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING.

ANY AND ALL UNAUTHORIZED USE IS STRICTLY PROHIBITED. Copyright © 2014 by SAGE Publications, Inc.

R O D D Y , A N T H O N Y I S A A C 3 7 2 7 B U