crisis management report

8/2/2019 Crisis Management Report

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Seminar on Contemporary Management

Issues

Crisis management

Submitted to

Department of management science

Swami Keshvanand institute of technology, management &

Gramothan. Jagatpura, jaipur (Raj.)

In partial fulfillment of

Master of business administration

Of the Rajasthan technical university, Kota

Academic session 2008-09

Submitted by:

Dimple bansal

MBA Sem. II


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Acknowledgement

Perseverance, inspiration and motivation have always played a keyroll in any venture. It is not just the brain that matters most, but thatwhich guides them: the character, the heart, generous qualities and

progressive forces. What was conceived just as an idea materializedslowly into concrete facts? The metamorphosis took endless hours oftoil, had its moments of frustration, but in the end everything seemedto have sense.

At this level of understanding it is often difficult to understand the

wide spectrum of knowledge without proper guidance & advice.Hence , I would like to thankMr.Atul Gupta his immense interest,valuable guidance, constant inspiration kind co-operation throughoutthe period of work was undertaken, which has been instrumented inthe success of this report. I would also express my sincere thanks toMr.vikas shoutriya (HOD, SKIT, DMS).

Last but not the least I acknowledge my profound sense of gratitudetowards my parents and friends for their moral support.

Dimple Bansal


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Contents

Introduction to crisis management

The primary aims or benefits of Crisis Management Types of Crisis management Models & Theories associated with Crisis Management

Management Crisis Planning- Out line

Crisis Management in a planned way

Action in the beginning of the Crisis

After the Crisis Preparing for the Crisis Management & Response

Crisis Management & Response

Organizing Continuity Plan

Communicating the Continuity Plan & Training

How to plan for potential corporate Crisis

Risk management

The Risk cycle

Risk management v/s Crisis management

Crisis management process-an overview

Crisis management model

Crisis management communication

Examples of organizational crisis

Example of successful crisis management

Government and crisis management

Case-study Conclusion Bibliography


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Crisis Management an introduction

A crisis is a major, unpredictable event that threatens to harm an organization andits stakeholders.

Three elements are 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 is a relatively new field of management. Typically, proactivecrisis management activities include forecasting potential crises and planning howto deal with them, for example, how to recover if your computer systemcompletely fails.

Hopefully, organizations have time and resources to complete a crisismanagement plan before they experience a crisis. Crisis management in the faceof a current, real crisis includes identifying the real nature of a current crisis,

intervening to minimize damage and recovering from the crisis. Crisismanagement often includes strong focus on public relations to recover any

damage to public image and assure stakeholders that recovery is underway.

Crisis management is the process by which the organization manages a widerimpact, such as media relations, and enables it to commence recovery. Irrespectiveof the size of an institution affected.

A crisis presents a risk to the assets of the establishment, putting the assets of the people,the information, and the property of the organization under threat. These assets can havelocal, national, and international significance in their function, and consequently, may be

an important consideration for the protection of a nations infrastructure. Themanagement and response to crises in organizations is crucial for effective institutionalfunctioning. Disruptions to the operation of establishments and the influence onemployees can dramatically affect corporate productivity. Such disturbances toorganizations can take many forms including accidental and deliberate causes, initiatedfrom within the organization, as well as from external organizations.

Disasters can be categorized as natural or man made. Natural disasters include storms,floods, tsunamis, fires, pollution, and epidemics, while man made disasters can emanatefrom accidents and hostile acts, such as fires and explosions. Attacks on the people,information, and property of organizations can be prevented or the impact minimized

through a well conceived and thoroughly tested crisis management plan. Such planningneeds to leverage from quality HRD initiatives to maximize the power of human capitalavailable to organizations.


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Figure 1.

Expecting the Unexpected

Crises eventuate from disasters that are an unexpected event requiring specificarrangements or specific actions. Reilly stated effective crisis managementrequires organizational responses which are outside the firms ordinary repertoireof management activities. Essentially, crisis management planning is aboutpreparing for events that the organization has normally not previouslyexperienced. Crises through disasters, such as the tsunamis, can occur withoutwarning, often with effects that are severe and sometimes catastrophic ongovernment, business, communities, and people.

Terrorist threats and natural catastrophes are high on the agenda for these neverexperienced events, and consequently, the application of a well consideredresponse strategy is a vital component of a crisis management plan. The currentthreat of terrorism against government, commercial, and financial institutionsenhances the need for crisis management for the continued operation of


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organizations. The ability to successfully deal with a disaster is an importantmanagement competency that has the capacity to avoid or reduce theconsequences of the impact of the ensuring crisis.

The Quality of Crisis ManagementCrisis management in all its facets is a challenging task. Smooth operation in thisinherently high demanding uncertain context requires multidisciplinary teamwork

between groups of people from a variety of backgrounds. These groups rely onsolid procedures and tactics, congruent communication tools and interoperablecommand- and control systems, throughout the chain of organizations.

