Crisis Management (Chapter 1)

Management is never put more strongly to the test than in a crisis situation. The objectives are immediate
and so are the results. What you and those around you do or don't do will have long lasting implications. Today,
individuals responsible for the management of businesses and public agencies must deal effectively with
increasingly complex laws and issues or face the consequences.

➢ What is a crisis for my firm?

A crisis can be defined as any unplanned event, occurrence or sequence of events that has a specific
undesirable consequence.

Examples: Natural disasters, financial manipulation, societal disruption, pollution, and stringent regulations are
but a few examples of potential crisis situations. The reasons for focusing on these issues may result from a
commitment to protect the public, your employees, to comply with government regulations or to protect the firm
from possible liabilities and litigation. The consequences for not focusing on these issues can be disastrous.

Mean age Examples:

• Mad cow disease

• TWA flight 800

• Egypt Air flight 990.

• Swiss Air 100.

• President Clinton's impeachment

Long age Examples:

• The Three Mile Island nuclear disaster

• The Challenger explosion

• The explosion of Union Carbide's chemical plant in Bhopal, India

• The Exxon Valdez oil spell

Crises are extreme events that cause significant disruption and put lives and property at risk. They
require an immediate response, as well as coordinated application of resources, facilities, and efforts beyond
those regularly available to handle routine problems. They can arise from many sources. Natural disasters
such as major earthquakes, hurricanes, fires, and floods clearly can precipitate crises.

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Man-made crises can be accidental, such as oil spills or the release of toxic substances into the environment,
or they may be intentional, such as bombings by terrorists. Warfare clearly presents a continuing set of crises.
and although operational warfare concerns were largely outside the scope of this text, many of the
characteristics and computing and communications requirements of crisis management in other contexts
overlap with the needs of warfare. The military requirements for command, control, communications,
computing, and intelligence, for example, have much in common with the nonmilitary crisis management
requirements for understanding a complex situation and preparing a coordinated response.

Crisis Management or Management by Crisis: Crisis management is the conscious and deliberate action
taken by the management to anticipate, handle and response to crisis. If we do not manage the crisis, it will
manage us. This means that management by crisis is a sort of managerial reaction taken to deal with the
crises after they happen. Crisis management has several phases or components with different time horizons.
Among these are preparedness (including planning and training), crisis avoidance (averting a developing
crisis), response, and recovery.

➢ The following exhibit shows the crisis management phases:

• Compliance means that all organization members and units should comply with crisis management
regulations (both issued by the organization and government).
• Response to a crisis involves an initial reaction with available resources, a rapid assessment to determine
the scope of the problem, mobilization of additional resources (such as personnel, equipment, supplies,
communications, and information), and integrating resources to create an organization capable of
managing and sustaining the required response and recovery. During and after the response, the need to
disseminate information to the public, including the press, is an important part of the context within which
crisis managers operate.
• Requirements at each phase differ. For example, conventional (e.g., scheduled) training is needed for the
earlier phases, while at crisis time, "just-in-time" training is needed to bring people up to speed.
Recognition of pre-crisis phases illuminates opportunities for specific preparations. They include the
simulation of possible crises to identify likely needs, which can guide the pre-positioning of resources in

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 anticipation of predictable kinds of crises (e.g., earthquakes, floods, or tornadoes in areas prone to such
natural disasters) or the formation of plans to access them when needed.

➢ Crisis Characteristics

We can identify several distinctive characteristics of crises and factors relevant to managing them. The
following exhibit shows these characteristics:

1- Magnitude: Crises overwhelm available resources. In many cases, problems that are manageable at one
level become crises as the magnitude of the problem increases beyond normal or expected bounds, thus
overwhelming the resources on hand.

Examples:

• An automobile accident or a fire in a single building requires emergency services—fire engines and
ambulances are dispatched—but does not overwhelm those services and so is not a crisis. Overload
situations may lead to crises.
• Hospitals in a region may be prepared for a certain number of emergency patients within a 24-hour period
but will experience a crisis if ten times as many patients arrive.

2- Urgency: Crises have a serious, immediate impact on people and property and require an immediate
response. Lifesaving fire, rescue, and emergency medical services are clear examples. In some crises, a fast
response may reduce the need for later countermeasures. Shorter-duration events with severe time pressures
are also crisis. However, it is important to note that long-term effects may influence planning for short-term
crises; for example, Steven Smith, of the National Center for Atmospheric Research, noted research
suggesting that global warming is linked to an increase in the intensity of extreme weather-related disasters,
such as floods and hurricanes.
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3- Infrequency and unpredictability: Some high-magnitude events, such as earthquakes, are not necessarily
unexpected, but they occur infrequently, and their location and magnitude are unpredictable. Crisis
management thus requires contingency plans for identifying needed resources—including resources that other
agencies or organizations can offer—and deploying them rapidly.

