What is Crisis?
A crisis may be described as shortly as ‘a time of intense difficulty or danger’. Crisis can be critical and may even completely knock down the business. From a business perspective, a crisis usually impacts sales and business reputation. A very recent example is the battery issue of Samsung Galaxy Note 7, wherein the batteries started exploding while in the use.
Three elements generally represent primary attributed to a crisis: (i) threat to the organization, (ii) the element of surprise, and (iii) a short decision time.
Crisis management is the process through which an organization tackles an unfavorable event that negatively affects the organization, its stakeholders, or the general public. It consists of following steps:
Establishing metrics to predict the particular situations may cause a crisis and mechanism of automatically triggering the necessary responses.
Communication is another important aspect and quick communication is usually considered a superior way of tackling the crisis. The integrity and character of organizations are dependent on the perception of their responses during the crisis. Well thought out and uniform communication throughout the hierarchy are a support to the successful crisis management process.
Types of Crisis
Otto Lerbinger, an expert in corporate public affairs categorized eight types of crises:
Environmental disturbances and unfavorable natural phenomenon can be defined as the natural crisis. Natural crisis events are beyond human control. Earthquakes, Tornadoes, Tsunamis, Hurricanes, Drought, Landslides, Flood, all are suitable examples of a natural disaster. These crises usually affect masses, property, and infrastructure and an organization can only be prepared with preventive measures in place against them.
The technological crisis is the consequence of failure/malfunctioning in technology. Physical breakdown of the hardware, glitches in software are basically technological crises. As already quoted, Samsung Galaxy Note 7 is a very recent example of technological crisis.
Confrontation crisis is a result of lack of consensus amongst the stakeholders while they end up quarreling with each other. Labor strikes, shareholder disagreement, boycott are non-productive events that follow such discords.
Confrontation crisis is usually caused by internal conflicts and unproductive communication. The Great Railroad Strike of 1877, is a classic example of Confrontation crisis, which began in Martinsburg, West Virginia, the United States after the Baltimore & Ohio Railroad (B&O) reduced salaries for the third time within a year.
Crisis of Malevolence
Organizations face the crisis of malevolence when some notorious employees take the help of criminal activities and extreme steps to fulfill their demands.
Spreading false rumors, conspiring against senior management cause crisis of malevolence.
The Satyam Scam of India is one example of such crisis. On 7 January 2009, the chairman of Satyam, Ramalinga Raju, resigned, confessing that he had manipulated the accounts by US$1.47-Billion. The global corporate community was said to be shocked and scandalized.
Crisis of Organizational Misdeeds
Crises of organizational misdeeds are caused when management consciously implements certain decisions with harmful consequences for stakeholders of the organization. Usually, short-term gains are the motivation behind such decisions.
The crisis of organizational misdeeds can be further classified into following three:
Crisis of Skewed Management Values
The crisis of Skewed Management Values arises when management favor short-term economic gain and completely neglect broader social values.
Crisis of Deception
Organizations face the crisis of deception when management purposely conceals or manipulates important data and information.
Crisis of Management Misconduct
Organizations face the crisis of management misconduct when management indulges in deliberate acts of illegality like accepting bribes, passing on confidential information and so on.
Crisis due to Workplace Violence
This crisis arises when violent acts such as murdering or beating employees are witnessed in the office premises itself. For instance, Maruti (India) employees burned down a senior HR official during their strike at the factory.
Crisis Due to Rumors
Spreading unsubstantiated rumors about the organization and brand lead to reputation crisis, which may take years to resolve. There are many such examples in the corporate world.
This is a practical situation which many companies face and as a result of poor business/ product demand factors, the organizations are unable to pay its creditors. Losses and depleting funds lead to this crisis.
Example of Successful Crisis Management
In 1993, many people claimed of finding syringes in cans of diet Pepsi. Pepsi investigated the situation, leading to an arrest, which Pepsi communicated publicly. This was followed by their first video news release, clearly showcasing the production process to demonstrate that such incident cannot happen within their factory premises. A second news release showed the guilty arrested. A third video displayed surveillance footage from a convenience store where a woman was caught inserting a syringe into a can. The company also publicly worked with the FDA during this crisis, to come out clean. Even after the resolution of the crisis, the corporation thanked the public for standing by the corporation.
Unsuccessful Story of Crisis Management
Bhopal Gas Tragedy
The Bhopal gas tragedy in which poor communication before, during, and after the crisis cost thousands of lives, illustrates the importance of incorporating cross-cultural communication in crisis management plans. Local workers and residents of Bhopal could not understand warnings of potential threats from the Union Carbide plant installed by an American organization, Union Carbide. Operating manuals were also printed only in English. As claimed by Union Carbide, a day after the crisis Union Carbide’s upper management arrived in India but they were house arrested by the Indian government and were unable to contribute to the relief efforts. More than 2,250 people were killed in the crisis.