Chapter

Five

Crisis Management @

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After reading this unit, students will be able to:
• Understand the concept of crisis and crisis management.

• Recognize the classification of crisis.

• Know the methods of overcoming crises.

• Identify the risk management process.

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5.1 Introduction
Crisis management has become particularly important for those
destinations that heavily depends on tourism as a source of
income since they are the once who suffer most when negative
events occur.

Hospitality crises management are very critical because it

represent the process of preparing for responding to an
unpredictable negative event to prevent it from escalating into
an even bigger problem.

The primary aims of crisis described in the following points:

1- Ability to assess the situation from inside and outside.
2- Techniques to direct action(s) to contain the likely or
perceived damage spread.
3- Compliance with regulatory and ethical requirements.
4- Much better management of serious incidents.
5- Improved staff awareness of their roles.
6- Increased ability and confidence for the staff.

Executives, managers, and consultants should have specific

guidelines for developing crisis management programs to help
prevent future crises. A framework should be provided to
improve the organizations' crisis preparedness. First, we
consider how to determine those crises for which a company
should prepare. Next, the phases of a crisis are described
followed by a description of the organizational systems that
affect and are affected by it.

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5.2 Concept of Crisis and Crisis Management
The word crisis comes from the Greek ‘krisis’, which means
differentiation or decision. There are several concepts of crisis,
as follows:
Faulkner and Russell (2005) illustrated that crisis is any
unexpected event that affects traveler confidence in a
destination and interferers with the ability to continue operating
normally.

James and Gilliland (2001) reported that, crisis is a perception

or experience of an event or situation as an intolerable difficulty
that exceeds the person’s current resources and coping
mechanisms.

El-Hamalawy (1995) defined crisis as a disturbance which

affects the whole system of the organization and threatens its
main assumptions.

Therefore, several studied have produced strong argument in an

effort to define the ideal crisis management approach:
William and Olaniran (1998) claimed that, crisis management is
the use of public relations to minimize harm to the organization
in emergency situations that could cause the organization
irreparable damage.

Kauffman (1999) described that, crisis management is more than

an action taken within an organization, but also communication
between the organization and its publics during and after the
negative occurrence.

Hellsloot (2003), defined crisis management as the

identification of threats to an organization and its stakeholders,
and the methods used by the organization to deal with these
threats.

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 In addition to the concept of the crisis and crisis
management, there are some related concepts to this issue,
as follows:

Incident:
It is something happened and has no effect now, and it is a
disorder in a supplementary system in a higher system, while
the crisis is a disorder in the whole system.

Accident:
It is a sudden unexpected thing happened quickly and has no
effect after completed and it doesn't have the effect of continuity
after its violent sudden happening, while the crisis usually
extends to a period of time after its beginning and dealing with
it and it may happen due to an accident.

Conflict:
It expresses two contradictory wills and benefits and its
dimensions, parties and directions are known, while the
dimensions and information of the crisis is unknown.
Problem:
It is a main reason for the unwanted cases, it needs a lot of effort
and organized work to deal with, the problem may cause a crisis
but it is not the crisis itself, the crisis needs a speed to deal with
it while the problem need effort to solve it.

Shock:
It is an action that results from sudden unexpected feelings, it is
considered as one of the crisis results when the crisis explodes
suddenly and quickly.

Disaster:
A sudden action that threatened the national benefit of the
country or to put the natural balance for things out of order and
all the departments of the country take part in it.

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5.3 Classification of Crises
The classification of crises included four main stages as follows:
5.3.1 Classifying Crises according to its Life Cycle
This classification has great importance for the decision makers
in multinational operations; it includes five sub-stages during
their lifetime as following:
The Birth of the Crisis:
The crisis starts to appear for the first time in the form of
ambiguous feeling that infers undefined danger, due to the
increase for the unknown and the absence of much information
about the reasons of the crisis.

The Crisis in the Growth and Prevail Stage:

The feeling of the existence of the crisis increases and the
decision taker cannot deny its existence or ignore it and he has
to interfere immediately to decrease its negative effects.

The Crisis in the Mature Stage:

The crisis reaches its peak and the control over it becomes
impossible, this usually happens when this administrative
decision taker is not knowledgeable, arrogant and self-centered
person.

The Crisis in the Drawback Stage:

The crisis loses one of its important parts of the moving strength
due to rational treatment, taking note that some crises renew
their strength when the decision taken is not accurate.

The Crisis in the Vanishing Stage:

The crisis begins to lose its strength completely till it vanishes
completely and the attention to it ends and it becomes a historic
ended action.

