Business continuity and crisis management strategies

Jet Blue Airways

Theoretical Framework to Crisis Management Approach in Business Continuity

Jet Blue Airways Valentine's Day crisis 2007

Jet Blue Airways BCM

Crisis management

Stakeholder Analysis

Invocation and escalation

Management and recovery

Closure and review

Enterprise Management

Jet Blue Airways

Business continuity management (BCM) is defined by the Business Continuity Institute as 'holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience and capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities' (The Business Continuity Institute, 2007).

The impact of the 9/11 attacks has left companies with the compulsion to deal with the aftereffects and ever since, BCM has gained increased popularity. 9/11 was basically a crisis in the external environment that had wide ranging consequences for the business organisations. It has emerged as a discipline in organisational studies that is being paid tremendous attention. BCM as a discipline basically deals with conflict, crisis and planning for alternatives. To deal with conflict, some organisations take a proactive approach while others take a reactive stance. In case of a proactive approach, organizations have learned to deal with the crisis by focusing on developing contingency plans to avoid such events in the future as well. It is the responsibility of companies to be able to provide quality services and products to their customers even in disruptive times. This reflects the commitment of the organization to its stakeholders and hence it is essential that a proper crisis management plan be established in the organization.

BCCM framework has been developed to serve as a guide for the managers in dealing with different situations. Each crisis is different and therefore requires different treatment. Every crisis has to be treated in a unique way and a new strategy has to be formulated. Every crisis cannot be dealt with in a similar manner. This framework is very simple and can be followed at all levels of management. This paper covers the incidence of Jet Blue Airways in 2006 as the discussion case to explain the crisis management tactics followed by the organization's management. Each part of the case will be discussed in detail to show the impact of following or ignoring the BCCM principles. Jet Blue Airways is a prime example of how BCCM strategies can work for an organisation. The incidence has been discussed and analysed in detail along with the exploration of the stakeholders and the impact of the disaster on each stakeholder. Furthermore, the management's actions in light of the BCM principles have also been discussed in detail.

Theoretical Framework to Crisis Management Approach in Business Continuity

In order to understand the full implications of the BCCI, it is important to review the functional framework of the BCCM. BCCM is basically a discipline that works for the well being of the business and ensures that none of the conflict in the internal or external environment becomes lethal for the business. The fundamental aspect of the BCCM is that proper responsibility for the crisis at various levels is assigned. The whole organisation is tapered in a way that it is best equipped to deal with conflict. It is not possible to deal with the conflict at one of the levels of the organisation. Instead, crisis engulfs the whole organisation and needs to be dealt with, as collective enemy. The conflict might arise because of issues inside the organisation or outside the organisation. The BCCM reflects the organization's risk profile as well as the external environment. (Brizek, 2007)

Furthermore it is also important to take the BCCM approach to factors extended beyond the technological difficulties that might arise in the organizational functioning. In the past, organisations only dealt with crisis on a need basis and before the need arose, no precautionary measures were taken. The traditional approach to managing crisis when it hits the corporation has been replaced with the emphasis on a proactive approach recently. The firms are required to have the capability to face uncertain events in order to increase the effectiveness. The more proactive an organization is the higher is the chance for business performance improvement for the company. (Refer to Appendix 1 for diagrammatic representation)

The emergency situations require the organization to take certain steps, which are necessary to save the organisation from vanishing into oblivion. Federal Emergency Management Agency's graphical framework for Comprehensive Emergency Management has provided a simple framework which can be followed by organizations to minimize damage. This has been described in the "Comprehensive Emergency Management Framework" mentioned in Appendix 2. This model has been modified according to changing scenarios to accommodate the needed changes. It requires an organization to mitigate the risks once occurred and take actions for future scenarios.

The Herrald's model (1998) has been a modification of the structure presented by the Federal Emergency Management Agency and has served as a valuable guideline for organizations. This model not only incorporates the general structure but also specifies how organizations can monitor their activities by breaking them down into different sectors. Hence the response categories are also elaborated as compared to the previous model. Herrald's model was essentially developed on the same theme as the Federal Emergency Management Agency's model, but provides things in a lot more detail.