Evaluation of concepts and improving crisis management staffs is widelyacknowledged to be a major challenge. It is costly to bring together one group

people, confront them with a good scenario, do proper performance measurementand get good learning results. It even appears to be impossible to conduct larger-scale exercises in real-life with all organizations involved. It is too disruptive,takes too much time and you cannot have as much control over what happensduring the exercise as to ensure proper learning experiences for everyone present.If there is one conclusion to draw from recent national large-scale crisismanagement exercises, then it is certainly that the preparation for these exercisesis not optimal. There would be a lot to gain quality-wise from a more structuredapproach to training and exercising. Also, the real world is not a properexperimentation environment, in which you can arrange the situation as such as to

create an ideal environment for trying out tactics and procedures, new equipment,new modes of operation, etc.Therefore, there is a need for environments in which crisis management staffs

can improve their effectiveness and efficiency with current and future ways ofoperation, which is not the real world. An environment in which we can createscenarios and situations the way we believe them to be optimal to detectweaknesses in the crisis management system and the teams operating in it.

Excellence comes from developing skills in 4 related areas:

Leadership Communication Human Performance Process Improvement

Organizations should be prepared to apply these skills practically, regularly andrealistically to embed the theory.


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The primary aims or benefits of crisis management

1. Ability to assess the situation from inside and outside the Institution as allstakeholders might perceive it.

2. Techniques to direct action(s) to contain the likely or perceived damagespread.

3. Better institutional resilience for all stakeholders.4. Compliance with regulatory and ethical requirements, e.g. corporate [social

responsibility].5. Much better management of serious incidents or any incident that could

become serious.6. Improved staff awareness of their roles and expectations within the institution.7. Increased ability, confidence and morale within the institution.8. Enhanced risk management insofar that obvious risks will be identified,

mitigated (where possible) and through crisis and business continuity

management - as prepared for.9. Protected and often enhanced reputation a much reduced risk of post eventlitigation.

Figure 2.

To achieve this one should use these tools:

Training Needs Analysis Assessment Development of Training Process Enhancement/Design Teaching Training Exercising Presentation Expert Advice Ongoing Analysis Coaching

Summative Confirmation


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Types of crises

Sudden crisis, such as fires, explosions, natural disasters, workplaceviolence.

Smoldering crisis, where problems that start out small and could befixed develop into major issues.

Bizarre crisislike the finger in the Wendy's Restaurant Chili.

A one-of-a-kind crisis

Perceptual crisiswhere the crisis emerges from others' perceptions of

activities rather than the activities themseleves


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Models and theories associated with crisis management

Crisis Management Model

Successfully diffusing a crisis requires an understanding of how to handle a crisis before it occurs. Gonzalez-Herrero and Pratt created a four-phase crisis

management model process that includes:

-issues management,

-Planning-prevention,

-the crisis, and

-post-crisis.

The art is to define what the crisis specifically is or could be and what has causedit or could cause it.

Theories of crisis management

Structural-Functional Systems Theory

Providing information to an organization in a time of crisis is critical to effectivecrisis management. Structural-functional systems theory addresses the intricaciesof information networks and levels of command making up organizationalcommunication. The structural-functional theory identifies information flow inorganizations as "networks" made up of members and "links". Information inorganizations flow in patterns called networks.

Diffusion of Innovation Theory

Another theory that can be applied to the sharing of information is Diffusion ofInnovation Theory. Developed by Everett Rogers, the theory describes howinnovation is disseminated and communicated through certain channels over a

period of time. Diffusion of innovation in communication occurs when anindividual communicates a new idea to one or several others. At its mostelementary form, the process involves: (1) an innovation, (2) an individual orother unit of adoption that has knowledge of or experience with using theinnovation, (3) another individual or other unit that does not yet have knowledgeof the innovation, and (4) a communication channel connecting the two units. Acommunication channel is the means by which messages get from one individualto another.


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Management Crisis Planning

No corporation looks forward to facing a situation that causes a significant

disruption to their business, especially one that stimulates extensive mediacoverage. Public scrutiny can result in a negative financial, political, legal andgovernment impact. Crisis management planning deals with providing the bestresponse to a crisis.

1. Contingency Planning

Preparing contingency plans in advance, as part of a crisis management plan, isthe first step to ensuring an organization is appropriately prepared for a crisis.Crisis management teams can rehearse a crisis plan by developing a simulated

scenario to use as a drill. The plan should clearly stipulate that the only people tospeak publicly about the crisis are the designated persons, such as the companyspokesperson or crisis team members. The first hours after a crisis breaks are themost crucial, so working with speed and efficiency is important, and the planshould indicate how quickly each function should be performed. When preparingto offer a statement externally as well as internally, information should beaccurate. Providing incorrect or manipulated information has a tendency to

backfire and will greatly exacerbate the situation. The contingency plan shouldcontain information and guidance that will help decision makers to consider notonly the short-term consequences, but the long-term effects of every decision.