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5.3.2 Classifying Crises according to its Frequency
Periodical Crises:
These crises happen frequently, repeatedly & periodically,
however this kind of crises are unexpected and unpredictable
such as the crisis of unemployment.
Non-periodical Crises:
These are haphazard crises and do not have logical reasons, so it
is not easy to expect them and they happen with out
introduction.

5.3.3 Classifying Crises according to its Breadth

Mass Crises:
This kind of crises strikes the whole country and the whole
population feels it such as epidemics & infectious diseases, over
population, social and political instability.

Partial Crises:
They happen in certain sectors of the country, as in tourism for
example, shortage of manpower, if they weren’t treated
immediately they turn to mass crisis.

5.3.4 Classifying Crises according to its Nature

Crises can be classified according to their nature to:
Natural Crises:
A natural crisis is the consequence of a natural hazard such as
volcanic eruption, earthquake & landslide. It leads to financial,
structural, and human losses. The resulting loss depends on the
capacity of the population to bear the crisis.

Man-made Crises:
A man-made crisis is a threat that have an element of human
intent, negligence and error such as sociological hazards
(terrorism, arson, civil disorder & war), technological hazards
(industrial hazards, strctural collapse, power outage, fire &
radiation contamination).

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5.4 Methods of Overcoming Crises
The stages of crises are divided into three main parts;
First : Before the Crisis: - Preparing for the Worst,
The best way to minimize the impact of a crisis in this stage is
to put a communication strategy in place, taking into account
preparing a crisis management plan and keeping in mind the
worst-case scenario.

Second : During the Crisis - Minimizing Damages,

The first 24 hours of a crisis are crucial. An unprofessional
response could wreak further havoc on the destination, while
responsible management of the crisis can help the property to
recuperate faster.

Third : After the Crisis - Recovering Confidence,

The damages caused by a crisis can stay in the minds for
potential tourists for a long time. Recovery demands a
redoubling of efforts and planning for the image building
communications taken into consideration being pro-active in
communications, always looking for positive news and
improving the quality of services and facilities through feedback
of survey results on tourist perceptions.

To encountering crises, the following steps should be taken into

account:
1- Facilitating the administrative procedures.
2- Managing crisis in a scientific way, that includes planning,
organizing, direction and observation.
3- Showing the facts to the public opinion quickly with a great
deal of caution and accuracy during declaring statements for
mass media.

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Lufthansa (1) had specific crisis management team to face various
stages of the crises. Glaesser (2007 c) stated that the emergency
response and action plan at Lufthansa plays an important role in
reducing negative effects of crises.

Head of crisis management team

Crisis management team

True and complete information for external enquiries

Telephone center
Handling of communication

Telephone service for families, friends of the victims

Caring for air passengers, relatives, persons at the

sight, persons affected
Passenger team
Listen

Inform & Help

Support to the station concerned

Take over of routine activities
Relief team
Maintenance of station service

Management of tasks assigned by station head

Handling of administrative tasks

Logistic team
Air tickets for relatives

Hotel reservations

Providing financial support, Answering problems

Figure 5.2 Organization of Crisis Management at Lufthansa

Source : Glaesser, 2007 c.

There are many questions that arise when identifying the

policy of overcoming crises:

1- What is the role of authorized governmental authorities in

time of crises in the hospitality field?
2- What is the role of society in preventing the negative effects
of crises?
3- Does the hospitality industry need more laws and
legislations to overcome different crisis?

1- Directory of World Airlines (2007), defined Deutsche Lufthansa AG, the flag carrier of Germany as one of
the largest airlines in Europe in terms of overall passengers carried.

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 In addition to the above negative aspects of crises, there
are positive effects that should not neglect such as:

1- Developing the cognitive skills of the hotel staff.

2- Developing a crisis management system at hotel operations.
3- Enlightening the public about the importance of tourism as a
main source of national income.
4- Identifying the results learned from crises to avoid mistakes
that cannot be repeated in the future.
5- Changing leaderships who cannot deal with crises well.
6- Drawing up a strategy for media.

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5.5 Executives Responsibilities in Crisis Time
Crisis management involves five main activity clusters:
1- Crisis managers work to prevent crisis situations from
arising and to minimize crisis impacts.
2- Before crisis situations arise, crisis managers plan responses
and recovery activities and rehearse organizational members
in doing those activities so that organizations are prepared in
some way to deal with future crisis situations.
3- When a crisis situation arises, crisis managers deal with the
crisis onset in the available time.
4- When threats of crisis begin to affect the situation, crisis
managers deal with any crisis impact.
5- After a crisis, crisis managers can be involved in managing
recovery and restoration programs.

