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What Is Crisis Management?

What Is Crisis Management?

Because no business is immune to a crisis, every business must understand the basics of crisis management. In this article, learn what crisis management, the different types of crisis, and the stages of crisis management are.

 

Are you ready? Let’s begin with…

 

What is crisis management?

The process of planning for, managing, and mitigating the effects of unanticipated negative events in an organisation is known as crisis management. This approach entails predicting dangers, developing strategies to limit harm, and putting these tactics into action when a crisis happens.

 

Regardless of the size or kind of business, crises share similar characteristics: A crisis is a threat to the organisation, has some element of surprise, necessitates action to alter the course of events, and necessitates quick decision-making.

 

Emergencies can develop unexpectedly when an incident outside the organisation’s control occurs, such as an earthquake. Alternatively, a crisis can grow over time as a minor problem intensifies because the organisation fails to recognise or act on warning indicators. 

 

Without further ado, let’s move to why crisis management is important?

 

Why does crisis management matter?

Some businesses still follow the old saying, “If it ain’t broke, don’t fix it”, for various reasons. However, the best moment to devise a strategy for tomorrow is not today but yesterday. And indeed, before anything “broke.”

 

Allowing others to know you have a plan for dealing with a problem might give them confidence that you know what you’re doing and that you’re doing it in a logical, comprehensive, and coordinated manner.

 

Planning ahead of time may save your firm in the event of a catastrophe, but keep in mind that the risks are enormous. A crisis can severely impact an organisation’s image, reputation, stability, and future if it is not handled correctly. It could also expose it to legal ramifications, such as lawsuits and litigation. Insurance premiums may rise while employee morale falls; similarly, the stock price of publicly traded corporations and their revenue streams may fall.

 

Different types of crisis

Crisis managers must plan ahead of time, and identifying the major types of crises is a solid starting point for building a threat list. Businesses may categorise crises based on their area of activity or the nature of the issue.

Crisis Management in Business

Boston University scholar Otto Lerbinger classified crises into eight categories: natural disasters, technological, confrontation, malevolence, organisational misbehaviour, workplace violence, economic and personal crises in his 1997 book. Here’s a summary for each category.

 

Natural disasters: These crises are frequently caused by weather and environmental factors such as storms, droughts, floods, and wildfires. Hurricane Katrina, which hit the United States in 2005, is a notable natural disaster.

 

Technological Crisis: These crises are caused by technological concerns such as hardware outages, software malfunctions, network troubles, data loss and breaches, and computer sabotage. The shift to cloud-based storage and software as a service (SaaS) exposes businesses to technology failures at their vendors. Large outages (such as a satellite or undersea data cable failure) might affect numerous enterprises simultaneously. A technology crisis is the 2017 Experian data breach, in which hackers stole the personal information of around 148 million customers.

 

Confrontation: This crisis occurs when activists with a cause-related agenda clash with businesses or governments. Boycotts, protests, sit-ins, and other forms of civil disobedience are examples of such situations. Environmental protesters, for example, who occupy trees to resist commercial logging, are one example.

 

Malevolence: This sort of crisis begins with hostile or criminal actions directed at a corporation to destroy it. Industrial espionage, cybercrime, executive kidnapping and product tampering are examples of such actions. For example, in the Night Dragon assaults, hackers gained access to the computer networks of five major oil and gas corporations to steal valuable information.

 

Organisational Misbehaviour: These crises are caused by management when it knowingly takes measures that affect stakeholders or critical third parties. Deception, misbehaviour, and behaviours motivated by unethical or short-sighted values are examples of such actions. When an executive takes a bribe to steer a contract to an unqualified bidder, this is an example of a crisis of this type.

 

Workplace Violence: These crises occur when an employee or former employee attacks other employees at a firm location out of resentment over the attacker’s employment. (Other types of workplace violence against employees, such as patients attacking healthcare personnel, do not fall into this category because the perpetrator is not an employee or former employee.)

 

The Economic Crisis: A financial crisis might be company-specific, in which a company has a problem, such as negative cash flow, that hampers its capacity to operate. It can also be regional, natural or global, such as an economic downturn that reduces sales and causes stock markets to decline. Companies react to financial crises with short-term measures like emergency loan lines and long-term measures like corporate reorganisation, layoffs, and other cost-cutting measures. The 2008 bankruptcy of Lehman Brothers as a result of losses in the subprime mortgage industry constitutes a financial crisis.

 

Personnel Crisis: These crises are generally precipitated by the departure of key employees, such as a star sales representative or a brilliant drug scientist. These critical individuals may be stolen by competitors, courted by headhunters, or enticed with innovative changes or promotions. Of course, death and retirement are also considerations. Broader personnel crises occur when employee morale deteriorates, organisations face financial difficulties, and layoffs leave departments understaffed. A potential personnel crisis occurred in 2019 when Apple’s Head of Design, Jony Ive, quit the business.

 

Now that you know the different types of crises. Here are the golden rules for crisis management. Learning them will put you well on your way to mastering crisis management best practices.

 

Golden Rules for Crisis Management

  1. Accept responsibility

Covering up the PR disaster will only aggravate the situation. Manage the problem instead by accepting responsibility, reacting quickly, and responding to comments. Create a press release and share it on social media to gain control of the situation and get the message out there.

 

Crisis Management Example

 

  1. Be proactive, open, and accountable.

In today’s real-time social media environment, where critics exist, reputation management is more important than ever, yet it can be destroyed in a moment. The corporation must assume responsibility for the event and apologise.

 

  1. Be prepared to face social media wrath.

Ignoring the prospect of social media blowback is the worst thing a company can do. Just because a corporation isn’t selling on social media doesn’t mean that their customers won’t vent their rage on those sites when anything goes wrong.

 

  1. Always remember to be human.

Nobody feels better when they hear, “you’ll look into it.” It’s crucial to express that you’re deeply grieved by what happened and that you’ll endeavour to make things better. Then, explain how rules will be implemented to prevent this from happening again.

 

  1. Apologise first, then take action.

Moving forward requires extending a meaningful apology. Failure to do so adds gasoline to the flames and postpones shifting the narrative. Following a public apology, the corporation must issue a call to action to demonstrate that it is changing its methods in the future.

 

  1. Keep track of, plan for, and discuss

Put your social team on high alert, monitoring at the top of the priority list. If they notice a spike in negativity or increased activity, use the crisis plan to respond proactively on social media with prepared information.

 

  1. Begin by attempting to comprehend the circumstance.

All essential details should be communicated to important stakeholders. Never say “no comment” when asked to comment. Even if you’re still evaluating a scenario, just say so. People presume guilt or make their own assumptions if you don’t say in the matter.

 

  1. Be well-prepared

Nobody wants to be at the centre of a crisis, but scurrying around because you’re not prepared to deal with it only makes matters worse. Anticipate probable crisis scenarios and develop internal procedures for dealing with them.

 

Conclusion

Because no business is immune to a crisis, everyone must do everything possible to prepare for one. When developing your own crisis management plan for your company, you don’t need to reinvent the wheel so much as create your own way of spinning it. Every company is unique, and each management team has its own style, but those with a strategy fare the best in crises.

 

With that said, if you still want to know more about crisis management or looking for a crisis management plan implemented in your business, get in touch with us! 

 

We’re here to help you build one.