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

Toyotas 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