2. Business Continuity Planning

When a crisis will undoubtedly cause a significant disruption to an organization, abusiness continuity plan can help minimize the disruption. First, one must identifythe critical functions and processes that are necessary to keep the organizationrunning. Then each critical function and or/process must have its own contingency

plan in the event that one of the functions/processes ceases or fails. Testing thesecontingency plans by rehearsing the required actions in a simulation will allow forall involved to become more sensitive and aware of the possibility of a crisis. As aresult, in the event of an actual crisis, the team members will act more quickly andeffectively.


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Crisis management in a planned way

It is a good idea to draw a flow chart of how the beginning of the crisis will behandled. It will define the responsibilities and tasks of each organisation level. Itmight be sensible to divide the flow chart into local measures and Groupmeasures. The chart will also define at what stage the local crisis managementteams and the Group crisis management teams will be convened.

The crisis management team is one of the most vital parts of the continuity plan.The team members, their tasks and responsibilities and where they convene should

be stated in the plan.

The crisis management team gives advice to the management in matters pertainingto the crisis, and will assess the needs of the parties involved in the crisis. Theteam will convene whenever needed and makes plans for all the sub-areas. The

premises of the team, the crisis management centre, have been planned andreserved in advance. All decisions and pieces of information received during thecrisis will be marked in the logbook.

Figure 3.


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After the crisis

When the acute crisis is over, the after crisis phase will commence. This can besplit into three parts:

psychological first aid,

company recovery and

learning from losses.

It is natural that HR must be responsible for the personnels well being andpsychological recovery by recruiting skilled outside help as soon as possible.Directives as towhat authority one should turn to and where help will be given will be stated in

the continuity plan. There are organisations specified into this activity in mostcountries.

How the companys recovery is handled will at the end of the day decide if thecompany will survive after the crisis. When the recovery plan is drafted, one hasto know the company and its resources thoroughly. From that follows that onlythe company staff can draft the recovery plan and choose the right recoverystrategies.

Group level and local level crisis management often need different skills; thus thelocal level crisis management team can be more or less equal to the recoveryteam. Recovery includes all the measures that have to be undertaken in order toget the company back in business fast and effectively. The recovery team starts itswork simultaneously with the crisis management team. When the group crisismanagement team is convened, this fact does not cause any trouble, but if thelocal crisis management team is supposed to convene at the same time with thelocal recovery team, it might be difficult, and the operation must be plannedcarefully. It is worth while to specially consider the structure of the recovery team.Persons who are practical and creative should be allocated to this group.

The recovery strategy work starts by assessing the critical needs for the personnel,raw material, machinery, storage and logistics etc. The critical time for certainfunctions, i.e. the time that the plant can cope without those functions, must bedefined. After this the processes and parts of production must be prioritised. Afterthe prioritisation has been done, the recovery strategies for each sub-operation will

be drafted. The following matters must be considered in the recovery strategy:what resources are needed to get the fundamental functions back on track withinthe critical time frame? Can the production be moved to another unit? Is therespare capacity available? Can personnel be moved to another unit? In that case,how do we solve the logistic, IT, overtime and other similar problems?

One also has to remember the legal facts when drafting the recovery plan.Concerning these matters, the companys legal department has to be consulted.


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Matters like how to interpret the force majeure paragraphs, what obligations thereare towards business partners in a crisis situation and other legal problems will bediscussed with the legal department.

Dependencies are one of the key areas in recovery planning. When assessing the

risks, the size of all the dependency risks is considered, but the recovery plan hasto define how to deal with these risks during crisis. The dependencies can be splitinto internal (interdependency)

and external risks. The production chain has to be considered starting fromsuppliers of raw materials and commodities ending with customers and logistics.In this work it is a good idea to use the experts from your insurance company.

One must learn from losses. All incidents, even the minor ones, should beanalysed. A process of how to follow up the losses and what was done right andwhat was done wrong should be created. This is normal quality work, but it is

often forgotten in connection to losses. The knowledge gained from the loss mustthen be put to use in training programmes, thus ensuring that the perhaps veryexpensive experience can be of benefit to the personnel throughout the company.


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Preparing for Crisis Management and Response

(PPRR)

A prevention,

preparation,

response, and

Recovery

Four stage model of crisis management has been adopted by many organizations tomanage unforeseen events within an establishment. This PPRR approach to crisis

management, shown in Figure 1, is an iterative model that provides ongoingopportunities for learning. Preparedness is integral to crisis management and responseas it forms the foundation upon which recovery of the operation can occur. The

preparation phase of the PPRR model accommodates HRD in the management ofcrises and increases understanding of precursor events leading to a crisis scenario.Figure 1 shows the iteration logically commencing from preparation, to response, torecovery, to prevention in order to commence the cycle again with modified andimproved aspects of the process illustrated in the PPRR Crisis Management Model.