A simple mean of exploring perceptions about resources,

people, response, recovery and communication of crisis is to use
a geo-metric shape as shown in figure 2.3:

Public Event
perception
Response
Media Physical
Impact

Public Mental
perception Recovery Impact

Stakeholders Continuity

Figure 5.3 The Crisis Management Sphere

Source : Heath, 1998.

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Crisis management involves two forms of decision-
making:
• Pre-Crisis Decision Making:
Where time is available and information is concrete and
complete, decision-making needs to be made optimal through
associative and combinative decision assessment. This form of
decision-making takes eight steps:
1- Identify the problem or need for a decision.
2- Identify the criteria or facts of the decision.
3- Determine the means of assessing the criteria or facts.
4- Determine and define alternatives.
5- Analyze the alternative or choices.
6- Select an alternative or choice.
7- Implement the alternative or choice.
8- Evaluate decision process and outcome impact of decision.

• Decision Making in Crisis Condition:

Managers are expected to make decisions based on
paradigms that depart from traditional rationality and
information processing models. This is particularly so under
crisis conditions, where there is little time and information
available for choice consideration.

Gonzalez et al. (1995) created a four-phase crisis management

model process; the figure 2.4 shows that:
1. Issues
Management

4. Post Crisis 2. Planning

Prevention

3. Crisis

Figure 5.4 Four-phase Crisis Management Model

Source : Gonzalez et al., 1995.

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5.6 Risk Management Process
The risk management covers all the processes involved in
identifying, assessing, judging risks, assigning ownership,
taking actions to mitigate them and reviewing progress.

5.6.1 Risk Identification

Dorfman (2007) stated that the risk identification involves
generating lists of possible risks and sources of risk. This
process can include some sorting of risk sources into groups of
similar impacts. Sufficient information can be gathered by
combining information from different sources.

According to the Anonymous, Standard ISO 31000 (2009), the

process of risk management consists of several steps, which are
as follows:

1- Identification of risk in a selected domain of interest.

2- Planning the remainder of the process.
3- Mapping out the following:
o the social scope of risk management.
o the identity and objectives of stakeholders.
o the basis upon which risks will be evaluated.
4- Defining a framework and an agenda for identification risks.
5- Developing an analysis of all risks involved in the process.
6- Mitigation of risks using available technological, human and
organizational resources.

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The figure 5.5 shows the main steps through the risk
management cycle:
Identify the Risks

Evaluate the Risks Monitor and Report

Identify Responses Plan and Resource

Select

Figure 5.5 Risk Management Cycle

Source : Dorfman, 2007.

5.6.2 Risk Overcoming

Hackman (2001) established four separate functions for
overcoming risks; First, execute the work. Second, monitor and
manage the work process. Third, design the performing unit.
Fourth, set determine the collective goals and mission of the
organization. He identified four types of performing units based
on the previous separate functions, the figure 2.6 shows that:

Setting
overall
direction
Area of
management
Designing responsibility
performing
unit

Monitoring
work
process
Area of
performing unit
Executing responsibility
the task

Manager- Self- Self- Self-

led unit managing designing governing
unit unit unit
Figure 5.6 Hackman’s Authority Matrix
Source : Pollock and Perloff, 2001.

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5.7 Case Studies of Applying T.Q.M during Crisis Time
There is a great deal of profit to be made by quality
improvement in products and services. The heart of TQM is the
conviction that it is possible to achieve defect-free work most of
time. This assertion is phrased in various ways as right first
time, working smarter or zero defect said Bank (2009 a).
Quality improvement is all about prevention as Crosby (1998)
said, "The purpose of quality management is to set up a system
and a management discipline that prevents defects from
happening in the company’s performance cycle". The following
figures indicated this approach:

QUALITY
P IMPROVEMENT
R
O
F
I
T SALES
P

B A OPERATING COSTS

Figure 5.7 Quality Pays for Itself in Cost Reduction

Source : Crosby, 1998.

S
A
L
E
S

CUSTOMER
SATISFACTION

QUALITY IMPROVEMENT
Figure 5.8 Quality Pays for Itself in Sales Growth
Source : Crosby, 1998.