4- Uncertainty and incompleteness of information and resources: (combined with a need to respond
despite these shortfalls). Even with complete information, chaotic conditions during a crisis make the prediction
of future conditions uncertain. A strategy of waiting and watching is not generally viable in a crisis, and so
decision-makers must be prepared to act despite these limitations and to change course as new information
becomes available.

5- Special need for information and access methods: Both prior to and during a crisis, there may be
extraordinary needs for more and different sorts of information (both from the crisis scene and from remote
sources of information and expertise). As well as for sharing and presentation of information to decision and
judgment makers, analysts, workers in the field, and the public. These parties' needs create demands for
information flows into, within, and out of the crisis area.

6- Multidimensionality: Some events become crises because of their multidimensional nature and side
effects. A crisis that damages the transportation system can create crises in systems that depend on
transportation, such as medical services; it may also inhibit a rapid response, thus worsening the problem. A
power failure in New York during a heat wave may cause not only health and safety risks for people caught in a
subway system, but also economic disruption due to the interruption of computer-based financial transactions
(e.g., stock trading).

7- Location and social context: Where a crisis occurs influences its nature and the ability to respond. Many
communities apply a rational cost-benefit analysis that gives planning for highly unlikely events a low priority.

Because disaster is seen as rare, emergency planning is associated with high cost and low benefit.

8- Pressure of Time: At the time of the crisis the managers are required to make decisions within few hours or
days. These decisions may take a lot of time to be made in usual circumstances. It is not easy to make such
decisions because they are usually made in unexpected and urgent cases.

The pressure of time adds to the managers' agony. It increases the impact of other pressures and financial
disruptions in all levels of the organization. The major task of the management is to limit the effects of the crisis
within a limited time. Making decisions to deal with the crisis usually makes mangers tensioned and anxious.

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➢ Psychological effects of crises may include (El Gamal, 2004:18-19):

1- Pressures of crisis may lead to generate and study new ideas that can not be thought about in the usual
circumstances.

2- Pressures may make those who are prone to tension more tensioned.

3- Crises restrict thinking and make some managers withdraw from the situation.

4- During crisis, the management may seek escape goats or another party to blame.

5- The management-during the crisis- tries to use defensive mechanisms. These mechanisms may restrict its
ability to face the facts and consequences of the crisis.

➢ Types of crises

There are many types of crises. Those can be classified as follows:

The classification of crises according to their contents (1): Crises can be classified according to their
content into 7 types of crises in 3 groups. These groups are crises of physical world (nature and technology),
crises of human environment and crises of managerial failure.

1- Crises of Nature and Technology:

This type of crises is a dominant one. We feel it in our life. Earthquakes are good examples of nature crises
and disasters. Crises of nature cause a lot of damage in properties and human lives. Search of natural
resources and increase in world populations creates new societies that are threatened by floods, hurricanes
and earthquakes.

The advancement of technology creates a lot of environmental problems. These problems should be dealt with
by decision-makers. The risks of mass destruction weapons are examples of these problems. As technology
goes sophisticated the probability of risks and crises increases.

2- Crises of Human Environment:

When people become more aware and highly educated, their lives will become more complicated. Terrorism is
one of these crises that the political and social conditions create. Some groups use terrorism to force their
governments and communities to respond to their demands. Rumors are examples of human environment
crises. They harm the reputation of the organization.

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3- Crises of Managerial Failure

Managerial failure crises are reflected in deception, dysfunctional behavior and misconduct of management.
One of the reasons of these crises is that the values and practices of the management do not come up with the
social and environmental demands. Marketing and financial pressures, sometimes, make managers commit
dysfunctional behaviors such as deceiving, misleading, and blackmailing other people or organizations. These
functional behaviors, sometimes, lead to serious crises.

Managerial failure crises include three types of crises: violating the right values and ethics, deceiving and
misconduct. The first type of these crises is usually happening when managers pay a lot of attention to results
on the account of interests of stakeholders. The second type, deceiving, refers to ignoring the reports about
mistakes and negative performance of the organization. The third type of managerial failure crises usually
happens when managers are accused of unethical or illegal crimes.

The classification of crises according to their general characteristics (2): Crises can be classified
according to the crisis characteristics and its challenges. This classification depends on four characteristics:

1- The extent of threats accompanying the crisis (high/low).

2- Available alternatives to handle the crisis (few/many).

3- Pressures of time to respond to the crisis (high pressures/low pressures).

4- The extent of controlling the development of the crisis (high/low).

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