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Crisis management
Submitted to
Department of management science Swami Keshvanand institute of technology, management & Gramothan. Jagatpura, jaipur (Raj.)
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Acknowledgement
Perseverance, inspiration and motivation have always played a key roll in any venture. It is not just the brain that matters most, but that which guides them: the character, the heart, generous qualities and progressive forces. What was conceived just as an idea materialized slowly into concrete facts? The metamorphosis took endless hours of toil, had its moments of frustration, but in the end everything seemed to 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 thank Mrs. Savita choudhary her immense interest, valuable guidance, constant inspiration kind co-operation throughout the period of work was undertaken, which has been instrumented in the success of this report. I would also express my sincere thanks to Mr.vikas shoutriya (HOD, SKIT, and DMS).
Swekchha Jain
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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 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 Examples of organizational crisis Example of successful crisis management Government and crisis management Case-study Conclusion Bibliography
1 7 8 9 10 10 12 13 14 15 16 18 19 20 21 22 22 23 23 26 27 29 30
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Disasters can be categorized as natural or man made. Natural disasters include storms, floods, tsunamis, fires, pollution, and epidemics, while man made disasters can emanate from 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 planning needs to leverage from quality HRD initiatives to maximize the power of human capital available to organizations.
Figure 1.
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Organizations should be prepared to apply these skills practically, regularly and realistically to embed the theory.
Figure 2.
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Training Needs Analysis Assessment Development of Training Process Enhancement/Design Teaching Training Exercising Presentation Expert Advice Ongoing Analysis Coaching Summative Confirmation
Types of crises
Smoldering crisis, where problems that start out small and could be fixed develop
into major issues.
A one-of-a-kind crisis
Perceptual crisis where the crisis emerges from others' perceptions of activities
rather than the activities themselves
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No corporation looks forward to facing a situation that causes a significant disruption to their business, especially one that stimulates extensive media coverage. Public scrutiny can result in a negative financial, political, legal and government impact. Crisis management planning deals with providing the best response to a crisis.
Contingency Planning
Preparing contingency plans in advance, as part of a crisis management plan, is the 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 to speak publicly about the crisis are the designated persons, such as the company spokesperson or crisis team members. The first hours after a crisis breaks are the most crucial, so working with speed and efficiency is important, and the plan should indicate how quickly each function should be performed.
When a crisis will undoubtedly cause a significant disruption to an organization, a business continuity plan can help minimize the disruption. First, one must identify the critical functions and processes that are necessary to keep the organization running. 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 these contingency plans by rehearsing the required actions in a simulation will allow for all involved to become more sensitive and aware of the possibility of a crisis. As a result, in the event of an actual crisis, the team members will act more quickly and effectively.
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Figure 3.
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Four stage model of crisis management has been adopted by many organizations to manage unforeseen events within an establishment. This PPRR approach to crisis management, shown in Figure 1, is an iterative model that provides ongoing opportunities for learning. Preparedness is integral to crisis management and response as it forms the foundation upon which recovery of the operation can occur. The preparation phase of the PPRR model accommodates HRD in the management of crises and increases understanding of precursor events leading to a crisis scenario. Figure 1 shows the iteration logically commencing from preparation, to response, to recovery, to prevention in order to commence the cycle again with modified and improved aspects of the process illustrated in the PPRR Crisis Management Model.
This managerial and response approach to crises can be applied to facilities and organizations ranging from local enterprises to national infrastructure. In order to achieve a more professional approach to crisis management, organizations need to effectively plan, implement and prepare, especially for natural disaster threats, by assessing the risk to the organization and evaluating the consequence of a event occurring.
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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 generals. If the actions taken by subordinates are wrong, youll know soon enough.
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Figure 1
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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 disturbance or injury (Fischer & Green 2004). For government and private organizations, this means that the organization continues its business and meets desirable goals without disruption or fear of disruption. Hence, the proliferation of terrorist incidents in national and international contexts impinges on this state of crisis management and response needed in organizations. Moreover, the evaluation of the risk of an event from terrorist activities or natural disasters is essential, and accordingly, a response instituted with the understanding that the risk might be realized. The concept of risk is foremost when considering the protection of assets. Indeed, the likelihood of occurrence of the threat posing the risk will determine the need for intervention in the activities within a facility. The consequence of an event occurring that will affect an organization will determine the extent of human and organizational resources dedicated to this possible event. If the event will severely disrupt or cause dislocation to the normal operations of the organization, then a risk management decision is necessary to determine the amount and type of resources deployed and the management of the possible event. By their very nature, crisis management and response carry some form 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 the risk is realized. The maintenance of risk management and risk reduction strategies for national infrastructure facilities at an enhanced level is crucial to be prepared for incidents that can occur without warning, with effects that are severe and sometimes catastrophic on the government, or the business community. The components of threat and harm determine the levels of risk. Threat levels or the probability of incidents being realized, are determined by the subjective assessment of all relevant facts and the information derived from intelligence about the adversary. A threat level is allocated a rating of the likelihood of the threat eventuating. Harm is the amount of damage that may occur if the threat is realized, or considered as the criticality of the loss. Senior management, who understand the consequential impact of an incident from a realized threat, will best determine the level of harm that the organization may incur.