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5.7.1 The Multinational Corporations
Bank (1999 b), referred to the following case studies in
multinational corporations that have several benefits when
applying TQM during crisis time in their establishments:

5.7.1.1 British Airways

British Airways is the largest airline and flag carrier of the
United Kingdom and one of the largest in Europe. It has
progressed in a less than a decade from a shoddy airline known
for its indifference to passengers to a world beating and
financially sound. A total quality approach was the solution.
The problem was its poor reputation for customer service during
the period from October 1990 to October 1995; What did
British Airways do?
The organization set out to become a fitter one by focusing on
its customers. The Deputy Chairman and Chief Executive made
it his mission to support the courses. He personally introduced
the courses. Theses sessions covered the range of people skills
from assertiveness to body language from copying with stress to
giving and receiving strokes. The objectives of the course were:
1- To introduce the techniques and application of systematic
problem solving.
2- To give participants experience of group working and group
leadership.
3- To discuss and solve practical problems concerned with
business success.
British Airways went through each of these phases, the pattern-
breaking phase with the preparation for privatization with the
restructuring of routes from Europe, the United States and the
Pacific. It was brutal, even the old coat of arms and logo had to
go as planes were repainted to reflect the new corporate identity.

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The new corporate identity applied to the fleet, the terminals,
retail outlets and uniforms for ground & cabin crew staff. Out
went old central budgeting systems, unnecessary levels of
management, old performance appraisal systems, poor
information retrieval and old reward structure.

The experimenting and visionary stages were very difficult due

to a rather hostile national environment for change in which
British Airways operates. Sir Colin Marshall made the point that
British Airways culture changes were made against rather
unfavorable problems in British society. These were the
following:
1- An attitude fairly apathetic to business success.
2- The absence of ways of developing good managers in the
right type and numbers.
3- An underachieving educational system.
4- Ineffective investment in new technology.
5- The only effective motivation for good performance being
the threat of loss rather than the hope of gain.

Results:
The results are impressive from a financial viewpoint; a 13%
profit increase in 1989, a 12% increase in 1990, until the Gulf
War airline crisis British Airways was on target to achieve
another 12% increase in 1991. Due to its effective total quality
programs, It was in excellent financial shape and today the
annual profit after tax was about £540 million, and it was fourth
largest airline in the world carrying over 25 million passengers
with a very large international network of routes with over 160
destinations in 75 countries.

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2.7.1.2 Xerox
Xerox Corporation is an American world’s largest document
management company. Xerox develops and markets innovative
technologies, products and solutions that customers can depend
upon to improve business results. Xerox provides the industry’s
broadest portfolio of document systems and services. Ranging
from high-speed color presses to digital imaging and archiving
services.

The problem started when Japanese photocopy machine

companies, led by Canon and Ricoh, began to match Xerox on
copy quality, reliability and service and to beat them on price.
What did Xerox do?

Xerox responded to the serious threat to its business by taking

the following steps:
1- Trimming its costs by about $600 million a year, Xerox
employees were reduced through redundancy from 120,000
in 1990 to 104,000 three years later.
2- Restructuring, led from corporate headquarters in Stamford,
U.S.A.
3- Competitive benchmarking its new rivals in terms of
products, service and practices.
4- Launching a total quality program based on massive training
in the teaching of Deming and Juran.

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Xerox views that there are three basic objectives for
implementing quality:

1- To install quality as the basic principle and to ensure that

quality improvement becomes the job of every Xerox
person.

2- To ensure that Xerox people provide customers with

innovative products and services that fully satisfy their
requirements.

3- To establish in the Xerox culture new management and work

processes. We must unleash the creative talents and energies
of all Xerox people.

Results:
The Xerox Corporation assisted the quality implementation
team in every way possible from providing its own training
material packaged under the "Leadership Through Quality"
label, which would cascade from director level to the office and
factory floor of Xerox worldwide, through the high level of
senior management commitment to the cultural change the TQM
process would set in motion.
In its planning sessions at top level, Xerox identifies the cultural
changes demanded by the new quality policy. The specially
designed "Leadership Through Quality" training material
identified "five change levels", interacting with each other,
which are essential to achieving the desired change, These were
as follows:

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 1- Standards and measurements will provide all Xerox people
with new ways of assessing and performing their work,
solving problems and improving quality systems, the
following figure 2.9 shows the six-step problem solving
process and a nine-step quality improvement process:

1. Identify output
Planning
for
quality 2. Identify customer

3. Identify customer
requirements

4. Translate requirements
into supplier specification

Clear problem
definition
Monitoring Organizing
for quality for quality

Identify and select

Evidence problem: explore, Correct &
clarify and describe
5. Identify steps in
of problem sufficient work process
9. Recycle resolution Evaluate
Evaluate Analyze data
solution:
solution: problem:
problem: Gather,
measure
measure results Gather,
displaydisplay
and
results Problem &interpretation
interpretation 6. Select
solving measurements
process Generate
8. Evaluate results Implement
potential
solution
solutions
7. Determine process
Commitments Select and plan Alternative capability
solution: evaluate
gained and options
all options
responsibilities
assigned

Best option(s)
and
action plan

Work process

Figure 5.9 Xerox Corporation's Problem-solving Process

Source : Bank, 1999 c.

