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Crisis Management

Crisis


A major unpredictable event that has potentially negative
result and must be addressed immediately

Three elements are common to most definitions of crisis
– a threat to the organization
– the element of surprise
– a short decision time
Types of crisis
– Natural disasters / Accidents
– Human malice/ criminal behavior
– Technical breakdowns
– Economic and market forces
– Workplace violence
– Rumors
Crisis Management

It is a systematic anticipation of and preparation for internal and


external problems that could seriously threaten an organizations
reputation, profitability and survival.

It prevents a crisis from becoming a catastrophe.


Steps in crisis management

1. Conduct a crisis audit


– Review the usual sources of risk that might affect
your organization
– Prioritize on the basis of their potential monetary
impact and probability of occurrence
2. Formulate contingency plans
– Create a crisis management team
– Assess the scope of the problem
– Develop the plan and test it

3. Perfect the plan through practice


The 1980’s Tylenol poisoning murders spurred
panic, wide-spread fear, and perhaps the best-
ever corporate response to a major public
relations crisis. James E. Burke, then CEO of
Tylenol-maker Johnson & Johnson, will be best
known for his strong, decisive leadership and
what has widely been recognized as a model
of exceptional corporate crisis management.
Fortune magazine named him one of history’s
10 greatest CEOs.
Be forthcoming and honest- In 1982, seven
people died after taking capsules of Extra-
Strength Tylenol that had been laced with
cyanide. The sabotage spurred a national
panic about the safety of over-the-counter
medications, and threatened the very survival
of Johnson & Johnson. Tylenol products
represented one-fifth of J&J’s revenue at the
time. J&J was careful to point out that, based
on the evidence, the tampering must have
occurred at the retail stores. However, they
did not attempt to shift blame. They were
extremely candid.
Act quickly and decisively - According to
Tedlow, on the afternoon of the first deaths,
the company:
ü
set up toll-free numbers manned by
company employees
ü
sent 450,000 telex messages to doctors’
offices, hospitals and trade groups
ü
stopped all Tylenol advertising
Take responsibility, even if you don’t have to - Less
than one week after the deaths, J&J spent more than
$100 million recalling 32 million bottles of Tylenol
capsules from store shelves. According to a Harvard
Business School case study of the incident, the heads of
the FDA and FBI felt that a recall would be an
overreaction. J&J’s management put customer safety
ahead of their financial concerns. The company also
established relations with the Chicago Police
Department, FDA and FBI to maintain a role in
searching for the person responsible for the deaths,
and became the first company to adopt new triple-seal
tamper-resistant packaging rules.
Treat people with respect - Within months, J&J re-
introduced Tylenol capsules to consumers. It distributed
over 40 million, $2.50 coupons (enough to purchase a
good-size bottle) to compensate customers who threw
away Tylenol during the scare. They also created a new
pricing program that saved consumers up to 25%.
Good behavior pays dividends - As the tough decisions
were being made by Mr. Burke and his executive team,
many were skeptical. They warned that the company’s
reputation would never recover. Time has proved them
wrong. Less than a year after re-launching Tylenol, J&J
regained a 30% share of the market and once again became
the top-selling pain reliever. Today, Tylenol enjoys the
highest ratings for consumer confidence, and is the most
prescribed over-the-counter pain reliever.
Ultimately, the decisions were part of a
shrewd plan to salvage the reputation and
revenue of J&J, and return Tylenol to
commanding market share. Even so, Mr. Burke
proved that putting the customer first can
reap greater rewards than a short-sighted
drive to deflect blame and protect share price.

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