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CRISIS MANAGEMENT

Key issues
Crisis Management

Crisis management is the process by which an


organization deals with a major unpredictable event
that threatens to harm the organization, its
stakeholders, or the general public
Elements of a Crisis

Three elements are common to most definitions of crisis:

(a)a threat to the organization,

(b) the element of surprise,

(c)a short decision time

(d)a need for change


Crisis management - 1

Crisis management consists of:

Methods used to respond to both the reality and


perception of crises

Establishing metrics to define what scenarios


constitute a crisis and should consequently trigger the
necessary response mechanisms.

Communication that occurs within the response phase


of emergency management scenarios
Crisis Management - 2

The credibility and reputation of organizations is heavily


influenced by the perception of their responses during
crisis situations
Crisis Management - 3

* respond to a crisis in a timely fashion makes for a


challenge in businesses.

* must be open and consistent communication


throughout the hierarchy to contribute to a successful
crisis communication process.
Types of Crises
Natural disasters
Malevolence
Technical breakdowns
Human breakdowns
Challenges
Mega-damage
Organizational misdeeds
Workplace violence
Rumors
Crisis Management

Technological crises

- caused by human application of science and


technology

- when technology becomes complex and coupled and


something goes wrong in the system as a whole
(Technological breakdowns)
Crisis Management

Crises of organizational misdeeds

- when management takes actions it knows will harm or


place stakeholders at risk for harm without adequate
precautions
Crisis Management

Types of crises of organizational misdeeds:

- crises of skewed management values

- crises of deception

- crises of management misconduct.


Crisis Management

Crisis management model - Gonzalez-Herrero and Pratt 95

Successfully diffusing a crisis requires an


understanding of how to handle a crisis before it
occurs

- issues management

- planning-prevention

- the crisis

- post-crisis
Contingency
Planning
Plan in advance
Rehearse via simulation
Stipulate who the spokesperson is
Speed and efficiency in response to crisis
Offer accurate information or it will backfire
Plan offers info and guidance to help decision makers deal
with long-term effects of decisions
Role of apologies in
crisis management

Controversial - for fear of legal outcomes

Evidence says that a compensation and sympathy are


effective

True contrition includes sympathy for victims and offers of


compensation to offset losses or suffering
TOYOTA
CRISIS MANAGEMENT FAILURE

Toyotas communication strategy:


Too little, too late

Beyond the quality problem


Toyota mismanaged the crisis
TOYOTA
Basic Rules Violated

For senior mgmt: crises must become their #1 priority


immediately.

Integrity of firm threatened - immediate hands-on


control of CEO/team

Sticking accelerators in 2008 - not treated as a serious


matter
TOYOTA
Basic Rules violated

Find facts & solutions fast:

- Toyota managers at first in denial

- accepted a patch (remove floor mats), not solution

- when crisis exploded -- engineering solution/stopped


production

- Even today no one outside of Toyota knows what the


real problems are open to speculation and rumors
TOYOTA
Basic rules violated

Communicate fully and accurately:

- to all constituents to sustain trust

- err on side of protecting consumers & maintain trust


with a recall

What Toyota did:

hushed problem and hoped it go away