Strategic
Planning & the Crisis Management Team
Case Study:
Mini- Case – BP Gulf of Mexico Oil Spill
Please answer each question thoroughly with a minimum word
count of 200 each. Use APA format with in-text citations and a reference page.
Do not include a cover page and place your answers underneath each question for
easier breakdown. Use the file attached as an additional reference if needed.
Let me know if you have any questions or concerns.
Case Summary
1. In a narrative format, summarize the key facts and issues
of the case.
2. Update the information in the case by researching it on
the Internet. Focus your response on the specific issues in the case.
Case Analysis
3. Was the Deepwater Horizon accident a problem associated
more with cost cutting or with a faulty process safety culture?
4. What impact did BP’s strategy have on the crisis?
Application
5. Assume the role of Tony Hayward’s successor as CEO of BP.
What steps would you take to address the crisis and rebuild BP’s reputation?
*Discuss the Case
Regarding the opening and closing case in the Readof Amy
Bishop, what mechanisms should the university have had in place to detect the
coming crisis before it occurred? Please
remember to use scholarly (not general sources) sources and be very careful of
plagiarism. Minimum word count for this question only is 250.
*Here’s a link that
you may use in addition to research
http://www.cbsnews.com/news/amy-bishop-ex-univ-of-ala-professor-who-pleaded-guilty-to-shooting-six-people-sentenced-to-life-in-prison/FOR THE USE OF SAVANT LEARNING STUDENTS AND FACULTY ONLY.
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CHAPTER 4
A Strategic Approach
to
W
R
Crisis Management
Landscape Survey
The
Internal
Landscape
The
External
Landscape
I
G
H
T
Strategic Planning
,
Chapter 4: A Strategic
Approach to Crisis
Management
Chapter 2:
The Crisis
Management
Landscape
Chapter 3:
Sources of
Organizational Crises
Chapter 5:
Forming the
Crisis
Management
Team and
Writing the
Plan
Chapter 6:
Organizational
Strategy
and Crises
S
H
E
R
Crisis
R
Y
Crisis Management
Chapter 7:
Crisis
Management:
Taking Action
When
Disaster Hits
Chapter 8:
Crisis
Communications
Organizational
Learning
Chapter 9:
The
Importance
of Organizational
Learning
Chapter 10:
The
Underlying
Role of Ethics
in Crisis
Management
2
7
Opening Case, Part 1: The Professor, “Arrogant Amy”
9
3
Dr. Amy Bishop arrived on the campus of the University of Alabama at Huntsville
B had a Ph.D. from Harvard and
(UAH) in 2003 with impeccable credentials. She
was by all means a rising star in the field of neurobiology.
Her new position was
U
that of a tenure-track assistant professor, a job that would require her to teach and
conduct research. A tenure-track professor at UAH has six years to make a case for
the long-term stint known as tenure. An assistant professor who is not deemed to
be a good fit may be denied tenure, at which time the assistant professor begins
anew at another institution.
In general, a tenure-track faculty member must be a good teacher and provide
a steady stream of research scholarship in the form of peer-reviewed publications.
In addition, being collegial is a term used frequently on university campuses. Albeit
81
82
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
subjective, the notion of collegiality means that faculty members are respectful of
their students and peers. Put a bit differently, a faculty member must be likeable,
although agreement with everything that is said at the university is not required.
Indeed, one can disagree with another colleague’s viewpoint but still be respectful
and courteous to that colleague. Professors who are overly confrontational or arrogant may find it hard to attain tenure at some institutions. Amy Bishop’s arrogant
and abrasive style rubbed many people the wrong way, earning her the informal
nickname “Arrogant Amy.” She was even known for introducing herself as “Dr. Amy
Bishop, Harvard-trained” (Wallace, 2011).
Bishop’s personal style of carrying herself did not go over well at UAH. Initially,
she was described by colleagues and W
students as funny and extroverted, but she was
not universally liked. Students complained that her exam questions went beyond
R was circulated by students complaining
what was covered in the course. A petition
I
about her exams (Dewan, Saul, & Zezima,
2010).
Her relationship with graduate students
G was also volatile. It was generally known
that most students simply did not last long working for her in the laboratory, and
H completing their degrees. One student was
many transferred to another lab before
dismissed from her lab in May 2006.
T The student promised to return notebooks
and keys the next day, but Bishop called
, the campus police to address the situation
(Dewan et al., 2010).
Her erratic behavior was noted by a member of her tenure committee, who commented in a report that she was literally
S “crazy.” When given a chance to restate the
word crazy, the faculty member did not change his stance, stating “I said she was
H
crazy multiple times and I stand by that. . . . The woman has a pattern of erratic
behavior. She did things that weren’tE
normal. . . . She was out of touch with reality”
(Wallace, 2011).
R
In March, 2009, the university decided not to accept her application for tenure.