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2- Recognition and reward will ensure that Xerox people are
encouraged and motivated to practice the behaviors of
leadership through quality. Both individuals and groups are
recognized for their quality improvement.
3- Communications will ensure that all Xerox people are kept
informed of the objectives and priorities of the corporation.
It includes both formal media such as magazines and films
as well as informal media such as staff meetings.
4- Training will provide every Xerox person with an
understanding of leadership through quality and
knowledgeable of the tools and techniques for quality
improvement, these courses involve the following subsidiary
steps:
• The training is delivered in family groups consisting of
a manager and his or her direct reports.
• The manager assisted by a professional trainer
conducts the weeklong problem-solving and quality
improvement training.
• During the weekly course, the group selects a problem
or project for application of the quality processes and
tools.
• After training, the manager guides the family group in
the use of quality process.
• Once the project is under way, members of the family
group work with a professional trainer to deliver
weeklong training to their own subordinates.
5- Management behavior and actions will ensure that the
management team provides the necessary leadership,
managers must practice quality principals regularly.

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5.6.1.4 Hyatt Regency
Global Hyatt Corporation, one of the world’s premier hotel
companies, It is distributed all over 44 countries worldwide with
the number of 735 hotels and resorts (over 136,000 rooms). This
chain is operating under the Grand Hyatt, Park Hyatt, Hyatt
Regency and the Hyatt Brands. In April 2007, Hyatt launched
its newest global brand, Andaz. All Hyatt Hotels feature a
committed focus on a stimulating interiors, innovative exterior
design and modern technology that integrates several unique
and new applications of exclusive branding into its chain of
hotels.
The crisis occurred in July 17, 1981 when a Hyatt Regency
hotel walkway collapsed in Kansas City, Missouri, United
States, killing 114 people and injuring more than 200 others
during a tea dance.
The basic problem was a lack of proper communication between
the engineering firm which designed Hyatt Regency and the
contractor responsible for manufacturing the rods.
In particular, the drawings were only preliminary sketches but
were interpreted by the contractor as finalized drawings. The
designer failed to review the initial design thoroughly, and
accepted the contractors' proposed plan without performing
basic calculations that would have revealed its serious intrinsic
flaws - in particular, the doubling of the load on the fourth-floor
beams. This tragedy remains a classical model for the study of
engineering ethics and errors.
The investigators eventually determined that the design of Hyatt
Regency Hotel only supported 60 percent of the minimum load
required by Kansas City building codes.
The original design refereed to each walkway was to be spanned
by box beams to provide a connection for the support rods.
However, to support the fourth level walkway, the support rod

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would require threads along most of its length. In addition, the
long rods would be difficult to handle during construction; the
following figure 5.10 shows this concept:

Figure 5.10 Original Design of Hyatt's Walkway

Source : Conn et al., 1997.

An alternative to the single rod supporting both the fourth

and second floors were adopted which used two rods in series
instead of a single rod. A sketch of the revised design is shown
in figure 5.11:

Figure 5.11 Revised Design of Hyatt's Walkway

Source : Conn et al., 1997.

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What did Hyatt Corporation do?
Hyatt Corporation made many efforts to overcome this crisis,
including the following:
1- $140 million was awarded to victims and their families in
both judgments and settlement in subsequent civil lawsuits.
2- A large amount of this money came from Crown Center
Corporation.
3- The reconstruction after the tragedy included:
A- Fewer walkways.
B- More strongly reinforced.

1- The hotel later reopened, and has been renamed Hyatt

Regency Crown Center. It has since been renovated and now
serves as one of the city’s most luxurious hotels.

Results:
The results are impressive from a hospitality viewpoint;
Hyatt Corporation was able to overcome the critical crisis this
was after several marketing campaigns inside and outside the
United States, which led to the occupancy rates to its normal
rates and the hotel regained much of its good reputation and
regular guests.

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