Figure 5

The PPRR Crisis Management Model

This managerial and response approach to crises can be applied to facilities andorganizations ranging from local enterprises to national infrastructure. In order to achievea more professional approach to crisis management, organizations need to effectively


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plan, implement and prepare, especially for natural disaster threats, by assessing the riskto the organization and evaluating the consequence of a event occurring.

Crisis Management and Response

Communities and individuals have always used physical security methods to protect theirvaluables, which is a trend that continues in this era. However, as the tools and devicesavailable to criminal and terrorist elements become more sophisticated, law enforcementagencies and crisis management professionals need to have a comprehensive knowledgeand understanding of the crisis management threats and risks principles necessary to

protect corporation and societal infrastructure. Thus, as the amount of crime and terrorismcontinues to increase, and affects the community in financial and social terms, so does theneed for better strategies for protecting assets In addition, organizational components ofcommercial, retail, and industrial organizations, as well as leisure facilities, all require a

crisis management planning to protect the assets of employees and visitors, themanagerial and financial information of the facility, and the material contents of theorganization. Consequently, a worldwide demand for high quality professional training incrisis management and response issues has emerged commensurate with the internationalescalation of terrorism .

As the perceived threats increase from terrorism and major criminal activities,professional crisis managers and consultants are in constant demand in national andinternational contexts. This situation reflects the demand for these services and products

by business, industry and the broader community . Effective crisis management andresponse training has become increasingly important to industry and governments

because of the moral and legal responsibility of a company or government to ensure that

the employees have been provided with appropriate training to undertake their worksafely, to avoid compensation and risk liabilities.

The current high incidence of global terrorism, major criminal activities and naturaldisasters has determined the need for high quality professional training in crisis responseand management. Consequently, the demand HRD for the protection of people and assetsis high in the national and international contexts. Resources invested in HRM initiativesto change corporate culture through the training and the training of crisis managementcomponents reward organizations in both ethical and business perspectives. The nextsection describes an example of a world class HRD Singaporean programmed and facilityfor crisis response and management.


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Organising a continuity plan

The continuity actions can be split into three main phases: actions before, duringand after the crisis. Before the crisis, obviously the planning must be doneincluding also the continuity plan. The most important thing is that topmanagement must commit itself to the project and communicate this to all parties.Top management will choose the planning group members, who will represent allsectors of the company at least production, IT, HR, Finance, Logistics and PRshould participate, but when needed, also maintenance, purchasing, marketing andstorage will be represented in the project.

When the planning group has been formed, a BIA (Business Impact Analysis) will

be carried out, i.e. the members of the group will discuss different crisis scenarios,imagining the impact of those scenarios and how to deal with them. If a somewhatupdated risk analysis is available, its findings will be used in the work. It is,however, important to realise, that reality is often much more amazing than whatwe can imagine, and it is impossible to plan for all situations. But the frameworkfor crisis management can be built, and the processes with which the crisismanagement will proceed in a controlled way can be defined. To operate in acrisis often needs some improvising, and if that can be done based on check listsand directives prepared in advance, it is possible to save a lot of time. In the

projects where the writer of this article has participated, the best results have beenreached when the planning group really has been enthusiastically workingtogether from the beginning and the discussions have been lively. As a so-calledspin-off effect, valuable information about other parts of the organisation hascome out that might not otherwise have been available to all participants.

Information and communication

Communication and media planning is an important part of the Continuity Plan. Ithas been said that no crisis can be so bad that it couldnt be worse through badcommunication. On the other hand, a crisis can be turned into an advantage byhandling the communication in an exemplary way.

The media plan defines who will inform what and to whom and in what order.One way is to split the information into two parts the initial information and thefollow-up information. The contents of the bulletin must be planned includingwho the receivers will be, what media and channel are to be used. Generally thereshould only be one person and his substitute who will give out information aboutthe crisis, and to whom all contacts should be directed. It is most important not togive out false information, and that the information is received exactly as it has

been intended to.

When the crisis is over, one generally releases a final bulletin where the final facts

about the crisis are explained, and also how the crisis finally was handled.


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It is advisable to use the available expert training services in crisiscommunication.

Communicating the continuity plan and training

When the plan has been completed, it must be communicated to the whole staff. A

good channel for this is the companys own intranet. Staff should be trained in

activating the plan. The crisis management team could be trained by using case

exercises in order to see whether the plan would function in practice. The plan and

all its appendices must be updated continuously. This way the companys

continuity plan will turn into a tool that helps and serves the whole company and

perhaps even its survival.

In a crisis, always sit down and think hard about your decision, and for as long as

needed (or allowed) about ways in which you can resolve it.

It has to be you. That applies even if somebody else has to carry the burden of

action - how you brief, direct, and control the other or others will be vital to the

outcome. In seeking a solution, look for a simple answer that you can apply, rather than a

complex one that requires many hands.

