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

Toyota’s 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