Crisis Management

Definition: Crisis management is a strategical approach of anticipating the catastrophes, preparing the organization and its people to face such threats and minimizing its repercussions over the business operations. Its successful execution depends on smart planning and effective communication.

A company with a robust crisis management system can prosper even when the others are going through a bad phase. Also, such organizations become competent, highly-trusted and profitable in the long run.

Content: Entrepreneurial Management

  • Types of Crisis
  • Stages
  • Steps
  • Cycle
  • Plan
  • Importance
  • Example
  • Strategy
  • How to Manage Crisis Effectively?

Different Types of Crisis

Before solving the issue, we must be aware of its form. Therefore, we are listing out the different kinds of crisis an organization may encounter while running the business:

Financial Crisis: The organization sometimes gets overburdened by debts, shrinking its liquidity. This leads to bankruptcy, credit overdue, non-repayment of loans, etc.

Natural Crisis: Some uncontrollable hazards caused by the environment or nature, includes floods, earthquakes, tsunami, cyclones, etc. For the companies, it results in property damage, loss of resources, disruptive business operations and disturbed supply chain.

Public Health Crisis: One of the preeminent trouble arises for the companies when a global pandemic or any other communicable disease widespread, thus slowing down the business operations causing enormous loss to the companies.

Technological Crisis: The companies at times face technical issues like a security threat, software malfunctioning, backup failure and machinery breakdown.

Confrontation Crisis: Confrontation crisis arises when the workers enter into conflicts, coordination impairment, internal disputes and communication barriers. It culminates strikes, disobedience, non-compliance and other forms of misconduct within the organization.

Workplace Violence: This is a serious problem of employee misbehaviour or disorder leading to clashes and fights with seniors, the management or among themselves.

Crisis of Organizational Misdeeds: This a fault from the management’s end where certain strategies or decisions are undertaken even after knowing its hazardous repercussions on the organization and its people.

Crisis of Deception: The management circumvents the customers with false information and commitments which would never be met. Also, the managers tend to fiddle with the facts and data.

Crisis of Malevolence: When some employees engage in malice practice, say spreading rumours about the company or carrying out immoral and illegal activities like embezzlement; the organization faces serious circumstances.

Stages in Crisis Management

To guide the corporates on effectively diminishing the impact of critical situations on the business, the following crisis management process was developed:

Pre-Crisis Phase

Planning before the catastrophe can save the company from huge loss. Thus, at this stage, the management anticipates the danger and becomes cautious. It also devises relevant strategies to be implemented for dealing with the adverse situation. A crisis manager is authorized to take the charge.

Crisis Response

At this point, the crisis bursts out, and the management needs to face it wisely. The crisis manager immediately constitutes a team to command the crisis response. Effective crisis communication is the only means through which the company can resolve the complications.

Thus, the crisis manager and the team interacts with the internal and external parties; i.e., the employees, shareholders, suppliers, public, customers and media to update them with the issue.

Post-Crisis Phase

The repercussion of any crisis are long-lasting and therefore, cannot be neglected. The crisis management team develops a plan to overcome these adverse circumstances and keep the business operations on track.

The crisis manager goes through this plan and suggests changes if required. The team makes the amendments and presents the final blueprint.

Steps to Crisis Management

When it comes to dealing with a catastrophe, the management usually wonders where it should start from?

The below-mentioned process directs the companies towards efficient crisis management:

  1. Design a Plan: The management analyzes the different kinds of adverse situations which may arise. Thus, various strategies are framed to tackle with each form of crisis.
  2. Select a Spokesperson: Next is assigning and training a spokesperson who represents the organization in front of the outer world at the time of such crisis.
  3. Maintain Transparency and Honesty: The crucial point is to endeavour a strong brand image and trust of the public by providing the correct and accurate information to everyone.
  4. Frequently Update Employees: Employees are the public representatives for the company and they should be well-informed of the facts. This not only makes them alert but also avoid gossips or rumours to spread within and outside the organization.
  5. Inform Stakeholders, Suppliers and Customers: It is essential to brief all the parties associated with the company about the catastrophe to maintain their trust and obtain support from them.
  6. Be First Source of Information: The company should immediately disclose the crisis news to the public. This would protect the corporate image from negative publicity or scepticism.
  7. Establish a Social Media Team: Social media can make anything viral today. Therefore, a proficient team is formed to manage, post, respond and keep a track of all the activities going on the social platforms in this context.
  8. Keep Succession Plan Ready: There should be a substitute or backup to everything; the plan, the spokesperson and other responsible personnel. It is a significant step to keep the things on track even if the plan breaks down or someone leaves in between the crisis.

