Crisis incidents and their management

Crisis Incidents

The last decade has been riddled with crisis on the global as well as domestic scale. Crisis on many fronts have been noticed for instance natural calamities, terrorism issues, scandals, technological issues and financial disarray. Even so, most leaders aren't fully up to the task in terms of leading a company or society, in general, out of a crisis successfully. Experts at the start of this decade went hand in hand to eliminate the Y2K bug, which became the first Internet crisis. On September 11, 2001, the terrorist attacks in New York City on World Trade Center threw U.S. off balance. Next, the Katrina Hurricane struck with full vengeance in the gulf region which tore apart communities as we know it. The Tsunami of 2004 was another tragic event which rendered millions of people homeless. Last but the not the least, the recession of 2008 shutdown major corporations as financial markets crumbled. The H1N1 disease occurred in 2009 (OECD, 2011).

These recent events indicate that crisis is unavoidable. Most of the time, the leadership team is ill prepared for the crisis situation. Not being able to handle the crisis situation can lead to severe organizational crisis imposing disastrous consequences on a long-term basis affecting the reputation, organization's profits, human resources and market share. It is imperative for the organizations and its leaders to maintain a positive outlook. The fact of the matter is that executives and leadership team lack crisis management training and practical crisis management experience in their portfolio (OECD, 2011).

Hence, the failure is evident. The focus is on relationships with stakeholders and partners when leadership teams address crisis situations. But the fact of the matter is that public relations and public speaking will do more harm than good for solving such disastrous crisis. Management has no need of creating competencies for a crisis situation. It takes risk management and strategic planning to plan for crisis, while leaders must attend to such crisis aptly. They should be willing to learn from blunders and forward their learning's to their subordinates. This instills a change in the organization. A true leader must prepare a unit for such situation and hope to mitigate a crisis. The top management must be in full control of deflecting a crisis. Its involvement fuels motivation throughout the hierarchy (OECD, 2011).

This paper draws on examples from crisis incidents to make substantive points about leadership. The incidents chosen are among those that are relevant to one or more issues of leadership. The incidents have been chosen to reinforce one another, contrast with one another, or show different facets, but they all are connected by the logic of the argument and not be random choices.

Background

There are two kinds of crisis situations- Crisis which builds up slowly and an unexpected crisis. An unexpected crisis can greatly influence the day-to-day activities of an organization on a temporary business. The natural calamities can hinder the activities bringing them to a standstill. The warning time is next to nil (Erickson, 2006).

Smoldering crisis starts small in an organization and adds up with the passage of time. They pose a serious threat to the stakeholders and put the management team in jeopardy (Erickson, 2006). With regards to stages of a crisis management, one can divide them into the following 5 stages:

1: Signal Detection:

Whilst they are much less observable in most crisis that take place abruptly and with no warning (e.g., all-natural calamity), nearly all other kinds of crisis have several early indicators which point to a top organizational management that something is faulty. A gradually developing rise in consumer issues or perhaps defect rates, for instance, could be an indication of an emerging crisis in the quality of the products being sold (Barton, 2007).

2: Prevention and Preparation stage of Crisis

The preparation as well as prevention stage is certainly one where managers participate in activities to organize for or avoid an emerging or present crisis. Most of these activities can include creating crisis guidelines and operations, figuring out a crisis response group, executing crisis exercises, and much more. Since the prevention and preparation stage of crisis management must not mean that the aim for managers would be to stop all crises, but instead participate in realistic preparation to be able to strongly position the entity to avoid possible crises and also to handle the ones that are inevitable (Barton, 2007).

3: Damage Control Stage of Crisis Management

The aim of the damage Control or containment stage would be to restrict the status, monetary, as well as other risks to organizations and society survival in relation to the crisis. This really is accomplished via activities which restrict the encroachment of the local crisis straight into otherwise unaffected areas of the society or even the business environment. Containment as well as damage control often pre-consumes management time as well as focus when crises take place. Certainly, it really is these pursuits that individuals relate with crisis management groups and organizations, and signify an essential move toward the subsequent stage: company recovery (Barton, 2007).

4: Recovery of business to normalcy

Among the ultimate objectives of any crisis state of affairs would be to get back the society or the organization (in question) to the pre-crisis situation. Leaders continuously attempt to assure stakeholders that, regardless of the hindrance, matters are functioning without problems or will undoubtedly be going back to normal quickly. Within this recovery stage, crisis managers must have some short- as well as long-term endeavors developed to return the organization (in question) or the society to normalcy (Barton, 2007).

5: Learning

Organizational learning is the method of obtaining, analyzing, working on, as well as distributing new data across the organization (in question) and the society at large. With regards to managing crisis circumstances, nevertheless, leadership runs the potential risk of implementing a reactive as well as defensive position that stops learning. Firms having a learning position would certainly be susceptible to the previously mentioned crisis stages and could well be enhanced from an explicit effort to comprehend the fundamental elements leading to the crisis. Leaders might subsequently control this understanding to help fundamental alternation in systems as well as processes (Barton, 2007).

