1 Issues Management and Crisis Management Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved Prepared by Deborah Baker Texas Christian University Chapter 6

2 1. Distinguish between the conventional and strategic approaches to issues management. 2. Identify and briefly explain the stages in the issues management process. 3. Describe the major components in the issues development process and factors in actual practice. 4. Define a crisis and identify the four crisis stages. 5. List and discuss the major stages or steps involved in managing business crises. Chapter 6 Learning Outcomes

3 Chapter 6 Outline  Issues Management  Crisis Management  Summary  Key Terms  Discussion Questions

4 Introduction to Chapter 6 This chapter focuses on issue and crisis management, and the planning processes required to improve stakeholder management and to respond to stakeholder expectations.

5 Issues Management Conventional Approach Strategic Management Approach Narrow Focus Broad Focus

6 Issues Management Conventional Approach  Issues fall within the domain of public policy or public affairs management.  Issues typically have a public policy / public affairs orientation or flavor.  An issue is any trend, event, controversy, or public development that might affect the corporation.  Issues originate in social / political / regulatory / judicial environments.

7 Issues Management Strategic Management Approach  Issues management is typically the responsibility of senior line management or strategic management staff.  Issues identification is more important than it is in the conventional approach.  Issues management is seen as an approach to the anticipation and management of external / internal challenges to the company strategies, plans, and assumptions.

8 Strategic Issue Management 8 Figure 6-2

9 Issues Definition Issue A matter that is in dispute betweenparties. The dispute evokes debate,controversy, or differences of opinion.

10 Issues Definition Characteristics of an Emerging Issue  Terms of the debate are not clearly defined  Issue deals with matters of conflicting values and interest  Automatic resolution is not available  Issue is often stated in value-laden terms  Trade-offs are inherent

11 Basic Assumptions Issues Management Process  Issues can be identified earlier, more completely, and more reliably  Early anticipation widens the range of options  Early anticipation permits study and understanding of the full range of issues  Early anticipation permits organization to develop a positive orientation towards the issues  Organization will have earlier identification of the stakeholders  Organization will be able to supply information to influential publics earlier and more positively, creating better understanding

12 Model of Issues Management Process Identification of Issues Analysis of Issues Prioritization of Issues Formulation of Issue Responses Implementation of Issue Responses Evaluation, Monitoring, and Control of Results Figure 6-3

13 Identification of Issues Scan the environment Identify emerging issues and trends

14 Identification of Issues Leading Forces as Predictors of Social Change  Leading events  Leading authorities / advocates  Leading literature  Leading organizations  Leading political jurisdictions

15 Identification of Issues Figure 6-4

16 Issues Selling and Buying Issues Selling Relates to middle managers exertingupward influence in organizations asthey try to attract the attention of topmanagers. Issues Buying Top managers adopt a more openmind-set for the issues that matter totheir subordinates.

17 Who Who (which stakeholders) is affected by the issue? Who Who has an interest in the issue? Who Who is in a position to exert influence? Who Who has expressed opinions on the issue? Who Who ought to care about the issue? Who Who started the ball rolling? (Historical view) Who Who is now involved? (Contemporary view) Who Who will get involved? (Future view) Analysis of Issues

18 Ranking of Issues Xerox Approach  High priority  Nice to know  Questionable PPG Approach  Priority A  Priority B  Priority C Probability-Impact Matrix HighMediumLow High Medium Low Probability of Occurrence Impact on Company

19 Filtering and Ranking of Issues Figure 6-5

20 Five Filter Criteria 1. Strategy 2. Relevance 3. Actionability 4. Criticality 5. Urgency Ranking of Issues

21 Other Issues-Ranking Techniques Polls / Surveys Expert panels Content analysis Delphi Technique Trend extrapolation Scenario building Use of precursor events or bellwethers

22 Formulation and Implementation of Responses Formulation The response design process Implementation The action design process  Plan clarity  Resources needed  Top management support  Organizational structure  Technical competence  Timing

23 Issues Development Process Issues Development Process The growth process or life cycle of an issue

24 Issue Development Life Cycle Process Figure 6-6

25 Issues Management in Practice  Companies that adopt issues management processes …  develop better overall reputations  develop better issue-specific reputations  perform better financially  Provides a bridge to crisis management

26 Crisis Management To manage a crisis one first must understand that crises:  Occur abruptly  Cannot always be anticipated or forecast  May not occur within an issue category

27 Crisis Management Basic Causes of a Business Crisis 1. Acts of God 2. Mechanical problems 3. Human errors 4. Management decisions / indecisions

28 The Nature of Crises Crisis Definitions  A major, unpredictable event that has potentially negative results and its aftermath may significantly damage an organization and its employees, products, services, financial condition, and reputation.  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.

