The Crisis Manager

Facing Disasters, Conflicts, and Failures

Otto Lerbinger

• Verlag: Routledge
• Jahr: 2012
• ISBN:
  9781136594144
• Auflage: 2
• Thema: Business
• Thema: Public Relations

Responding to the era of crises in which we now live, The Crisis Manager offers wise counsel for anticipating and responding to crises as well as taking the steps required to reduce the impact of these events. Spotlighting the reality of crisis at levels ranging from local to global, author Otto Lerbinger helps readers understand the approaches and ways of thinking required for successful crisis management in today's world. As no organization or individual is immune from crisis, he guides managers to make good decisions under conditions of high uncertainty, and to consider the interests not only of stockholders but also of a wide variety of stakeholders.

With a focus on the threat of crises to an organization's most valuable asset – its reputation – The Crisis Manager covers:

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• Preparation for crisis, including crisis communication planning

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• Physical crises – natural, biological, and technological

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• "Human climate" crises, stemming from targeted attacks on an organization's policies, actions, or physical holdings

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• Crises due to management failure, including mismanagement, skewed values, deception, and misconduct

New to this second edition are the use of social media in crisis management, and chapters on image restoration strategies and crises stemming from mismanagement, as well as a comprehensive updating of the entire work. Real-world case studies provide examples of what worked and what did not work, and the reasons why.

Written for present and future crisis managers in all types of businesses and organizations, this resource will be required reading for students in public relations, business, and management, as it prepares them for their crucial roles as decision makers.

Part I

Preparing for an Era of Crises

The word crisis is embedded in our vocabulary. People are increasingly saying, “I have a crisis,” rather than “I have a problem.” They seem to realize that today’s problems are graver and more difficult to cope with. The media reflect this situation as shown by a Nexis search of the word crisis that yields almost one thousand entries for just one week.

Crises are more omnipresent because humankind has been pushing out on all kinds of boundaries. Geographically, missionaries have gone to all corners of the world. So have enterprises that obtain resources from all over the world and seek to sell their products and services in world markets. Their supply chains are long and distribution centers span the Earth. World population is growing rapidly putting a strain on resources of all kinds, including food. The British economist, Thomas Malthus, appears more frequently in journals because he warned that population growth would outstrip the production of food.

Another push has come from population shifts as people move to more hospitable and beneficial regions, often causing problems of assimilation and coexistence of differing cultures. Communication channels have extended to all corners of the Earth, making it easy to obtain almost any kind of information, but also making it difficult to conceal problems and wrongdoing. Marshall McLuhan’s global village has truly materialized. Change produces strains that can easily erupt into crises. Just as plates on faults of the Earth’s crust cause earthquakes, tension points caused by human interaction can flare up.

Awareness of crises has grown as science discovers new mysteries both in outer space and the inner space of cells. Astronomers have shown what a small part of the universe Earth is, and environmentalists warn how fragile it is. We are warned that asteroids from outer space can collide with Earth and decimate living creatures, as happened to the dinosaurs. Physicists, using colossal facilities with such awesome names as “heavy ion relativistic collider,” seek to discover the smallest unit of matter and how the Earth was created by the “big bang” millions of years ago. In the meantime, medical researchers and psychologists are using MRIs to penetrate the intricacies of the brain. They are discovering that humans are not as rational as commonly thought and are instead “wired” to respond emotionally to crises just as their evolutionary predecessors did. Science and technology are opening up new areas that create both uncertainty and vulnerability.

Human beings may become overwhelmed by the changes and accompanying risks they encounter. They may recognize entropy—a trend toward disorganization—or sense that chaos is near. Some people may respond by engaging in risk aversion, blotting out unpleasant stimuli. This reaction carries the same danger as the psychological state of repression. Awareness of the actual disturbance disappears, but it nevertheless manifests itself in unhealthy and dysfunctional attitudes and behavior. Rational problem solving is impeded. People may engage in rational concentration on the important task at hand and simply ignore, at least temporarily, “peripheral” matters. Economists have long used the magic wand of peribus paribus—let other things remain the same—to do this. They also limit their cognitive burden by thrusting some variables under the heading of externalities. These solutions, however, do not work during a crisis, because a crisis is a holistic event that combines a wide variety of variables. One of the purposes of risk management—and contingency planning—is to try to identify the operative variables.

