Crisis Leadership and the Learning Organization Chapter 12 Crisis Leadership and the Learning Organization Copyright © 2010 by South-Western/Cengage Learning All rights reserved. PowerPoint Presentation by Rhonda S. Palladi Georgia State University

Chapter 12 Learning Outcomes Explain why crisis leadership competence is an important consideration when hiring new leaders. Identify the benefits of pre-crisis planning. Identify the key components of the pre-crisis planning phase. Describe the five-step process to crisis risk assessment. Describe the role of the CEO and communication in managing a crisis. List five or more attributes that can be used to describe the learning organization. Distinguish between the traditional organization and the learning organization. Describe the role of leadership in creating a learning organization. Define the key terms listed at the end of the chapter.

Crisis Leadership Crisis Is a low-probability, high-impact event that threatens the viability of the organization and is characterized by ambiguity of cause, effect, and means of resolution, as well as by a belief that decisions must be made swiftly While a pre-crisis response will not prevent a crisis, it can minimize financial loss and long-term damage to a firm’s reputation

Crisis Leadership (cont.) Strategic crisis leadership requires three things: Using environmental monitoring techniques to identify events that could trigger crises in the future Integrating crisis management into the strategic management process so it remains a regular part of the overall strategy-evaluation process Establishing a culture that embraces crisis awareness and preparation as a way of life

Crisis Leadership (cont.) Crises come in many forms Natural disasters Terrorist attacks Product failures Human error disasters Unexpected death of key individual(s) System failures

The Impact of Environmental Factors The importance of crisis leadership is intensified due to technological advances The Internet and communication networks allow millions to analyze and critique virtually every aspect of an organization’s response to a crisis A company today may have only minutes, not hours, to contain a crisis

Crisis Management Plan An effective crisis management plan is one that is: Comprehensive, with clear leadership, team, and individual assignments in the form of roles and responsibilities Upgraded frequently and supported by training and periodic drill sessions Coordinated and controlled across levels and units of the organization A crisis management plan should address what happens before, during, and after a crisis

Pre-Crisis Planning A pre-crisis plan is the best way to mitigate the negative consequences of any crisis Pre-crisis planning entails three components that every organization (large, small, for-profit, or non-profit) should address when putting together a comprehensive crisis response plan: Appointing a crisis leader Creating a crisis response team Assessing risk

Pre-Crisis Planning (cont.) Crisis leader Scans and monitors the internal and external environments for potential threats or warning signs of a crisis Requires individuals or departments to keep logs of complaints or incidents Monitors customer and employee complaints and behavior Identifies emerging patterns or trends in the regulatory environment, competitive landscape, and social environment Coordinates the activities of the crisis management team to ensure that the members work well together

Pre-Crisis Planning (cont.) Crisis response team Should involve a good mix of the representatives from all sectors of the organization Diversity in the makeup of the crisis management team is emphasized Members must be calm, self-confident, assertive, and dependable during a crisis Leaders must develop comprehensive training programs for crisis response team personnel and engage them in frequent drills that simulate an actual crisis situation An effective team functions as one unit with one voice under a single unit command

Pre-Crisis Planning (cont.) Crisis risk assessment Crisis teams set out to identify potential incidents that could hit the organization and then determine the degree of preparedness necessary The crisis leader and crisis team members begin the risk assessment process by engaging in “what-if” scenario analysis that focuses on creating realistic incidents under each crisis category Scenario analysis and planning is a tool that helps leaders prevent or respond to crises through decision-making skills based on possible outcomes of crises

Risk Assessment Model S W O T Criteria Risk Identification (Risk Chart) Risk Assessment & Ranking 1 2 Risk Reduction Strategies S W O T 3 Crisis Prevention Simulations 4 Crisis Management 5 Source: Based on Lawrence Barton, Crisis in Organizations, 2nd ed., South-Western/Thomson Learning, 2000, p. 19.

Pre-Crisis Planning (cont.) Ultimately the best gauge to determine an organization’s readiness to respond to a crisis is how it rates according to the following five factors: Quality of strategic crisis plan Awareness and access to crisis management information Readiness for a quick response Effective communication plan in place Effective crisis leadership

Pre-Crisis Planning (cont.) A comprehensive crisis response plan based on risk analysis indicates: Who is in charge of making key decisions Who is on the team and what their roles and responsibilities are Who is to respond to media inquiries How the plan will be executed What other employees are required or not required to do or say

Pre-Crisis Planning (cont.) The benefits of a pre-crisis response plan include: Faster response time Better judgments Ready and available resources Fewer costly mistakes Less panic Quicker resolution of the crisis

Managing During a Crisis An effective response in the event of a crisis is critical to an organization’s survival An organization should make itself accessible as quickly and openly as possible Such quick action can help to preserve the credibility and reputation of the organization and its leaders during the crisis

Managing During a Crisis (cont.) The role of senior leaders Employees will seek guidance from company senior leaders in terms of: How business operations will continue Ways to cope with the situation It is the senior leader’s responsibility to: Stay engaged and lead from the front Focus on the big picture and communicate the vision Work with the crisis management team

Managing During a Crisis (cont.) The role of senior managers (cont.) Effective leaders: Remain focused on the vision and mission of the organization despite dealing with the reality of the present Rely on the values and principles found in their mission statements to guide company decision making during a crisis View crisis management as a team effort

Discussion Question #1 Describe why a senior leader’s physical presence is critical during a crisis.