Since youre unlikely to get that answer by conventional thinking, try

deliberately to be unconventional, original, lateral.

Part of the decision is how to use yourself. In any situation where youre an

unknown factor, what people know about you is what you choose to let them

know - and that can be a powerful weapon on your side.

In a bad situation, dont hesitate to use shock as a tool. It works much better than

fright. But you must do something to bring home the urgency of the position.

Work in the knowledge that even in a good situation, operations can always be

improved - and that those who are best placed and best equipped to improve them

are the operators themselves.

In a crisis, quick and decisive action is generally much more effective than

deliberate and delayed response.

Second-guessing the opinions of those in the front line is never done by good


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generals. If the actions taken by subordinates are wrong, youll know soon

enough.

Figure 1


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How to Plan For Potential Corporate Crisis

Despite the new popularity of crisis management, executives who are fully readyto respond to emergencies are still in the minority. When a disaster unfolds, manycorporate chiefs shake their heads and refuse to acknowledge the gravity of the

problem. Says Gerald Meyers, former chairman of American Motors, who teachesa course in crisis management at Carnegie-Mellon University: "The mostfrequently made mistake is denial, and it's the biggest one you can make. Denialthen gives way to anger. When the crisis doesn't go away quickly, the panic setsin." Agrees Donald Deaton, a senior vice president at Hill & Knowlton, a NewYork-based public relations firm with an expertise in crisis management: "Youcan't sit on your hands waiting for the problem to disappear. You have to takecharge."

Company officials must next overcome a powerful impulse to run for cover fromthe press and the public. "Executives often bury their heads in the sand and refuseto communicate. But adopting a bunker mentality is always to their owndetriment," says Fink. Moreover, he continues, "many companies go astray bylying." When that happens, the public loses faith in the firm, and its products,which may never be restored.


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Risk Management

Security is defined as a stable, relatively predictable environment in which an individual

or group may pursue its ends without disruption or harm, and without fear of disturbanceor injury (Fischer & Green 2004). For government and private organizations, this meansthat the organization continues its business and meets desirable goals without disruptionor fear of disruption. Hence, the proliferation of terrorist incidents in national andinternational contexts impinges on this state of crisis management and response needed inorganizations. Moreover, the evaluation of the risk of an event from terrorist activities ornatural disasters is essential, and accordingly, a response instituted with the understandingthat the risk might be realized.

The concept of risk is foremost when considering the protection of assets. Indeed, thelikelihood of occurrence of the threat posing the risk will determine the need forintervention in the activities within a facility. The consequence of an event occurring thatwill affect an organization will determine the extent of human and organizationalresources dedicated to this possible event. If the event will severely disrupt or causedislocation to the normal operations of the organization, then a risk management decisionis necessary to determine the amount and type of resources deployed and the managementof the possible event. By their very nature, crisis management and response carry someform of risk, and so the function of the personnel in this area is to conduct a risk analysis

based on intelligence of the possible event and the consequences to the organization if therisk is realized. The maintenance of risk management and risk reduction strategies fornational infrastructure facilities at an enhanced level is crucial to be prepared for incidentsthat can occur without warning, with effects that are severe and sometimes catastrophicon the government, or the business community.

The components of threat and harm determine the levels of risk. Threat levels or theprobability of incidents being realized, are determined by the subjective assessment of allrelevant facts and the information derived from intelligence about the adversary. A threatlevel is allocated a rating of the likelihood of the threat eventuating. Harm is the amountof damage that may occur if the threat is realized, or considered as the criticality of theloss. Senior management, who understand the consequential impact of an incident from arealized threat, will best determine the level of harm that the organization may incur.


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Crisis management-risk management

The risk cycle

Figure 6

The risk cycle


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Risk management v/s Crisis management

There is a vast difference between crisis management and risk management. Wecan understand it by this diagram.

Figure 7.

Risk management v/s crisis management


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Crisis management process

An overview

Figure 8.


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The crisis management process

Figure 9.


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Crisis Management v/s Crisis Communications

Some companies freely use the phrases Crisis Management and CrisisCommunications interchangeably. There is a distinct and important difference

between the two terms and not knowing the difference can be dangerous for anunsuspecting company in a crisis if it thinks it is hiring one type of firm and findsout too late that the firm that was hired cannot do the job required

Our definitions are simple: Crisis Management deals with the reality of thecrisis. Crisis Communications deals with the perception of the reality

"Crisis Management" is an umbrella term that includes many components. CrisisCommunications is but one component -- albeit a very important one -- of Crisis

Management. Full service Crisis Management firms provide all CrisisCommunications services, including:

media relations;media strategies;media training;media interviews;employee relations;shareholder relations;community relations;and more.

also provide such essential crisis management consulting services as:

crisis vulnerability audits;

proactive pre-crisis planning and management training;

crisis forecasting;

crisis management plan testing and evaluation;

consultation with senior management to help teams manage crises;

crucial decision-making strategies involved in the actual management of acrisis as it unfolds;

intervention and interface with government regulators on a client's behalf;advising companies and their law firms on legal strategies designed toserve the client's best business interests;

post mortems following a crisis to help assess what went right or wrong;and more.