In order to formulate a more comprehensive framework, the most recent framework for business crisis and continuity management has been laid by Shaw (2004) which incorporates Harrald's (1998) model into the context. The figure in Appendix 4 describes the levels of hierarchy in an organisation where crisis management is needed. These are areas like knowledge management, crisis management, system monitoring, Incident management, Planning and training initiatives. The core competencies are required in order to manage the crisis as described by Shaw (2004).

The framework highlights management at different levels. Enterprise management, for instance includes aligning the organization's culture, objectives and the structure. The purpose is ensuring that all the activities of the firm are in line with the firm's strategies. Business crisis and business continuity should be in line with the enterprise management scope. In other words, these must not deviate from the mission and the vision of the organisation, otherwise their utility is lost. (Elliot and Herbane, 2001)

The crisis management in business continuity means that the activities must be coordinated in case of a crisis. The activities of the organization must be in alignment to the strategic goals that have been formulated by the management. The crisis management process has been described diagrammatically in Appendix 5, showing that it is a continuous process. The process goes on, in tandem with other organisational activities. The organizations need to be proactive in order to minimize the damage. The control requires a constant monitoring of the events in order to ensure prevention. Furthermore, any discrepancy in the normal functioning is spotted in time due to the monitoring. The crisis is then evaluated after which successive measures are taken to avoid the risks and losses. For Restoration and recovery from the crisis, it is very important that the organization should be proactive and responsive to the changes occurring in the external environment. (Tsui, 2000)

It is important that in addition to the technological capabilities to counter the crisis, the management must have the core competencies as described by Shaw and Harrald (2004) to ensure minimum loss. Stakeholders like investors, shareholder, regulators and the creditors of the organisation are an important factor in crisis management which is often ignored by the managers because of an internal focus. The perception of the stakeholders is highly critical and hence it is imperative that their interests should not only be kept in mind, but given priority if the situation demands it. (Elsasser, 2001)

The crisis must be communicated once detected after which the knowledge management competency enables the organization to properly analyse the situation at hand. Knowledge management deals with all sorts of information in the organization which keeps the company informed and cognizant. The risk management includes the utilization of knowledge management to make risk-based decisions. The impact of the risk is better assessed if the managers are competent in risk management. The risk assessment involves the monitoring of events which can go wrong in the business and the examination of existing solutions to the possible problems. Planning is done after the risk assessment which can be categorized into several types such as crisis management plan, incident management plan, communication plan, business continuity, recovery and restoration plans. These plans are used to formulate plans which are then implemented. The operational responses are impacted by the operations, logistics and the finance of the organization which are managed under incident management. These incidents are then responded to in order to ensure the business continuity. Further actions are taken in order to minimize damage in the future through restoration and transition.

Jet Blue Airways Valentine's Day crisis 2007

Background

Jet Blue Airways has had a good reputation as a leading airline in the United States. However, on 14th of February, 2007 it suffered a massive blow in the form of winter storms which hit the Northeast making the operations of the leading airlines impossible for almost a week. Several passengers were left waiting in the flight while many more were left behind at the John F. Kennedy Airport for hours. Around 1200 flights were cancelled and the company suffered a major loss of $20 million. Hence, the entire operation of the company was in shambles with employees dispersed with a poor communication process. Around 11,000 pilots and flight attendants were confused with no directions or instructions. The company launched its emergency tactics immediately and tried its best to deal with the situation at hand. The damage control by the company can be assessed based upon the measures taken by Jet Blue's management.

Jet Blue Airways BCM

Crisis management

Immediately after the crisis hit Jet Blue Airways, corrective action was taken to counter the damage. The crisis management can be explained in the light of the framework which we have previously discussed.