Argument for leadership and crisis management

In such crisis situations, the leadership must rise to the occasion and genesis of crisis must be identified by the organizational members too. Being proactive and reflective is the key here to avert a crisis from escalating and thus ending it. The executives are up against a different task altogether as it differs from their routine business. It is due to the fact that organizational crisis are low probability/high consequences situations categorized by time pressure, ambiguity system failure along with narrowed authority (Groom and Fritz, 2011).

The signal detection stage of a crisis

There are no red flags in a sudden crisis, but in the case of a building up crisis, a long list of red flags develops overtime indicating a series of small setbacks. These red flags aren't attended by the top management. This can happen due to several reasons. First and foremost is the case of people relying on others to attend to such frivolous matters. Second are ego mechanisms spawning denial regarding such issues in an attempt to maintain a resolute image when evidence points to the contrary. Failure to notice the red flags and ignorant behavior of the organizational leaders can create an impending crisis. This also limits the leaders from appointing and allocating resources, personnel and information which can neutralize the crisis situation (Groom and Fritz, 2011).

In signal detection phase, the leadership needs to identify the red flags and alert the lower management. External and internal environment must be scrutinized. This early detection can facilitate the detection, processing as well as responding to a potential crisis in making. Preventive measures must be taken and red flags must be identified. Perspective and decision making are imperative in crisis leadership (Groom and Fritz, 2011).

In such situations questions asked are, how did this came to be? When did this happen? What measures must be taken to solve a crisis? Identifying these red flags can solve or at least create a potential framework for a crisis situation. They may seem unrelated or incoherent in pattern. The case of Ford-Firestone is evident in this case; defective tires were used in Ford Explorer cars, which went unnoticed by Ford management. Red flags were apparent in this case with memos of cheap quality, accidents occurring, vehicle complaints in overseas and lastly failure reports from risk management team of Ford itself. The management didn't or failed to acknowledge red flags piling up which were clear as daylight (Groom and Fritz, 2011).

Perspective taking is the capacity of entertaining new ideas and viewpoints of one another which diversifies the crisis detection signal as we know it. The responsibility of a true leader lies in ensuring no is affected by the eventual crisis situation. This allows the top management to be compassionate with others and realize their standpoints. Leaders are prone to attend to those who are most active and vocal in their work. This may include shareholders and stakeholders. This may create a communication gap and create a void of perspectives (Groom and Fritz, 2011).

If Ford had taken heed of its customers earlier or listened to their risk management team before, a contingency plan would have been created. This wouldn't have a crisis buildup. Firestone neglected the red flags as insignificant (Groom and Fritz, 2011).

The leaders should gather opinions from all segments of their departments. This includes top to lower hierarchy. Leaders should influence their management to let the subordinate's voice their concerns and work accordingly. Crisis experts examine thoroughly with a strict eye and reflect on the data collected. The leaders can challenge their own perspectives (Groom and Fritz, 2011).

Leadership in preparation and prevention stage of a crisis:

This is the phase where leaders engage to deflect a crisis. This includes making crisis policies, strategies, procedures and creating schedules for crisis drills. This doesn't mean all forms of crisis will be subverted. This means that leaders will be able to better manipulate crisis if they materialize out of the blue. When an organization is ready for a crisis situation, it copes well. Leaders should be well aware of the strata of its organization and make a failsafe plan accordingly. Otherwise, it can affect an organization negatively. In this way, a better crisis management is created which features the entire strata of an organization. For instance, Wal-Mart was better prepared when Katrina Hurricane occurred. Government agencies scrambled and flip flopped meanwhile. Wal-Mart gathered its basic supplies needed in times of need. Wal-Mart served the American population well than government in comparison. The CEO of Wal-Mart was all set for a crisis situation with previous experience. He set up teams for work in this case, which was a lesson to learn for the American government agencies (Mueller, 2010).

So creativity in this case can work wonders for a given organization when new ideas, products, services and processes are required. Creativity is intensely required when a crisis occurs as a contingency plan needs to be made. This requires going beyond conventional rationalization. Competent leaders are to locate a crisis earlier. Scenario planning is also important in creating maps for reference and use later on (Mueller, 2010).

Leadership during damage control stage of crisis management

Leaders are occupied with solving a crisis and contain the damage control which takes toll on their time and attention. But business recovery is also required. Crisis containment is needed to keep a crisis from multiplying and expanding. The leaders in this phase aims to limit financial, repute and stakeholder damage (Dezenhall and Weber, 2007).

This phase of crisis ensues:

A: Acting speedily and decisively

B: Adaptive organizational structure

C: Being open minded

Acting speedily and decisively

Leaders must reach a decision under pressure. Crisis is deadly if left unattended. Therefore, immediate action is required by the top management. The time to think and ponder is little. In 1982 during Johnson & Johnson crisis, the management was lightning quick with its product modification. They pulled out their products from the shelves. Although the complaints received were from Chicago city only. This did cost Johnson & Johnson dearly in terms of finances. In the bigger picture, they regained the public trust again with their quick action. Their clientele did notice their quick response and remained loyal as before (Dezenhall and Weber, 2007).