Because of their unpredictable nature and their accompanying ripple effect, crisis situations are unlikely to leave any organization untouched forever. Leaders should not pretend otherwise. They can realistically count on facing some kind of organizational crisis at some point during their careers. Such a crisis will negatively affect people in an organization, which is often the most pernicious and difficult challenge leaders face in dealing with a crisis. But they can act to reduce the probability of a crisis reoccurring, reduce the duration of a crisis, and soften the negative impact by addressing the human element of a crisis before, during, and after it occurs.

A crisis is generally characterized by a high degree of instability and carries the potential for extremely negative results that can endanger the continuity of the organization. It’s a key moment or critical period that brings both surprise and dramatic change. In this way a crisis can be described as a turning point in the affairs of an individual or an organization. It’s significant because the consequences of the situation will be decisive in determining the future of that individual or organization. The word itself originates from the Greek krisis, which means “to sift or separate.” A crisis has the potential to divide an organization’s past from its future, to replace security with insecurity, and to separate effective leaders from ineffective ones. A crisis also has the potential to swap routine for creativity and to shift an organization from “business as usual” into significant change.

Many crises are generated by an emergency—a sudden condition or state of affairs that calls for immediate action. The crisis itself includes the emergency that served as its catalyst. The situation may be further aggravated by relentless media scrutiny, a restless and information-hungry workforce, and advanced technologies that are never 100 percent reliable. Think about the kinds of emergencies reported daily in the newspaper or on TV and how such emergencies lead to crisis situations.

Although no two crises are ever the same, they share some common traits. For example, a crisis isn’t usually expected or planned for. It generally comes as a bombshell that frightens and stuns those on whom it falls. There may have been signs and indications of impending difficulties, but in the flow of daily operations they were ignored, placed on the back burner, or wished away. The element of shock and even terror can be sharp and devastating if the crisis has an element of physical danger, if the crisis causes a death or serious injury, or if the crisis results in the destruction of property (for example, one’s office or place of work). For these reasons a crisis can exert a high impact on human needs, emotions, and behaviors.

In defining a crisis it’s helpful to think about the seriousness of the threat. The amount of impact a crisis will have on an organization’s leadership, workers, and stakeholders often depends on its severity. Along these lines, a useful breakdown of a crisis might place it at one of three levels of severity.

Level 1 crisis. In this situation the organization will be publicly embarrassed and mission success is threatened. Common examples of this level of crisis include sexual harassment charges brought against a key leader of the organization; an insensitive or racially charged statement by a company leader; or an overt action taken by the organization that damages the environment, places profit over public welfare, or is viewed as unethical, politically incorrect, or socially irresponsible. A specific case in point is the racial discrimination lawsuit filed against Texaco, an American oil company. African Americans had been complaining for years about discrimination in hiring and promotions. In 1996 a taped conversation among four senior white Texaco executives came to light and revealed vile and offensive attitudes toward African Americans employed at the company. A class-action lawsuit demanded $520 million in damages; Texaco settled out of court for $176 million and drew the ire and a boycott from African Americans across the country.

Level 2 crisis. At this level a situation exists in which there is personal injury, some property loss, possible loss of life, potential for serious damage to the company’s reputation, or a combination of these and similar items. An example of a level 2 crisis can be found at Johnson & Johnson. In the fall of 1982 seven people died in the Chicago area from taking cyanide-laced Tylenol (one of the company’s premiere products). Public relations experts consider the company’s handling of the crisis as one of the best examples of crisis leadership and corporate communications in the history of American business. Johnson & Johnson placed customer safety over corporate profits by immediately recalling $10 million worth of Tylenol from store shelves and warehouses, stopping both production and advertising of the product, cooperating with the media to inform the public of the problem, and offering a $100,000 reward for information leading to the killer’s capture. In 1983 the company reintroduced Tylenol with tamper resistant packaging. Because of the socially responsible manner in which the organization handled the crisis, confidence was regained and Tylenol’s market share was virtually restored to where it was prior to the crisis.

Level 3 crisis. This level defines a situation in which there is loss of life, significant property damage, a perceived threat to the survival of the company, or a combination of these and similar items. An example of a level 3 crisis is the accounting scandal at the Enron Corporation. The Houston-based organization inflated its profits and disguised its financial difficulties, and its leaders funneled millions into their own pockets. The company’s bankruptcy, in December 2001, produced billions of dollars of shareholder losses, thousands of job losses, and a near wipeout of employee 401(k) assets. Key Enron leaders were investigated for fraud and other financial abuses (one committed suicide), and Enron’s attempt at reorganizing has been inhibited by dozens of lawsuits filed by investors, pension funds, and lenders. The value of Enron’s stock was erased, and it has since been removed from the New York Stock Exchange. The firm of Arthur Andersen, whose job it was to ensure investors could rely on Enron’s financial statements, was convicted of obstruction of justice for the shredding of Enron’s financial documents during a Securities and Exchange Commission investigation. As a result of their part in the Enron scandal, many key Arthur Andersen employees have either left or been laid off. Like Enron, the company also faces the possibility of staggering liability claims. The firm no longer performs auditing work.

Crisis also has the tendency to bring a high degree of chaos and confusion into an organization. Typically, there is a lack of information precisely when virtually everyone in the organization has a huge emotional need for it. Those involved have a need to know and understand what happened, why it happened, and how it will impact their futures. Ambiguity is especially potent.

High-stress situations, such as a crisis, can move usually rational people away from sense and reason. In addition to those already listed (see “Crisis Is Emotional Chaos” on page 7), common emotions arising in crisis situations include fear, anger, anxiety, sorrow, surprise, shock, disgust, love, and the desire for revenge. These emotions can trigger positive or negative behaviors (the emotions themselves are not positive or negative, but the behaviors they trigger can be). People in a crisis can act with compassion, self-sacrifice, and courage, or they can display selfishness, cowardice, and greed. The potential for conflict and illogical behavior can be great. Previously dysfunctional behavior has the potential to become even more dysfunctional during a crisis. For those emotionally impacted by the crisis, even the simplest tasks can become difficult to perform. It is in this chaotic, ambiguous, and highly charged emotional environment—one rife with the human element—that leaders must lead, and lead well.

Effective crisis leadership boils down to responding to the human needs, emotions, and behaviors caused by the crisis. Effective leaders respond to those emotional needs as those needs are perceived by those experiencing the crisis, not just to their personal perception of what those emotional needs are, might be, or should be. The crisis will affect employee morale, attitudes, productivity, ability to focus, stress levels, relationships, and more. People are more apt to follow a leader who is reassuring and who can meet their primary needs—those needs they least want to give up.

Effective crisis leadership can rescue an organization from chaos and deliver opportunities where before there were only disadvantages. Organizations that successfully handle crisis situations can come out of them stronger and with greater employee, customer, and community loyalty than existed prior to the crisis. Leaders must look deep into the crisis for such opportunities that not only benefit the organization but also raise the potential for individual achievement among the organization’s employees. In their search, they should look to human elements—the emotions, the behaviors, and the reactions that affect and are affected by the crisis and can influence its outcome.