29 Crisis Management How a Crisis Should NOT be Handled  Minimizing the issue  Stonewalling  Too little, too late From Figure 6-7

30 Types of Crises Economic Personnel Physical Criminal Information Reputational Natural disasters

31 Types of Crises Outcomes of Major Crises  Escalated in intensity  Subjected to media and government scrutiny  Interfered with normal business operations  Damaged the companies bottom line  Resulted in major power shifts

32 Crisis Management: Four Stages Prodromal Crisis Stage Warning—precursor Symptom —precrisis Prodromal Crisis Stage Warning—precursor Symptom —precrisis Acute Crisis Stage Point of no return Crisis has occurred Acute Crisis Stage Point of no return Crisis has occurred Crisis Resolution Stage Patient is well/ whole again Crisis Resolution Stage Patient is well/ whole again Chronic Crisis Stage Lingering on—perhaps indefinitely; period of self- doubt; self-analysis Chronic Crisis Stage Lingering on—perhaps indefinitely; period of self- doubt; self-analysis Learning Figure 6-8

33 Pattern of a Poorly-Managed Crisis  Early indications that trouble is brewing occur.  Warnings are ignored / played down.  Warnings build to a climax.  Pressure mounts.  Executives are often overwhelmed or can’t cope.  Quick-fix alternatives look appealing. Hasty moves create trouble.  Clamming-up versus opening-up options present themselves.  Most firms choose the former.  A siege mentality prevails.

34 Managing Business Crises Fink’s Three-Stage Model 1.Identifying the crisis 2.Isolating the crisis 3.Managing the crisis

35 BusinessWeek’s Five Steps in Managing Crises 1.Identify areas of vulnerability 2.Develop a plan for dealing with threats 3.Form crisis teams 4.Simulate crisis drills 5.Learn from experience Managing Business Crises

36 Monsanto’s 10R’s for Handling Public Policy Crises  Respond early  Recruit a credible spokesperson  Reply truthfully  Respect the opposition’s concerns  Revisit the issue with follow-up  Retreat early if it’s a loser  Redouble efforts early if it’s a critical company issue  Reply with visible top management  Refuse to press for what is not good public policy  Repeat the prior statement regularly Managing Business Crises

37 Managing Business Crises Augustine’s Six Stages of Crisis Management 1.Avoiding the crisis 2.Preparing to manage the crisis 3.Recognizing the crisis 4.Containing the crisis 5.Resolving the crisis 6.Profiting from the crisis

38 1. Identify crisis communication team 2. Identify key spokespersons 3. Train your spokespersons 4. Establish communications protocols 5. Identify and know the audience 6. Anticipate crises 7. Assess the crisis situation 8. Identify key messages to communicate 9. Decide on communication methods 10. Be prepared to ride out the storm Crisis Communications

39 Components of Crisis Plans  Media communications99%  Employee communications98%  Crisis management team94%  Communications with elected officials86%  CEO / senior executive involvement82%  Documentation / written policy / handbook81%  Website communications77%

40 Be First, Be Right, Be Credible Be First Be Credible Be Right Get message out first to control content and accuracy Be open, honest, and speak with one consistent voice Say and do the right thing

41 Benefits of Crisis Management  Fewer disruptions to every life for consumers, employees, and citizens  Preparing for one type of crisis may be beneficial when other types of crises strike

42  Issues management  Crisis management  Portfolio approach  Issue  Emerging issue  Issues selling  Issues buying  Probability-impact matrix  Issues development process  Crisis  Prodromal crisis stage  Acute crisis stage  Chronic crisis stage  Crisis resolution stage  Crisis teams  Crisis communications  Ten steps of crisis communication  Being first  Being right  Being credible Key Terms