Crisis Management Cycle

As we know that problems cannot be eradicated, however, its treatment goes on in cyclical order until its side effects on the business are minimized.

This crisis management cycle includes the following steps:

Identification: It all begins with recognizing the nature of catastrophe the company may face shortly. Every type of crisis needs to be dealt with using a different strategy.

Preparation: Next, the management has to systematically assess the loopholes in the action and communication to be carried out at the time of crisis. Also, proper planning in regards to assigning the responsibilities to the selective employees to hold command at the time of such a crisis.

Prevention: To anticipate and handle the issues before serious damage is better than battling with it later on. Therefore, the management takes the necessary steps to refrain from such adverse situations to shield the business.

Response: The organization needs to intelligently counter a crisis being fully backed with efficient communication channels, response modules, functional measures and the master plan.

Recovery: The repercussion of the crisis cannot be overlooked. To help the company withstand the crisis consequences and sustain the business functioning, the crisis management team comes on the front foot with a recovery plan.

Crisis Management Plan

A crisis management plan chalks down the blueprint of how the company would respond to an adverse situation. It is essential to keep the business going, safeguard the corporate image and maintain the profitability of the organization.

Being the first step in the crisis management process, it is crucial for organizations to accurately plan their actions.

The following steps would help the management to proceed with an effective crisis management plan:

  1. Identify various types of crisis that may occur.
  2. Ascertain the effect of each of these crises over the organization and its functioning
  3. Determine the plan of action essential for dealing with each of such crisis.
  4. Make sure who all will we responsible for handling the different crises.
  5. Decide the necessary steps to be taken by the teams so formed, for dealing with the crisis.
  6. Provide sufficient training and information to the responsible personnel.
  7. Review and amend the action plan frequently to avoid its obsolesce.

Why is Crisis Management Important?

Crisis management acts as an umbrella that shields the business from the impact of a catastrophe.

Let’s delve into its significance for a business entity:

  • Helps Frame Strategies: The management can develop a suitable plan to tackle the unfavourable event before its occurrence.
  • Prepares for Adverse Situations: The company can confront any kind of unfavourable situation if it plans systematic crisis management.
  • Determines Causes Behind Crisis: Crisis management facilitates the identification of problem source, thus making is fixation easier for the team.
  • Provides Mental Freedom to Employer: The directors or the business owners feel secured and stress-free when they are equipped with a robust crisis management system.
  • Builds a Company’s Reputation: The corporate image can be devastated if the crisis is not managed carefully. Also, if issues are dealt smartly, the organization emerges as a high reputation brand.

Crisis Management Example

The globally cherished confectionery brand ‘Cadbury’ owned by ‘Modelez International‘, promoted its Freddo Treasures chocolates through a real treasure hunting adventure campaign. The advertisement provoked people to explore the U.K heritage with their metal detectors to dig out Roman riches.

It indeed turned out to be a disaster, greatly criticized by the public on social media platforms. The archaeologist declared it to be a threat for the archaeological sites and an illegal act of looting.

Crisis Management Strategy

The company immediately pulled off the concerned website used for campaigning. The Mondelez International spokesperson apologized for this heinous marketing campaign and clarified the intentions of the brand. Moreover, the whole advertisement was redirected towards increasing the footfall in the museums where the U.k’s heritage and treasures are preserved.

We can say that Mondelez International handled the situation efficiently. Since it promptly noticed the public reaction and took the necessary crisis response steps to save the brand image and rectify its mistake.

How to Manage Crisis Effectively?

Of course, the organizations cannot completely abolish crisis, but they can take measures to reduce their influence on their business operations and brand image.

The key points to remember when trapped in an adverse situation are:

  • Select a spokesperson who has superior communication skills, persuasive ability and instantaneous responding capability.
  • Never suppress the facts, instead be the first source of authentic information to gain public confidence.
  • Don’t forego any false news or conversation, revert and correct all such negative spread of words.
  • You cannot dupe the media, so don’t try even. Rather cooperate and systematically uncover the situation using a proper channel of communication.
  • In some sensitive cases, sympathize with the sufferers and make efforts to abridge their pain in any possible way.
  • Taking prompt steps and making instant statements (but wisely) can curtail the negative consequences of the crisis over the organization.

The company that wins over its problems can emerge as a more powerful organization. If a business entity ignores or steps back from such hazardous circumstances, it would drown, sooner or later.

Crisis Management
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