CRISIS MANAGEMENT Key issues Crisis Management Crisis management

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