The purpose of Part I of this book is to understand the nature of crises, how to prepare for them, and how to limit the damage. Chapter 1 describes the types of crises organizations and the people in them are likely to face; also the stress caused by the key characteristics of crises—uncertainty, suddenness, and time compression. Chapter 2 discusses how the surprise accompanying crises can be reduced through risk management planning—deciding in advance what the most likely threats are and how they can be averted or minimized. The essentials of a contingency plan, which deals with specific crisis situations, are outlined so that organizations can prepare for the worst. Chapters 3 and 4 deal with an unavoidable aspect of a crisis—how it is reported by the both traditional and social media. The aim of an organization is to preserve its reputation and ability to continue to function effectively.

The Connection Between Risk and Crisis Management

Crisis management begins with risk management planning—asking about all the “what ifs” that might occur to an organization and the dangers it faces in its socio-political and human environment. Crisis management overlaps with risk management in focusing on the following concerns and activities:

• Reducing vulnerability to natural disasters;

• Engaging in surveillance for biological diseases;

• Considering such “upstream” measures as alternative technologies to lessen the chances of a technological disaster;

• Evaluating an organization’s vulnerability to confrontation;

• Establishing surveillance systems to warn of possible malevolent acts;

• Reevaluating optimistic risk analysis premises to ward off crises of skewed values and crises of deception; and

• Intensifying detection and control systems to discourage management misconduct.

The objective of these concerns and activities is reducing the risk faced by an organization. These risks may take the form of loss of sales, reduction in a company’s share value, destruction of human capital, an intensified regulatory environment, and loss of reputation. Like risk managers, crisis managers identify these risks, assess them, and seek to mitigate them. Some differences in degree exist, however, between the two types of managers. Risk managers are better trained to assess risks involving mathematical calculations—they know about “quants.” Crisis managers know what to do when vulnerabilities turn into actual crises. They know how to communicate with the media, deal with government authorities, and limit damage to an organization’s other stakeholders. They know how to protect and repair an organization’s reputation. The best crisis managers—those with a knowledge of management—also know what changes are needed in corporate governance, organizational culture, and information technology.

Three Obstacles Facing Risk Recognition

The joint message of risk and crisis management is that managers must have the courage to acknowledge the risks they face and to deal with them straightforwardly. They must overcome several kinds of mindsets that obstruct the honest analysis of risk: fatalistic attitudes, belief in a “naturalistic syndrome,” ego defenses, fear of disrupting group relationships, and unwillingness to impede the achievement of immediate goals.

A fatalistic attitude asserts that what will happen is bound to happen. It is most clearly manifested in attitudes toward natural crises. Public authorities and the public often feel that certain disruptions and disasters wrought by nature are inevitable and must simply be endured. Closely related is the naturalistic syndrome, which makes people accept the forces and consequences of nature and dissuades them from intervening. For example, a woman in New England voted against fluoridated water in the belief that “nobody should fool around with God’s water.” And there are still some economists and businesspeople who want to let business cycles follow their natural course, believing that thereby sick businesses will be weeded out and healthy ones allowed to survive. For this reason, some free market advocates opposed the plan by the Federal Reserve Bank and the Treasury Department to bail out major banks and financial institutions when the financial system was on the brink of collapse. The main trouble with such mindsets is that the possibility of human intervention is forfeited.