Effective Crisis Communication Can make or break a company reputation Effective pre-crisis planning should designate who will speak for the organization in the event of a crisis It is generally believed that it makes a difference whether the company representative or spokesperson is a senior-level manager or someone at a lower level of responsibility Providing honest and accurate answers is the essence of effective crisis communication

Effective Crisis Communication (cont.) Short-term benefits of an effective crisis communication system: Well-informed employees will assist the organization in presenting the facts to the outside world Employees may have excellent insight on the incident and valuable suggestions on solution alternatives

Effective Crisis Communication (cont.) Long-term benefits of an effective crisis communication system: The organization will have won over the confidence, loyalty, and commitment of the employees Employees’ appreciation, sense of belonging, and self-worth is enhanced A culture of teamwork and cohesion is created

Discussion Question #2 How important to an organization is internal (employee) communication during a crisis?

Guidelines for Effective Crisis Communication It is generally believed that the first 24 hours of a crisis are crucial because of the media’s need to know what happened so they can tell their audiences There is an information vacuum that, if left unfilled by the organization(s) involved, will be filled for them by others Telling the truth up front is the simplest and most effective way of defusing public hostility

Guidelines for Effective Crisis Communication An organization can use a number of avenues to disseminate its information or tell its side of the story to weather the storm brought on by a crisis Press release Is a printed statement that describes how an organization is responding to a crisis and who is in charge Press kit Is a package of information about a company, including names and pictures of its executives, a fact sheet, and key milestones in the company’s history News conference One-on-one interview

Guidelines to Effective Crisis Communications and Management Be present Don’t “spin” Communicate plan of action Be sensitive with affected parties Avoid conflicting messages Show a plan for how you will avoid a repeat in the future

Guidelines to Effective Crisis Communications and Management (cont.) Don’t make excuses for the leader Go the extra mile Go beyond the requirements of the situation When things are going good, take credit for it without being self-absorbed Remember that the media is your friend and link to the public Be honest and straightforward with them

Managing After a Crisis Top management should launch an evaluation (preferably by an objective third party) of the organization’s effectiveness in managing the crisis The analysis should focus on the following questions: How effective was the crisis team? How effectively did the crisis management plan perform? How effectively were victims and family members handled? What worked the least in mitigating the problem?

What is a Learning Organization? Is one that is skilled at creating, acquiring, and transferring knowledge, and at modifying behavior to reflect new knowledge and insights Organizational knowledge Is the tacit and explicit knowledge that individuals possess about products, services, systems, and processes Is often codified in manuals, databases, and information systems

The Traditional versus the Learning Organization Culture Most organizations today operate in environments characterized by continuous change However, for some—like the high-tech companies—discontinuous change occurs when anticipated or expected changes bear no resemblance to the present or to the past Given the realities of the current environment, the traditional organizational form is being replaced by the learning organizational form

The Traditional vs. the Learning Organization Stable environment Vertical structure Strategy is formulated from the top and passed down Centralized decision making Rigidly defined and specialized tasks Rigid culture that is not responsive to change Formal systems of communication tied to the vertical hierarchy with lots of filters Learning Changing environment Flat, horizontal structure Strategy is a collaborative effort within the organization and with other employees Decentralized decision making Loose, flexible, and adaptive roles Adaptive culture that encourages continuous improvement and change Personal and group networks of free, open exchanges with no filters

The Traditional Organization Culture Is based on the bureaucratic model that emphasizes a command-and-control structure, centralized decision making, highly formalized tasks, and a rigid, closed culture Is oriented toward the individual, and rewards are individualized Contains a mindset that there is a “right way” to do things, and only when that way is followed the organization will be successful Is efficiency-driven Deviating from standard operating procedures is frowned upon and mistakes are viewed as a symptom of poor performance

The Learning Organizational Culture Abandons the vertical structure for a flat, horizontal structure Teamwork is highly valued, and network systems facilitate open communication and exchange throughout the organization and with other external sources Encourages innovation and creativity in meeting current challenges by designing tasks that are much looser, free flowing, and adaptive Involves multiple learning processes that allow learning to feed forward to the organizational level and feed back to the individual Embraces the idea that people will learn if encouraged to face challenges, experiment, fail, and reflect on their experiences

Discussion Question #3 What message does it send when the organizational culture encourages employees to view mistakes/problems as opportunities for improvement rather than reasons to blame or punish those involved?

Learning and Knowledge Acquisition versus Firm Performance Research findings support the following: A firm’s ability to create and share knowledge is positively related to new product development success Organizational learning and knowledge creation have a direct positive influence on the level of innovation The learning organizational culture has a positive direct impact on employee, customer, and supplier satisfaction levels External knowledge acquisition has a positive impact on the processes of creativity and learning in problem solving

The Role of Leaders in Creating a Learning Organization Knowledge management is a key leader function Problems associated with failed efforts to create a learning culture are often attributed to poor leadership Leaders face a dual challenge of maintaining efficient operations and creating an adaptive organization at the same time

Guidelines for Enhancing Organizational Learning Encourage creative thinking Create a climate in which experimentation is encouraged Provide incentives for learning and innovation Build confidence in followers’ capacity to learn and adapt Encourage systems thinking

Guidelines for Enhancing Organizational Learning (cont.) Create a culture conducive to individual and team learning Institute mechanisms for channeling and nurturing creative ideas for innovation Create a shared vision for learning Broaden employees’ frame of reference Create an environment in which people can learn from their mistakes