CRISIS MANAGEMENT Key issues

Crisis Management Crisis management is the process by which an organization deals with a major unpredictable event that threatens to harm the organization, its stakeholders, or the general public

Elements of a Crisis Three elements are common to most definitions of crisis: a threat to the organization, the element of surprise, a short decision time a need for change

Crisis management - 1 Crisis management consists of: Methods used to respond to both the reality and perception of crises Establishing metrics to define what scenarios constitute a crisis and should consequently trigger the necessary response mechanisms. Communication that occurs within the response phase of emergency management scenarios

Crisis Management - 2 The credibility and reputation of organizations is heavily influenced by the perception of their responses during crisis situations

Crisis Management - 3 * respond to a crisis in a timely fashion makes for a challenge in businesses. * must be open and consistent communication throughout the hierarchy to contribute to a successful crisis communication process.

Types of Crises Natural disasters Malevolence Technical breakdowns Human breakdowns Challenges Mega-damage Organizational misdeeds Workplace violence Rumors

Crisis Management Technological crises caused by human application of science and technology when technology becomes complex and coupled and something goes wrong in the system as a whole (Technological breakdowns)

Crisis Management Crises of organizational misdeeds - when management takes actions it knows will harm or place stakeholders at risk for harm without adequate precautions

Crisis Management Types of crises of organizational misdeeds: crises of skewed management values crises of deception crises of management misconduct.

Crisis Management Crisis management model - Gonzalez-Herrero and Pratt 95 Successfully diffusing a crisis requires an understanding of how to handle a crisis – before it occurs issues management planning-prevention the crisis post-crisis

Contingency Planning Plan in advance Rehearse via simulation Stipulate who the spokesperson is Speed and efficiency in response to crisis Offer accurate information or it will backfire Plan offers info and guidance to help decision makers deal with long-term effects of decisions

Role of apologies in crisis management Controversial - for fear of legal outcomes Evidence says that a compensation and sympathy are effective True contrition includes sympathy for victims and offers of compensation to offset losses or suffering

TOYOTA – CRISIS MANAGEMENT FAILURE Toyota’s communication strategy: “Too little, too late” Beyond the quality problem Toyota mismanaged the crisis

TOYOTA Basic Rules Violated For senior mgmt: crises must become their #1 priority immediately. Integrity of firm threatened - immediate hands-on control of CEO/team Sticking accelerators in 2008 - not treated as a serious matter

TOYOTA Basic Rules violated Find facts & solutions fast: Toyota managers at first in denial accepted a ‘patch’ (remove floor mats), not solution when crisis exploded -- engineering solution/stopped production Even today no one outside of Toyota knows what the real problems are – open to speculation and rumors

TOYOTA Basic rules violated Communicate fully and accurately: to all constituents to sustain trust err on side of protecting consumers & maintain trust with a recall What Toyota did: hushed problem and hoped it go away