So, whether you require just Crisis Communications, or if your needs are (or maybecome) more complex, you would probably be better served engaging a fullservice Crisis Management firm that can handle and coordinate everything -- themanagement andthe communications -- before, during and after the crisis.


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Examples of organizational crises

Extortion Bribery Hostile Takeover Terrorist Attack Last minute LARA RFC Copyright infringement Vehicular fatality Information sabotage Product tampering Workplace bombing Natural disaster that destroys organizational office

Computer tampering sexual harassment Natural disaster that disrupts product/service Confidential data loss Kidnapping, (Key person; Tiger) Product/service boycott Work-related homicide Malicious rumor Hazardous material leak Plant explosion Personnel assault Assault of customers Product recall Counterfeiting Natural disaster that destroys corporate headquarters Natural disaster that eliminates key stakeholders


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Examples of successful crisis management

1. Tylenol (Johnson and Johnson)

In the fall of 1982, a murderer added 65 milligrams of cyanide to some Tylenolcapsules on store shelves, killing seven people, including three in one family.Johnson & Johnson recalled and destroyed 31 million capsules at a cost of $100million. The affable CEO, James Burke, appeared in television ads and at newsconferences informing consumers of the company's actions. Tamper-resistant

packaging was rapidly introduced, and Tylenol sales swiftly bounced back to nearpre-crisis levels.

Johnson & Johnson was again struck by a similar crisis in 1986 when a New York

woman died on Feb. 8 after taking cyanide-laced Tylenol capsules. Johnson &Johnson was ready. Responding swiftly and smoothly to the new crisis, itimmediately and indefinitely canceled all television commercials for Tylenol,established a toll-free telephone hot-line to answer consumer questions andoffered refunds or exchanges to customers who had purchased Tylenol capsules.At week's end, when another bottle of tainted Tylenol was discovered in a store, ittook only a matter of minutes for the manufacturer to issue a nationwide warningthat people should not use the medication in its capsule form (Rudolph, 1986).

2. Odwalla Foods

When Odwalla's apple juice was thought to be the cause of an outbreak of E. coliinfection, the company lost a third of its market value. In October 1996, anoutbreak of E. coli bacteria in Washington state, California, Colorado and BritishColumbia was traced to unpasteurized apple juice manufactured by natural juicemaker Odwalla Inc. Forty-nine cases were reported, including the death of a smallchild. Within 24 hours, Odwalla conferred with the FDA and Washington statehealth officials; established a schedule of daily press briefings; sent out pressreleases which announced the recall; expressed remorse, concern and apology, and

took responsibility for anyone harmed by their products; detailed symptoms of E.coli poisoning; and explained what consumers should do with any affected

products. Odwalla then developed - through the help of consultants - effectivethermal processes that would not harm the products' flavors when productionresumed. All of these steps were communicated through close relations with themedia and through full-page newspaper ads.

3. Mattel


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Mattel Inc., the country's biggest toy maker, has been plagued with more than 28product recalls and in Summer of 2007, amongst problems with exports fromChina, faced two product recalls in two weeks. The company did everything itcould to get its message out, earning high marks from consumers and retailers.Though upset by the situation, they were appreciative of the company's response.

At Mattel, just after the 7 a.m. recall announcement by federal officials, a publicrelations staff of 16 was set to call reporters at the 40 biggest media outlets. Theytold each to check their e-mail for a news release outlining the recalls, invitedthem to a teleconference call with executives and scheduled TV appearances or

phone conversations with Mattel's chief executive. The Mattel CEO Robert Eckertdid 14 TV interviews on a Tuesday in August and about 20 calls with individualreporters. By the week's end, Mattel had responded to more than 300 mediainquiries in the U.S. alone.

4. Pepsi

One crisis management success story revolves around the Pepsi Corporation. Thecrisis started with claims of syringes being found in cans of diet Pepsi. Pepsi,confident that the tampering was not their fault, urged stores nation-wide not toremove the product from shelves. The company had the cans and the situationthoroughly investigated. This led to an arrest, which Pepsi made public and thenfollowed with their first video news release. This showed viewers the companyssteps in the factories and how it was impossible to happen within their factories. Asecond video news release displayed the man arrested and proved to the public

that he had committed the scam. A third video news release showed surveillancefrom a convenient store where a woman was caught replicating the tamperingincident. The company simultaneously publicly worked with the FDA during thecrisis to get to the bottom of the scam. Basically the Corporation was completelyopen with the public throughout the entire ordeal. Every employee of Pepsieverywhere in the world was completely aware of all of the details as well. Thismade the internal public communications very effective throughout the crisis.Once the allegations were finalized the corporation launched a series of specialcampaigns designed to thank the public for standing by the corporation along withcoupons for further compensation. This case served as a design for how to handleother crisis situations. The management and public relations worked together

stupendously throughout the entire organization.

