What is Crisis Management? Types, Steps, and Examples

Having a solid plan in place to protect your business from unexpected or disruptive events is essential. By implementing a thorough Crisis Management Strategy, you can ensure that you are adequately prepared to handle any crisis that may arise. In this article, we will explore the world of crisis management and provide valuable insights into critical practices and strategies that can help you safeguard your business from a broad range of potential crises.

To understand the concepts of crisis management, the very first thing that you need to understand is what crisis is, so let us know that here and now-

What is a crisis?

A crisis is defined as a sudden and unanticipated situation that leads to chaos and anxiety amongst the employees at the workplace.

An organizational crisis is an emergency situation that can disrupt the stability of employees and the organization as a whole. It can affect individuals, groups of employees, organizations, and even have global implications. Researchers argue that any significant threat to an organization's operations that is not handled with care can be considered a crisis. During such situations, the safety of employees, owners, and the entire organization is at risk.

A crisis can be threatening in the following areas: public safety, financial security, and damage to reputation.

Characteristics of Crisis

A crisis is sequential, wherein disturbing situations harming the organization happen in a sequence.

It arrives on short notice, not giving much time for supervisors to improvise a strategy.

Crisis leads to feelings of anxiety, fear in employees and can threaten the organization’s existence.

Reasons for the Occurrence of Crisis

Failure of technology and machinery breakdown. It includes hacked systems, problems on the internet, password identification failures, and corrupt system files.

The disagreement between employees and arguments amongst them can also lead to a crisis.

Strikes, protests, and boycott on the part of employees can also lead to crisis.

Theft or terror attacks can also lead to a crisis.

The neglection of minor problems at the start can lead to significant issues in the future leading to unrest and crisis.

A lackadaisical approach from management towards their employees can result in careless behavior, potentially leading to a crisis caused by missed deadlines. Additionally, illegal actions such as bribery, fraud, and data breaches can also bring about organizational crises.

Lack of funds can lead to bankruptcy and lead to a crisis.

Crisis communication is related to three major factors: management of issues, discussion of risk, and control of reputation.

Inadequacy in these aspects may trigger a crisis and necessitate the implementation of crisis management. Poor crisis communication can have a negative impact on all three factors. With a clear understanding of what constitutes a crisis, it's time to examine the crucial characteristics of crisis management.

What is Crisis Management?

Crisis management includes systematic steps that are taken by an organization to combat any threatening situations.

Need for Crisis Management

Effective crisis management is crucial for every organization as it can cause significant disruptions in business operations, result in harm to individuals and the company, negatively impact reputation, and affect finances. Therefore, it is essential to develop the skill of crisis management to handle unforeseen situations and minimize the impact on the organization.

It helps in preparing employees to face adverse and unexpected situations with calm and courage.

It helps the employees adjust effectively with the unexpected changes in the organization.

It helps the employees effectively understand the reasons why the crisis is happening.

It also helps the managers to better prepare themselves in handling their task force of employees in the face of adversity.

Essential Features of Crisis Management

Having a comprehensive plan for crisis management entails taking into account all the activities and processes involved. This allows managers and their team members to thoroughly evaluate and analyze the issue at hand, enabling them to gain a clear understanding of the events that triggered the crisis and the associated risks. Additionally, it helps identify potential areas that may cause uncertainty within the organization.

Effective crisis management also provides ample time for team managers and employees to respond appropriately and efficiently to any changes that may have been made to the organization's culture.

Effective crisis management involves the seamless coordination of all organizational departments to successfully navigate any emergency situation.

During a crisis, efficient communication among employees is crucial for effective resolution. Key considerations during emergencies include:

It is important for employees to stay composed and avoid spreading rumors during a crisis. The management team should maintain open communication with external clients, employees, stakeholders, and media to prevent the spread of misinformation.

One should always try to avoid being too rigid. They should make it a constant effort to adapt to changes made and any new situations that arise.

Types of Crises handled by Crisis Management

 There are two significant types of crises.

They can be self-inflicted, or they can also be caused due to external forces.

External factors like natural disasters, terrorist attacks, security breaches, and misinformation can have a significant impact on a company's operations and brand reputation. The extent of damage caused by these events depends on the nature of the force. On the other hand, crises that are self-inflicted are caused by the company's actions. For example, if an employee smokes in an environment that contains hazardous chemicals or downloads questionable files on an office laptop, it can potentially harm the company.

Negative reviews that highlight poor customer service can severely damage a company's image. In today's digital age, such comments can spread rapidly across the internet, potentially reaching a vast audience. Another potential crisis that a company may face is rumors regarding fraudulent accounting practices within their accounting department. Effective operational risk management is crucial to prevent such crises from occurring.

An external crisis, on the other hand, can be tackled by having a crisis communication plan in place and ensuring that it is regularly updated and tested. This plan should include a designated crisis management team, clear communication channels, and pre-determined procedures for handling various types of crises. By being prepared and proactive, companies can minimize the impact of crises and protect their reputation and bottom line.

How can a crisis affect a business?

1. Damage of the company’s reputation

The impact of media on a company's reputation can be devastating in a crisis. Negative press can spread quickly through traditional media channels like TV, print, and radio, damaging the brand's image and value. It only takes a short amount of time for damaging stories to be published, and the effects can be long-lasting.