R
Bishop’s research was cited as being a low point. She had published one peerYand 2006, but none in 2007 and 2008. Then,
reviewed paper in each of 2004, 2005,
in 2009, she had three peer-reviewed papers, although one of them was published
in a journal that was not considered of very high quality. In addition, her teaching
2
failed to measure up to the standards desired by UAH (Bartlett, Wilson, Basken,
7
Glenn, & Fischman, 2010).
At this point in her career, it would
9 be expected that Amy Bishop would need
to move on to another institution. The career prospects, though, can be difficult
3
for some professors, as many in the higher education industry see not getting
B from that colleague’s peers (Wallace, 2011).
tenure as being the ultimate rejection
In addition, career mobility for a faculty
U member who teaches and researches in a
very specialized field can be limited. For some professors, there may be only one
or two positions each year for which they are truly qualified (Bartlett et al. 2010).
Dr. Bishop decided to appeal the tenure decision and requested that various faculty members write letters of support on her behalf. She was the main source of
income for her family and she desperately needed the job; the family was already
experiencing financial problems and had discussed declaring bankruptcy (Wallace,
2011). Despite her efforts to appeal the tenure decision, her request was still denied.
Dr. Bishop would need to seek employment elsewhere.
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Chapter 4. A Strategic Approach to Crisis Management
83
Opening Case Part 1 Discussion Questions
1. What can colleges and universities do to help their new faculty be successful in their jobs?
2. Some take the viewpoint that the institution is at fault if a faculty member
fails to attain tenure. Discuss this statement in terms of its merits.
3. Faculty members who are not granted tenure are often given a final oneyear contract before they are required to leave. What potential crisis could
emerge during that person’s last year on campus?
W
R
Opening Case Part 1 References
I
Bartlett, T., Wilson, R., Basken, P., Glenn, D., & Fischman, J. (2010, February 26). In Alabama,
G
a scientist’s focus turns deadly. Chronicle of Higher Education, pp. A8, A12.
Dewan, S., Saul, S., & Zezima, K. (2010, FebruaryH20). For professor, fury just beneath
the surface. New York Times. Retrieved July 26, 2012, from http://www.nytimes
T
.com/2010/02/21/us/21bishop.html?pagewanted=all
Wallace, A. (2011, February 28). What made this university researcher snap? Wired. Retrieved
,
July 26, 2012, from http://www.wired.com/magazine/2011/02/ff_bishop/.
S
Introduction
H
E understand both the sources of
Effective crisis management requires that managers
crisis events and the strategies needed to identify
R and plan for them. A crisis event
rarely occurs “out of the blue.” Instead, it usually follows one or more warning
R
signs. Typically, a series of precondition events occur before a crisis can commence.
Y that ultimately causes the crisis
These events eventually lead to the “trigger event”
(Shrivastava, 1995; Smith, 1990). Recall that in 1984, deadly methyl isocyanate gas
leaked from a storage tank at a Union Carbide plant in Bhopal, India, initially kill2
ing more than 2,500 people and injuring another 300,000. The trigger event for
this crisis was the entry of water into a storage7tank that subsequently caused the
unit’s temperature and tank pressure to rise. Numerous
preconditions contributed
9
to the origin of this accident. These included shutting down a refrigeration system
3
designed to keep the gas cool, failing to reset the tank temperature alarm, neglectB performing the maintenance and
ing to fix a nonfunctioning gas scrubber, and not
repair on an inoperative flame tower designed
U to burn off toxic gases (Hartley,
1993). Each of these four systems was designed to help alert plant workers and
contain the toxic effects of a gas leak. Each of them was inoperable the day of the
accident.
In the evolution of a crisis, the warning signs may not be identified until it is
too late, either because decision makers are not aware of them or because they do
not recognize them as serious threats. Sometimes managers are simply in denial.
Some assert that a crisis cannot happen to their organization or that the probability
of it occurring is so low that it does not warrant spending the time and resources
84
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
required to prevent it (Nathan, 2000; Pearson & Mitroff, 1993). In some cases, the
warning signs are ignored altogether, even though these preconditions are signaling
an impending crisis. For example, Toyota’s unintended acceleration problem with
its Camry model was preceded by a year’s worth of problems with stuck accelerators (Institute for Crisis Management, 2011). All of this underscores the importance
of assessing crisis vulnerability, the practice of scanning the environment and identifying those threats that could happen to the organization.
In this chapter, we examine crisis management from a strategic point of view.
First we overview the challenges managers face as they assess the external environment, particularly in terms of its uncertainty. We then proceed to the heart of
identifying potential crises and employ
Wthe SWOT (strengths, weaknesses, opportunities, and threats) analysis, a tool that is widely used in strategic planning. We close
R the link between organizational culture and
this chapter with a short discussion on
I
crisis planning.