Blindness or resistance to risk is further explained by ego defenses, which ward off unpleasant and threatening information and events, as well as “affiliative constraints” that disrupt group relationships. Regarding the latter, Irving Janis warns:

Whenever a crisis arises, policymakers are likely to seek a solution that will avert threats to important values in a way that will not adversely affect their relationships with “important people” within the organization, especially those to whom they are accountable, and that will not be opposed by subordinates who are expected to implement the new policy decision.³

A final reason for the unwillingness to face risks is the reluctance to interfere with the achievement of immediate goals. As seen with the procrastination on the O-ring of the Challenger spaceship, fatal flaws in design were tolerated so that the organization could move forward unimpeded. As discussed in contingency planning and crises of skewed values, management must be willing to consider “worst-case scenarios” in its risk assessments. It must encourage engineers and line managers to give greater weight to safety factors and not treat negative evaluations as disruptive of team loyalty or akin to whistle blowing.

Looking Toward the Future

Comprehensive crisis management looks beyond the immediate crisis event and preceding contingency planning with the aim of reducing the incidence of future crises and strengthening an organization’s ability to cope with those that do occur. Many of these efforts involve improved communications during a crisis; others involve the post-crisis phase of rebuilding.

The positive side of crises is that they prepare an organization for change. The Chinese symbol for crisis is taken earnestly, for it signifies opportunity as well as danger. The trauma of a crisis provides the stimulus and motivation for rebuilding, improving, and even transforming the organization. Its members develop a readiness for change. Resistance is reduced because change is legitimized. For this reason many a leader has maneuvered an organization into a crisis state even when there was no real crisis. By such devices as rearranging and reinterpreting statistics, license is obtained to undertake draconian measures.

Certainly when a crisis erupts, top management should seize the opportunity to restructure company thinking. Management must determine what organizational changes are needed, e.g., strengthening corporate governance, setting up new units, revising managerial roles, improving control systems, and instilling a new organizational culture. These have been among the response and renewal strategies discussed in conjunction with the various crisis types discussed in this book.

Chapter 1

Understanding Crises

Each year the news media report on natural disasters, biological diseases, technological mishaps, human conflicts, and management failures. When these events are severe and threaten vital values, they are classified as crises. Unfortunately, they seem to be happening more frequently and threatening to become more catastrophic. Humankind and no type of organization are immune from them.

In recent years, crises of management failure were the most numerous and widespread. Leading the list was the financial crisis of 2008, which started in the United States and caused the collapse of Bear Stearns, Lehman Brothers and several smaller banks, such as IndyMac. It was accompanied by the scandal of Bernard Madoff whose illegal Ponzi scheme accounted for losses of over $50 billion. These were accompanied by a cascade of stories about food poisoning from beef, tomatoes, jalapenos, pancake mix, bottled water, and melamine-tainted eggs. A meat company, Topps Meat Co., which had been in business more than 60 years, was forced out of business in early 2008.

The more familiar type of crisis, natural disasters, continued to menace people. Major ones were the May 2008 earthquake in Sichuan, China, which killed over 80,000 people and left over 5 million homeless; the Indian Ocean tsunami in 2004 which killed almost 230,000 people and displaced 1.7 million; and Hurricane Katrina in 2005 which caused widespread destruction to the city of New Orleans and its environs. Another kind of crisis, malevolence, manifested itself on a global scale by terrorism and on a local level by violence in the workplace and schools. The Virginia Tech massacre in 2007 dramatically demonstrated that no type of organization was immune to violent acts.

Managers in all kinds of organizations are slowly—all too slowly—recognizing the likelihood that at some time they will face a crisis. They must be ready, at an instant, to serve as crisis managers. They must acquire a crisis mentality that recognizes unwanted uncertainty and risk and a readiness instantly to respond to an erupting crisis.

Proliferation and Severity of Crises

The environment surrounding people and organizations is becoming increasingly complex and unstable. Too many things are changing: all products, not only hightech, have shorter life cycles; new technologies such as bioengineering and nanotechnology embody risks that are increasingly difficult to calculate; government regulation, deregulation and reregulation continue to change the rules of the marketplace; competition is intensifying and has become global; consumerism, civil rights, animal rights, and other social movements require greater and quicker social responsiveness; concern about global warming is causing the substitution of the heralded goal of economic growth with the goal of sustainable growth. When these challenges overwhelm the ability of managers to cope with them, a crisis occurs. Their aim is to res...