The digital landscape provides ample opportunity for your company's brand to remain associated with any ongoing crisis through the abundance of online sources, such as various websites and social media platforms. Any missteps, actions, or lack thereof can be scrutinized and disseminated to a global audience.

2. Disruption of the company’s business operations

During a crisis, it may be necessary to enlist employees from various departments, potentially causing a shortage of manpower in those areas and disrupting normal business operations and services.

3. Loss of revenue

Steps for Crisis Management

The ongoing negative publicity about air pollution can cause your company's valuable content to get lost in search engine results. This can have a detrimental effect on your brand's reputation and may even result in the loss of potential customers.

1. Having a Plan

The supervisory management team must establish a well-defined plan with specific goals. These goals should encompass ensuring the safety of employees, the public, as well as the organization itself. By having a comprehensive plan in place, the organization can maintain its reputation and ensure its longevity.

The plan should outline the necessary procedures that will be implemented to effectively manage the crisis.

2. Have a Spokesperson

It is crucial for organizations to appoint a skilled spokesperson who can effectively communicate with the general public. In times of crisis, such as when the health and safety of customers and employees are at risk, the media may react with outrage. Having a trained spokesperson on hand can help to address the concerns of the media and provide accurate information to the public.

3. Honesty and Openness should be Implied

When media coverage is perceived as unfair, it can exacerbate the already stressful situation. To effectively manage a crisis, it is essential for both the organization's leader and spokesperson to maintain transparency and authenticity. This approach can help mitigate the negative impact of the situation and foster trust with stakeholders.

Transparency is always appreciated and valued. This transparency should be communicated on all channels ranging from news interviews to internal meetings with employees.

4. Inform Your Employees

To ensure employee loyalty and engagement with organizational work, it's vital to keep them informed about ongoing crises. This not only keeps rumors at bay but also fosters a sense of trust and transparency in the workplace.

5. Have open communication with Customers and Suppliers

During a crisis, maintaining credibility and value to customers is crucial to retaining their interest, as well as keeping suppliers engaged. To achieve this, it's important to be transparent and keep them informed throughout the crisis. Failing to do so runs the risk of damaging your credibility and appearing self-centered. Your crisis management plan should prioritize direct and regular communication with customers and suppliers to keep them informed of developments.

6. Update Everyone Often

It is important to keep your strategies for improving your stock market performance or managing your organization's reputation up-to-date. Your stakeholders should be informed about the efforts you are making to overcome any challenges and succeed. Turning a crisis into a compelling comeback story can also be a great opportunity to engage and inspire your audience.

7. Be Active in Social Media

In today's digital age, having a strong social media presence is crucial for any organization. A robust social media strategy can help your organization gain widespread recognition and establish a loyal following. Consistently updating your social media channels also reassures your audience that your organization is active and committed to staying relevant.

Examples of Crisis Management

In the highly competitive global market, each sector presents its unique challenges, risks, and rivals. Even a small incident can negatively impact a company's brand value. Therefore, any circumstance, no matter how minor, can potentially jeopardize a company's reputation in the professional world.

False accusations, data theft, product recalls, and the loss of a critical member of the organization are just a few examples of worst-case scenarios that can wreak havoc on a company. These events have the potential to create chaos that could even result in the dissolution of the organization. In addition to these, there are also unavoidable emergencies such as natural disasters, global financial crises, and terrorist attacks.

Efficient handling of crises can prevent damage to a company's reputation, but those caused by oversight or poor decisions can have a negative impact. It is essential to have a well-planned crisis management strategy in place to effectively handle such situations. A prime example of this is Johnson & Johnson's response to the crisis they faced in the 1980s.

Johnson & Johnson Crisis Management Example

Johnson & Johnson's adept handling of the Tylenol recall during the 1980s, in which seven individuals died after ingesting a cyanide-laced product, earned the company widespread acclaim for its crisis management strategies.

Johnson & Johnson acted swiftly by recalling all Tylenol capsules in the market and collaborating with FDA officials to develop tamper-proof packaging. This responsible and proactive approach garnered positive media attention, which continues to shine a favorable light on the company today, nearly 40 years later.

In the current era, living in a crisis-free environment is not feasible. It is unrealistic to assume that everything will always run smoothly without any obstacles. Therefore, it is crucial to equip ourselves with the necessary skills to handle any crisis that may arise. Developing crisis literacy is one effective approach to ensure preparedness for crisis management.

Having crisis literacy is crucial in comprehending the potential dangers that the global economy or current events may pose to our organization. Fortunately, there are now numerous resources available that can aid us in managing crises more efficiently.

In today's digital age, it is imperative to maintain an active presence on social media and stay up-to-date with the latest trends in order to remain connected with the rest of the world. With everything going online, news and information can spread like wildfire, meaning that any crisis we face could be happening in front of millions of people. As such, it is crucial to remain authentic and truthful in our communications, as this will ultimately help to establish trust with our audience.

Having the trust and backing of your audience, including customers, employees, and suppliers, can be the key to overcoming any crisis. But how do you feel about integrating a crisis management strategy into your overall business management approach? Do you believe that crisis management is essential to ensuring the long-term viability of your business? Share your thoughts on this topic in the comments section below.