G
H
A Strategic Approach to Crisis Management
T
,
Crisis management requires a strategic mind-set or perspective (Chong & Park,
2010; Preble, 1997; Somers, 2009). Therefore, understanding effective crisis management requires that we first understand
S the four key distinctions of a strategic
orientation perspective.
H
1. It is based on a systematic, comprehensive analysis of internal attributes,
E
also referred to as strengths and weaknesses; and of factors external to the organiR
zation, commonly referred to as opportunities
and threats. Readers familiar with
strategic management recognize thisRprocess as the SWOT analysis. Approaching
this process in a systematic manner is important because it ensures that potential
Y
crises are not overlooked. Thus, we must look both inside and outside the organization as we determine the risk factors that must be confronted.
2 term and future oriented—usually several
2. A strategic orientation is long
years to a decade into the future—but
7 also built on knowledge of events from the
past and present.
9
3. A strategic orientation is distinctively
opportunistic, always seeking to take
3
advantage of favorable situations and avoiding pitfalls that may occur either inside
B
or outside the organization.
U
4. A strategic orientation involves choices, and very important ones at that.
Because preparing for every conceivable crisis can be costly, priorities must be
established. For example, resources must be spent to ensure safety in the workplace.
The expenditure of resources, however, does take money directly off the bottom
line. Because this approach is strategic, the expenditure may ensure the overall
well-being of the firm in the long run. Therefore, some expenditures should not be
viewed solely as cost items, but as investments in the future longevity (and safety)
of the company.
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Chapter 4. A Strategic Approach to Crisis Management
Because of these distinctions, the overall crisis management program must
include the top executive and members of his or her management team. The chief
executive is the individual ultimately accountable for the organization’s strategic
management, as well as any crises that involve the organization. Except in the
smallest companies, he or she relies on a team of top-level executives, all of whom
play instrumental roles in the strategic management of the firm (Carpenter, 2002;
Das & Teng, 1999).
Strategic decisions designed to head off crises are made within the context of
the strategic management process, which can be summarized in five steps (Parnell,
2013):
W
1. External analysis. Analyze the opportunities and threats or constraints
R
that exist in the organization’s macroenvironment,
including industry and
external forces.
I
G strengths and weaknesses in its
2. Internal analysis. Analyze the organization’s
internal environment; reassess the organization’s
mission and its goals as
H
necessary.
T
3. Strategy formulation. Formulate strategies that build and sustain competi,
tive advantage by matching the organization’s strengths and weaknesses
with the environment’s opportunities and threats.
S that have been developed.
4. Strategy execution. Implement the strategies
H
5. Strategic control. Engage in strategic control activities when the strategies
E
are not producing the desired outcomes.
R
Crisis management is an important consideration in each step, in different
R of crises that exist in the firm’s
ways. In the first step, managers identify the sources
external environment. Typically, the organization’s
external opportunities and
Y
threats are identified to determine specific vulnerabilities of concern. The threat of
online viruses and other denial-of-service (DoS) attacks, for example, may suggest
that the firm invest in upgrading firewall and2virus protection measures so that
its website is not taken offline by hackers (Robb,
7 2005). Also related to technology
is a new opportunity: the use of social media outlets in addition to the company’s
9
regular Web page. Facebook pages for organizations are common as firms seek to
3 move can be important when a
demonstrate their human side to the public. This
crisis does strike, because the company can useB
more personalized media outlets to
communicate its side of the story (Jacques, 2009).
U
Government regulations, formed in response to a previous crisis, are part of the
external environment. Following a salmonella outbreak and subsequent recalls of
tomatoes in 2008, the U.S. Food and Drug Administration strengthened inspection
and other measures to reduce the likelihood of a similar crisis in the future. Initially,
the agency focused on tomatoes as the culprit. Later, various types of peppers were
also part of the investigation (O’Rourke, 2008). Food-related firms from growers
to producers to restaurants should consider how this crisis evolved and what strategic changes might be appropriate (Zhang, 2008). Ultimately, those in the food
85
86
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
manufacturing industry must be knowledgeable concerning what is now labeled
food traceability, a term that requires all parties processing food to have the ability
to track inputs through the entire supply chain (Schrader, 2010).
The second step focuses on vulnerabilities within the organization that may
result in a crisis event. Typically, the organization’s internal strengths and weaknesses are identified to determine what vulnerabilities may be present. A poorly
trained workforce, for example, could lead to a workplace accident. Likewise, dubious advertising claims about one’s competitors could result in litigation. Aging
equipment is another common area of weakness.