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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
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Personnel assault Assault of customers Product recall Counterfeiting Natural disaster that destroys corporate headquarters Natural disaster that eliminates key stakeholders
2. Odwalla Foods
When Odwalla's apple juice was thought to be the cause of an outbreak of E. coli infection, the company lost a third of its market value. In October 1996, an outbreak of E. coli bacteria in Washington state, California, Colorado and British Columbia was traced to unpasteurized apple juice manufactured by natural juice maker Odwalla Inc. Forty-nine cases were reported, including the death of a small child. Within 24 hours, Odwalla conferred with the FDA and Washington state health officials; established a schedule of daily press briefings; sent out press releases 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 - effective thermal processes that would not harm the products' flavors when production resumed. All of these steps were communicated through close relations with the media and through full-page newspaper ads.
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3. Mattel
Mattel Inc., the country's biggest toy maker, has been plagued with more than 28 product recalls and in Summer of 2007, amongst problems with exports from China, faced two product recalls in two weeks. The company did everything it could 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 public relations staff of 16 was set to call reporters at the 40 biggest media outlets. They told each to check their e-mail for a news release outlining the recalls, invited them to a teleconference call with executives and scheduled TV appearances or phone conversations with Mattel's chief executive. The Mattel CEO Robert Eckert did 14 TV interviews on a Tuesday in August and about 20 calls with individual reporters. By the week's end, Mattel had responded to more than 300 media inquiries in the U.S. alone.
4. Pepsi
One crisis management success story revolves around the Pepsi Corporation. The crisis 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 to remove the product from shelves. The company had the cans and the situation thoroughly investigated. This led to an arrest, which Pepsi made public and then followed with their first video news release. This showed viewers the companys steps in the factories and how it was impossible to happen within their factories. A second video news release displayed the man arrested and proved to the public that he had committed the scam. A third video news release showed surveillance from a convenient store where a woman was caught replicating the tampering incident. The company simultaneously publicly worked with the FDA during the crisis to get to the bottom of the scam. Basically the Corporation was completely open with the public throughout the entire ordeal. Every employee of Pepsi everywhere in the world was completely aware of all of the details as well. This made the internal public communications very effective throughout the crisis. Once the allegations were finalized the corporation launched a series of special campaigns designed to thank the public for standing by the corporation along with coupons for further compensation. This case served as a design for how to handle other 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 the crisis cost thousands of lives, illustrates the importance of incorporating cross-cultural communication in
P a g e | 25 crisis management plans. According to American Universitys Trade Environmental Database Case Studies (1997), local residents were not sure how to react to warnings of potential threats from the Union Carbide plant. Operating manuals printed only in English is an extreme example of mismanagement but indicative of systemic barriers to information diffusion. According to Union Carbides own chronology of the incident (2006), a day after the crisis Union Carbides upper management arrived in India but was unable to assist in the relief efforts because they were placed under house arrest by the Indian government. Symbolic intervention can be counter productive; a crisis management strategy can help upper management make more calculated decisions in how they should respond to disaster scenarios. The Bhopal incident illustrates the difficulty in consistently applying management standards to multinational operations and the blame shifting that often results from the lack of a clear management plan (Shrivastava, 1987).
P a g e | 26 immune to crisis. In response to that reality, crisis management policies, strategies and practices have been developed and adapted across multiple disciplines.
P a g e | 27 A brief description of the five facets of crisis leadership includes: 1) Sense making may be considered as the classical situation assessment step in decision making. 2) Decision making is both the act of coming to a decision as the implementation of 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 the accountability 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.
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 or misadventure. Often, a situation is created which cannot be blamed on the company - 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 the US over-thecounter analgesic market - representing something like 15 per cent of the company's profits. Unfortunately, at that point one individual succeeded in lacing the drug with cyanide. Seven people died as a result, and a widespread panic ensued about how widespread the contamination might be. By the end of the episode, everyone knew that Tylenol was associated with the scare. The company's market value fell by $1bn as a result. When the same situation happened in 1986, the company had learned its lessons well. 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 the company decided the product
would not be re-established on the shelves until something had been done to provide better product protection.
P a g e | 28 As a result, Johnson & Johnson developed the tamperproof packaging that would make 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 price when the crisis first hit, the lost production and destroyed goods as a result of the recall were considerable. However, the company won praise for its quick and appropriate action. Having sidestepped the position others have found themselves in - of having been slow to act in the face of consumer concern - they achieved the status of consumer champion. Within five months of the disaster, the company had recovered 70% of its market share for the drug - and the fact this went on to improve over time showed that the 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 a crisis, 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 success included the following:
They acted quickly, with complete openness about what had happened, and immediately sought to remove any source of danger based on the worst case scenario not waiting for evidence to see whether the contamination might be more widespread Having acted quickly, they then sought to ensure that measures were taken which would prevent as far as possible a recurrence of the problem They showed themselves to be prepared to bear the short term cost in the name of consumer safety. That more than anything else established a basis for trust with their customers
Conclusion
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Crisis management in all its facets is a challenging task. Smooth operation in this inherently high demanding uncertain context requires multidisciplinary teamwork between groups of people from a variety of backgrounds. These groups rely on solid procedures and tactics, congruent communication tools and interoperable command- and control systems, throughout the chain of organizations. It is nessecery for all the organizations. Crisis management is the process by which the organization manages a wider impact, such as media relations, and enables 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 and outside the Institution as all stakeholders might perceive it. Techniques to direct action(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.
Bibliography
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