5. Bhopal

The Bhopal disaster in which poor communication before, during, and after thecrisis cost thousands of lives, illustrates the importance of incorporating cross-cultural communication in crisis management plans. According to AmericanUniversitys Trade Environmental Database Case Studies (1997), local residents

were not sure how to react to warnings of potential threats from the Union Carbideplant. Operating manuals printed only in English is an extreme example of


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mismanagement but indicative of systemic barriers to information diffusion.According to Union Carbides own chronology of the incident (2006), a day afterthe crisis Union Carbides upper management arrived in India but was unable toassist in the relief efforts because they were placed under house arrest by theIndian government. Symbolic intervention can be counter productive; a crisis

management strategy can help upper management make more calculated decisionsin how they should respond to disaster scenarios. The Bhopal incident illustratesthe difficulty in consistently applying management standards to multi-nationaloperations and the blame shifting that often results from the lack of a clearmanagement plan (Shrivastava, 1987).

6. Ford and Firestone Tire and Rubber Company

The Ford-Firestone dispute transpired in August 2000. In response to claims thattheir 15-inch Wilderness AT, radial ATX and ATX II tire treads were separatingfrom the tire coreleading to grisly, spectacular crashesBridgestone/Firestonerecalled 6.5 million tires. These tires were mostly used on the Ford Explorer, theworld's top-selling sport utility vehicle (SUV)

The two companies committed three major blunders early on, say crisis experts.First, they blamed consumers for not inflating their tires properly. Then they

blamed each other for faulty tires and faulty vehicle design. Then they said verylittle about what they were doing to solve a problem that had caused more than100 deathsuntil they got called to Washington to testify before Congress.

On March 24, 1989, a tanker belonging to the Exxon Corporation ran aground inthe Prince William Sound in Alaska. The Exxon Valdez spilled millions of gallonsof crude oil into the waters off Valdez, killing thousands of fish, fowl, and seaotters. Hundreds of miles of coastline were polluted and salmon spawning runsdisrupted; numerous fishermen, especially Native Americans, lost theirlivelihoods. Exxon, by contrast, did not react quickly in terms of dealing with themedia and the public; the CEO, Lawrence Rawl, did not become an active part ofthe public relations effort and actually shunned public involvement; the companyhad neither a communication plan nor a communication team in place to handlethe eventin fact, the company did not appoint a public relations manager to its

management team until 1993, 4 years after the incident; Exxon established itsmedia center in Valdez, a location too small and too remote to handle theonslaught of media attention; and the company acted defensively in its response toits publics, even laying blame, at times, on other groups such as the Coast Guard.These responses also happened within days of the incident (Pauly and Hutchison,2005).


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7. Public sector crisis management

Corporate America is not the only community that is vulnerable to the perils of acrisis. Whether a school shooting, a public health crisis or a terrorist attack thatleaves the public seeking comfort in the calm, steady leadership of an electedofficial, no sector of society is immune to crisis. In response to that reality, crisismanagement policies, strategies and practices have been developed and adaptedacross multiple disciplines.


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Government and Crisis management

Historically, government at all levels local, state, and national has played alarge role in crisis management. Indeed, many political philosophers haveconsidered this to be one of the primary roles of government.

Emergency services, such as fire and police departments at the local level, and theUnited States National Guard at the federal level, often play integral roles in crisissituations.

To help coordinate communication during the response phase of a crisis, the U.S.Federal Emergency Management Agency (FEMA) within the Department ofHomeland Security administers the National Response Plan (NRP). This plan is

intended to integrate public and private response by providing a commonlanguage and outlining a chain-of-command when multiple parties are mobilized.It is based on the premise that incidences should be handled at the lowestorganizational level possible. The NRP recognizes the private sector as a key

partner in domestic incident management, particularly in the area of criticalinfrastructure protection and restoration.

The NRP is a companion to the National Incidence Management System that actsas a more general template for incident management regardless of cause, size, orcomplexity.

FEMA offers free web-based training on the National Response Plan through theEmergency Management Institute.

Common Alerting Protocol (CAP) is a relatively recent mechanism that facilitatescrisis communication across different mediums and systems. CAP helps create aconsistent emergency alert format to reach geographically and linguisticallydiverse audiences through both audio and visual mediums.

Crisis management has become a defining feature of contemporary governance. Intimes of crisis, communities and members of organizations expect their public

leaders to minimize the impact of the crisis at hand, while critics and bureaucraticcompetitors try to seize the moment to blame incumbent rulers and their policies.In this extreme environment, policy makers must somehow establish a sense ofnormality, and foster collective learning from the crisis experience.

