JetBlue Airways 2007 Valentine's Day Crisis and BCM Strategy

Introduction to Business Continuity Management

Business continuity management (BCM) is defined by the Business Continuity Institute as a "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 left companies with the compulsion to deal with the aftereffects, and ever since, BCM has gained increased popularity. The 9/11 attacks were essentially a crisis in the external environment that had wide-ranging consequences for business organizations. BCM has emerged as a discipline in organizational studies that is receiving tremendous attention. As a discipline, it fundamentally deals with conflict, crisis, and planning for alternatives. To deal with conflict, some organizations take a proactive approach while others take a reactive stance. In the case of a proactive approach, organizations have learned to deal with crises by focusing on developing contingency plans to avoid such events in the future. It is the responsibility of companies to be able to provide quality services and products to their customers even during disruptive times. This reflects the commitment of the organization to its stakeholders, and it is therefore essential that a proper crisis management plan be established within the organization.

The BCCM framework has been developed to serve as a guide for managers in dealing with different situations. Each crisis is different and therefore requires different treatment. Every crisis must be approached in a unique way, and a new strategy must be formulated accordingly — no single response can be applied uniformly. This framework is simple and can be followed at all levels of management. This paper covers the JetBlue Airways incident of 2007 as a 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. JetBlue Airways is a prime example of how BCCM strategies can work for an organization. The incident has been discussed and analyzed in detail, including an exploration of the stakeholders and the impact of the disaster on each of them. Furthermore, the management's actions in light of BCM principles have also been discussed in depth.

Theoretical Framework for Crisis and Continuity Management

In order to understand the full implications of BCM, it is important to review the functional framework of the BCCM. BCCM is a discipline that works for the well-being of the business and ensures that no conflict in the internal or external environment becomes lethal for the organization. The fundamental aspect of the BCCM is that proper responsibility for the crisis at various organizational levels is assigned. The whole organization is structured in a way that it is best equipped to deal with conflict. It is not possible to address conflict at only one level; instead, crisis engulfs the whole organization and needs to be dealt with as a collective challenge. The conflict might arise because of issues inside or outside the organization. The BCCM reflects the organization's risk profile as well as its external environment (Brizek, 2007).

Furthermore, it is important to apply the BCCM approach to factors that extend beyond technological difficulties arising in organizational functioning. In the past, organizations only dealt with crises on a need basis, taking no precautionary measures beforehand. The traditional approach of managing a crisis only when it hits has been replaced by an emphasis on a proactive approach. Firms are now required to have the capability to face uncertain events in order to increase their effectiveness. The more proactive an organization is, the higher the chance of business performance improvement (see Appendix 1 for a diagrammatic representation).

Emergency situations require the organization to take certain steps necessary to prevent irreparable damage. The Federal Emergency Management Agency's (FEMA) Comprehensive Emergency Management framework provides a simple model that organizations can follow to minimize damage (described in Appendix 2). This model has been modified over time to accommodate changing scenarios. It requires an organization to mitigate risks once they occur and to take actions in preparation for future scenarios.

Harrald's model (1998) is a modification of the structure presented by FEMA 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. The response categories are consequently more elaborated compared to the earlier model. Harrald's model was essentially developed on the same theme as FEMA's model but provides considerably more detail.

In order to formulate a more comprehensive framework, Shaw (2004) incorporated Harrald's (1998) model into a broader context for business crisis and continuity management. The figure in Appendix 4 describes the levels of hierarchy within an organization where crisis management is needed. These areas include knowledge management, crisis management, system monitoring, incident management, and planning and training initiatives. Shaw (2004) describes the core competencies required to manage a crisis effectively.

The framework highlights management at different levels. Enterprise management, for instance, includes aligning the organization's culture, objectives, and structure to ensure that all activities are in line with the firm's strategies. Business crisis and business continuity management must fall within the enterprise management scope — they must not deviate from the mission and vision of the organization, otherwise their utility is lost (Elliot and Herbane, 2001).

Crisis management in business continuity means that activities must be coordinated during a crisis and must remain aligned with strategic goals. The crisis management process is a continuous one, as described diagrammatically in Appendix 5. Organizations need to be proactive in order to minimize damage, which requires constant monitoring of events to ensure prevention. Any discrepancy in normal functioning is spotted in time through this monitoring. The crisis is then evaluated, after which successive measures are taken to avoid risks and losses. For restoration and recovery, it is critical that the organization is both proactive and responsive to changes in the external environment (Tsui, 2000).

In addition to technological capabilities, management must possess the core competencies described by Shaw and Harrald (2004) to ensure minimum loss. Stakeholders such as investors, shareholders, regulators, and creditors are important factors in crisis management that are often overlooked due to an internal focus. The perception of stakeholders is highly critical, and it is therefore imperative that their interests are not only kept in mind, but given priority when the situation demands it (Elsasser, 2001).

Once detected, the crisis must be communicated, after which the knowledge management competency enables the organization to properly analyze the situation. Knowledge management deals with all sorts of information in the organization, keeping the company informed and cognizant. Risk management involves utilizing knowledge management to make risk-based decisions, and the impact of a risk is better assessed when managers are competent in this area. Risk assessment involves monitoring events that could go wrong and examining existing solutions to possible problems. Planning follows risk assessment and can be categorized into several types: crisis management plans, incident management plans, communication plans, and business continuity, recovery, and restoration plans. Operational responses are shaped by operations, logistics, and finance, all managed under incident management. Further actions are then taken to minimize future damage through restoration and transition.