Assessment

The first step was the assessment of the extent of damage caused as well as the exploration of the possible causes of the operational failure. The managers plunged deep into the root causes and came up with distinct flaws in the operation system. The first and the foremost was the inevitable bad weather situation. However, poor communication system was the leading cause for the disruption of the employees and the commotion and confusion which followed. The reservation system was overbooked. Furthermore, the employees were lacking in crisis management training. They were limited in their area of expertise because of which cross roles could not be established. Had they been adept in more than one areas of expertise, there would have been better alternative actions. (Elsasser, 2009)

Stakeholder Analysis

The impact of the crisis on various stakeholders needs to be assessed in order to develop a sound corrective action. The stakeholders are very critical to an organization's success and therefore, in times of crisis, it is important to prioritize them while decision making.

Customers

The impact of the weather crisis on the customers was massive. Hundreds of passengers were kept waiting in the planes as well on the airport which tarnished the credibility of the brand to a great extent. Dissatisfied customers were recording videos and uploading photos of the upheaval making it worse for the potential target market of the company.

Employees

Around 11,000 employees were left in confusion with no instructions during the crisis. Due to communication breaks proper assistance was absent and the employees had to deal with the situation on their own the best way they could. The company's information system were insufficient because of which the workforce was let down by the managers.

Investors

The shareholders were aware of the massive loss that the company would be incurring because of the 1200 flights that were cancelled. Their trust was at stake especially because of the huge financial losses.

The government

Due to the massive media coverage that the crisis received, the government's attention was grabbed almost instantly. Congress members sought to severe criticism of the Jet Blue Airways management. Suggestions to pass legislations against such actions were presented and the airline had come under observation by the government officials.

Competitors

The competitors could have seen the crisis that hit Jet Blue as an opportunity for them; however, due to the quick action by the company, the competitors were left rubbing hands in amazement. None of Jet Blue's competitors had ever dealt with the situation in such a manner which distinguished the company once again from its rivals.

Media

The crisis received extensive media attention. From print media to electronic media, news and videos of the incident had been broadcasted all over the world. The media was largely responsible for further shaping the public opinion about the company. The media coverage had a positive as well as a negative impact on the company. Initially when the crisis hit, Jet Blue had to suffer the humiliation and questions from all directions, however the same media vehicle was used by the company later on for corrective action and holding press conferences and briefings for apologies. Media was largely responsible for the change in the management structure which followed as well as the financial impact on the shareholders. Hence, it is important for Jet Blue to realize the importance of media as an effective tool for brand reputation and marketing protection for the future was needed. (Hanna, 2001)

Invocation and escalation

After assessing the situation, the CEO of the company David Neeleman, took charge of the situation. The executive team was compelled to formulate a quick and effective solution to deal with the situation. The company concluded to follow two suits of actions.

1. Mortification

2. Corrective Action

Management and recovery

The following courses of action were taken by the company in order to deal with the crisis.

1. Owing to the weak internal communication channels which had led to massive failure of internal communication, the company announced to correct its internal communication systems and formulate better information systems within the organization. The old systems that were being used were not accessible to everybody. The company's automated communications was used instantly to communicate with the employees and further improvements in the system were ordered.

2. The media was recognized as a very important tool for incident management due to which the CEO Neeleman made several appearances on the television programs. Immediately one week after the crisis, the CEO made a public apology on more than one occasions. In addition to the press releases, Neeleman also appeared on Late Night talk shows to explain the problems that had occurred and the corrective measures that the company was taking to bring the situation in control and to soothe the stakeholders.

3. Neeleman issued a Bill of Rights for the customers, right after the incidence hit in order to regain the trust of the customers. This Bill promised monetary compensation in case of a failed delivery of service to the customers.

4. Millions of dollars were refunded to the passengers who were affected by the flight delays. Travel Vouchers were issued which although cost the company a lot, however, was a very effective strategy to regain the lost trust of the customers.

Closure and review

All the actions taken by the management were monitored and reviewed after which the final set of actions were announced. The company consulted with several directors and experts in order to explore further potential risks which might arise so that proactive measures could be taken.

Improvement

1. JetBlue Airways decided to improve upon its existing Varolii communication system in order to increase the efficiency of the inward and outward information flow to better assess such situations in the future.

2. Employee trainings in more than one area of expertise were decided to better equip the workforce for handling crisis.

3. JetBlue emergency response department was established in 2001 in order to better handle such disasters in the future.