In the face of crisis, leaders must deal with the strategic challenges they face, thepolitical risks and opportunities they encounter, the errors they make, the pitfallsthey need to avoid, and the paths away from crisis they may pursue. The necessityfor management is even more significant with the advent of a 24-hour news cycleand an increasingly internet-savvy audience with ever-changing technology at itsfingertips.


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Public leaders have a special responsibility to help safeguard society from theadverse consequences of crisis. Experts in crisis management note that leaderswho take this responsibility seriously would have to concern themselves with allcrisis phases: the incubation stage, the onset, and the aftermath. Crisis leadershipthen involves five critical tasks: sense making, decision making, and meaning

making, terminating, and learning.

A brief description of the five facets of crisis leadership includes:

1) Sense making may be considered as the classical situation assessment step indecision making.2) Decision making is both the act of coming to a decision as the implementationof that decision.3) Meaning making refers to crisis management as political communication.4) Terminating a crisis is only possible if the public leader correctly handles theaccountability question.

5) Learning, refers to the actual learning from a crisis is limited. The authors note,a crisis often opens a window of opportunity for reform for better or for worse.


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Case study

Companies in Crisis - What to do when it all goes wrong.

Johnson & Johnson and Tylenol

Crisis need not strike a company purely as a result of its own negligence ormisadventure. Often, a situation is created which cannot be blamed on thecompany - but the company finds out pretty quickly that it takes a huge amount of

blame if it fumbles the ball in its response.

One of the classic tales of how a company can get it right is that of Johnson &Johnson, and the company's response to the Tylenol poisoning.

What happened????

In 1982, Johnson & Johnson's Tylenol medication commanded 35 per cent of theUS over-the-counter analgesic market - representing something like 15 per cent ofthe company's profits.

Unfortunately, at that point one individual succeeded in lacing the drug withcyanide. Seven people died as a result, and a widespread panic ensued about howwidespread the contamination might be.

By the end of the episode, everyone knew that Tylenol was associated with thescare. The company's market value fell by $1bn as a result.

When the same situation happened in 1986, the company had learned its lessonswell. It acted quickly - ordering that Tylenol should be recalled from every outlet -not just those in the state where it had been tampered with. Not only that, but thecompany decided the product would not be re-established on the shelves untilsomething had been done to provide better product protection.

As a result, Johnson & Johnson developed the tamperproof packaging that wouldmake it much more difficult for a similar incident to occur in future.

Cost and benefit

The cost was a high one. In addition to the impact on the company's share pricewhen the crisis first hit, the lost production and destroyed goods as a result of therecall were considerable.

However, the company won praise for its quick and appropriate action. Havingsidestepped the position others have found themselves in - of having been slow toact in the face of consumer concern - they achieved the status of consumerchampion.

Within five months of the disaster, the company had recovered 70% of its marketshare for the drug - and the fact this went on to improve over time showed that the


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company had succeeded in preserving the long term value of the brand.Companies such as Perrier, who had been criticised for less adept handling of acrisis, found their reputation damaged for as long as five years after an incident.

In fact, there is some evidence that it was rewarded by consumers who were so

reassured by the steps taken that they switched from other painkillers to Tylenol.

Conclusion

The features that made Johnson & Johnson's handling of the crisis a successincluded the following:

They acted quickly, with complete openness about what had happened,and immediately sought to remove any source of danger based on theworst case scenario - not waiting for evidence to see whether thecontamination might be more widespread

Having acted quickly, they then sought to ensure that measures were takenwhich would prevent as far as possible a recurrence of the problem

They showed themselves to be prepared to bear the short term cost in thename of consumer safety. That more than anything else established a basisfor trust with their customers


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Conclusion

Crisis management in all its facets is a challenging task. Smooth operation in thisinherently high demanding uncertain context requires multidisciplinary teamwork

between groups of people from a variety of backgrounds. These groups rely onsolid procedures and tactics, congruent communication tools and interoperablecommand- and control systems, throughout the chain of organizations.

It is nessecery for all the organizations. Crisis management is the process bywhich the organization manages a wider impact, such as media relations, andenables it to commence recovery. Irrespective of the size of an institution affected.

It has some primary goals like Ability to assess the situation from inside andoutside the Institution as all stakeholders might perceive it. Techniques to directaction(s) to contain the likely or perceived damage spread. Better institutional

resilience for all stakeholders.

It can be said that every organization should have a crisis management plan.


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Bibliography

www.crisismanagement.com www.wikipedia.org www.crisisrisk.com www.lyken.com
http://www.crisismanagement.com/http://www.wikipedia.org/http://www.crisisrisk.com/http://www.lyken.com/http://www.crisismanagement.com/http://www.wikipedia.org/http://www.crisisrisk.com/http://www.lyken.com/

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