JetBlue Airways Valentine's Day Crisis 2007: Background

JetBlue Airways had built a strong reputation as a leading airline in the United States. However, on February 14, 2007, it suffered a massive blow when winter storms struck the Northeast, making operations for several leading airlines impossible for almost a week. Several passengers were left waiting on aircraft while many more were stranded at John F. Kennedy Airport for hours. Approximately 1,200 flights were cancelled and the company suffered a major loss of $20 million. The entire operation of the company was in shambles, with employees dispersed and communication processes in disarray. Around 11,000 pilots and flight attendants were confused, receiving no directions or instructions. The company launched its emergency tactics immediately and attempted to deal with the situation as effectively as possible.

Crisis Management and Stakeholder Analysis

Immediately after the crisis struck JetBlue Airways, corrective action was taken to counter the damage. The crisis management response can be explained through the BCCM framework discussed above.

Assessment

The first step was assessing the extent of damage caused and exploring the possible causes of the operational failure. Managers identified distinct flaws in the operation system. The primary and unavoidable cause was the severe weather. However, a poor communication system was the leading cause of employee disruption and the resulting confusion. The reservation system was overbooked, and employees lacked crisis management training. Because staff were limited to narrow areas of expertise, cross-functional roles could not be established — had employees been adept in more than one area, better alternative actions could have been taken (Elsasser, 2009).

Stakeholder Analysis

The impact of the crisis on various stakeholders must be assessed in order to develop a sound corrective action plan. Stakeholders are critical to an organization's success, and in times of crisis, it is important to prioritize their needs during decision-making.

Customers: The impact of the weather crisis on customers was severe. Hundreds of passengers were left waiting on aircraft and in the airport, which seriously tarnished the brand's credibility. Dissatisfied customers were recording videos and uploading photos of the upheaval, further damaging the company's reputation with its potential target market.

Employees: Around 11,000 employees were left in confusion with no instructions during the crisis. Due to communication breakdowns, proper assistance was absent, and employees were forced to manage the situation on their own as best they could. The company's information systems were insufficient, leaving the workforce without adequate support from management.

Investors: Shareholders were aware of the massive losses the company would incur as a result of the 1,200 cancelled flights. Their trust was at stake, particularly given the scale of the financial damage.

The Government: Due to the extensive media coverage the crisis received, it attracted the attention of government officials almost immediately. Members of Congress sought to levy severe criticism against JetBlue's management. Proposals to pass legislation against such actions were put forward, and the airline came under observation by government officials.

Competitors: Competitors could have viewed the crisis as an opportunity; however, due to JetBlue's quick and decisive action, rivals were left with little to exploit. The manner in which JetBlue handled the situation distinguished the company once again from its rivals.

Media: The crisis received extensive media attention. From print to electronic media, news and videos of the incident were broadcast worldwide. The media was largely responsible for shaping public opinion about the company. Media coverage had both positive and negative impacts on the organization. Initially, JetBlue suffered intense scrutiny from all directions. However, the same media channels were later used by the company for damage control — holding press conferences, issuing briefings, and delivering public apologies. The media was also largely responsible for prompting the management restructuring and financial responses that followed. It is therefore important for JetBlue to recognize the media as an effective tool for brand reputation protection in the future (Hanna, 2001).

Conclusion

Uncertainties in business are unavoidable, and rapidly changing scenarios have made it increasingly difficult for organizations to keep their operations running smoothly and free of errors. Business continuity and crisis management are therefore critically important emerging concepts in today's business environment, equipping organizations with the techniques needed to handle difficult situations effectively.

The BCCM should reflect the culture of the organization. Leadership responsibilities have greatly increased, as the JetBlue Airways case clearly demonstrates. BCCM also enables organizations to stay ahead of potential disruptions and to respond quickly to uncertain situations. Stakeholders are critically important, and organizations must keep their perspectives in mind while making decisions. Organizations can develop better crisis management tactics when they recognize the value of a sound business continuity management system.

JetBlue Airways' BCM strategies have been commended and are suggested as a model for similar players in the industry. Through quick action, the company was able to respond in time and minimize the damage. More and more organizations need to recognize the importance of BCCM in order to ensure healthy, resilient businesses and to prevent organizational crises from escalating into irreversible harm.

References

Brizek, M., 2007. JetBlue Airways, trouble in the sky. Journal of Aviation Management and Education, 12(1), pp. 53–60.

Elliot, D., Swartz, E., & Herbane, B., 2001. Business Continuity Management: A Crisis Management Approach. New York: Routledge.

Elsasser, J., 2007. True blue: After a customer relations crisis, lessons learned at JetBlue. Public Relations Strategist, 13(3), pp. 14–19.

Elsasser, J., 2009. True blue: After a customer relations crisis, lessons learned at JetBlue — moving on after a midwinter meltdown.

Hanna, J., 2008. JetBlue's Valentine's Day crisis. Retrieved October 18, 2011, from Working Knowledge: http://hbswk.hbs.edu/item/5880.html

JetBlue., 2011. Bill of Rights information. Retrieved October 18, 2011, from JetBlue: http://www.jetblue.com/about/ourcompany/promise/index.html

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Reuters., 2009. How JetBlue turned crisis into opportunity: JetBlue Airways to discuss crisis communications at 2009 Continuity Insights Conference. Retrieved October 18, 2011, from Reuters:

Shaw, G. L., & Harrald, J. R., 2004. Required competencies for executive level business crisis and continuity managers. Journal of Homeland Security and Emergency Management, 5(1), pp. 9–13.

The Business Continuity Institute., 2007. Business Continuity Management Good Practice Guidelines.

Tsui, B., 2000. JetBlue soars in first months. Advertising Age, 71(38), pp. 6–7.