The Chalk’s Ocean Airways crash mentioned in Chapter 3 is an example of a
company with certain strengths that
Wmade it a popular small airline over many
decades. In 2003, the airline had been cited in the Guinness Book of World Records as
R airline (Scammell, 2003). The company
the world’s oldest continuously operating
I it flew vintage seaplanes to the Bahamas,
was a novelty in south Florida because
a feature that made it popular with G
local Bahamians who found the arrangement
convenient when returning home. Indeed, flying in seaplanes in a time of modern
H possessed. It was a visit back to nostalgic
aviation was a strength that the airline
T
times. Unfortunately, the vintage seaplanes
also embodied a weakness that was not
apparent to its mechanics: structural
fatigue
cracks caused by years of use. “This
,
accident tragically illustrates a gap in the safety net with regard to older airplanes,”
said Mark Rosenker, National Transportation Safety Board (NTSB) chairman. “The
signs of structural problems were there—but
not addressed. And to ignore continuS
ing problems is to court disaster” (Vines,
2007,
p. 14).
H
The third and fourth steps concern the development and execution of the firm’s
E Indeed, some strategies are more prone
strategies at the various functional levels.
to crisis events than others. For example,
R a strategy that emphasizes global expansion into less stable emerging nations engenders a greater risk of crisis than one
R
that has a strong domestic market orientation. This is not to suggest that potential
Y rather that they be evaluated closely within
crisis-laden strategies be avoided, but
the strategic decision-making process.
The final step involves strategic control. This is an evaluative process through
2
which the organization’s managers engage in a serious assessment of the outcomes
that are occurring or have occurred7in the organization. Once the assessment is
completed, the organization must take
9 action to counter undesirable or unanticipated outcomes that emanate from the strategy’s implementation. When a strategy
3
is executed as planned, control may be minimal. When execution difficulties exist
B the nature of strategic control may need to
or unforeseen problems arise, however,
change to crisis prevention or even U
crisis response. Monitoring mechanisms must
be established so that corrective action can be initiated when necessary. Strategic
control is useful in crisis management because it often signals that a problem may
be forthcoming. For example, accounting controls can signal whether there is
embezzlement taking place in the organization. Figure 4.1 depicts how these five
strategic steps fit within the crisis management framework. Note that Chapter 3
provided the foundation for the second step in the process—examining the external landscape. This chapter builds on that discussion and also focuses on Steps 2
and 3. In the next section, we examine the nature of environmental uncertainty as
it pertains to the strategic and crisis management process.
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Chapter 4. A Strategic Approach to Crisis Management
Landscape Survey
The
Internal
Landscape
The
External
Landscape
Strategic Planning
Crisis Management
Organizational
Learning
2. Internal
Analysis
3. Strategy
Formulation
4. Strategy
Execution
5. Strategic
Control
1. External
Analysis
W
R
I
Figure 4.1 A Strategic Approach to Crisis Management
G
H
T
Understanding Environmental Uncertainty
,
Chapter 3 discussed a number of external sources of crises: political–legal, economic, social, and technological forces. Preventing crises would probably not be so
complex if the top management team always had
Sperfect information. Unfortunately,
this is not the case. An important step in the strategic
H management process—analyzing
the external environment—presents one of the most critical challenges for preventing
E uncertainty.
crises: understanding and managing environmental
Managers must develop a systematic process
R to obtain information about the
organization’s environment. Ideally, top managers should be aware of the multitude
R
of external forces that influence an organization’s activities. Uncertainty occurs
when decision makers lack current, sufficient, Y
or reliable information and cannot
accurately forecast future changes. In practice, decision makers in any organization
must be able to render decisions when environmental conditions are uncertain.
2
Environmental uncertainty is influenced by three key characteristics of the orga7 can be classified along a simple–
nization’s environment. First, the environment
complex continuum. Simple environments have
9 few external factors that influence
the organization, and the strength of these factors tends to be minimal. Complex
3
environments are affected by numerous external factors, some of which can have a
B
major influence on the organization. Most organizations
fall somewhere between
these two extremes.
U
Second, the environment can be classified along a stable–unstable continuum.
Stable environments are marked by a slow pace of change. City and county municipalities typically fall under the category of stable environments. Unstable environments are characterized by rapid change, such as when competitors continually
modify strategies, consumer preferences change quickly, or technological forces
develop rapidly. The computer hardware and software industries reside in unstable
environments.
Third, environmental uncertainty is a function of the quality or richness of
information available to decision makers (Starbuck, 1976). This information
87
88
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
function usually does not present a problem for established firms operating in
developed countries. In these settings, information sources are of higher quality
and richness; they include business publications, trade associations, and welldeveloped governmental agencies. In emerging economies, however, reliable data
on items such as market demand, economic forces, and consumer preferences may
not be as readily available.
Considering these three environmental characteristics, uncertainty is lowest in
organizations with simple and stable environments, and where the quality of available information is high. In contrast, uncertainty is highest in organizations whose
environments are complex and unstable, and where the quality of information is
low (Duncan, 1972). The relationship
Wbetween uncertainty and the prevalence of
organizational crises can now be seen: as uncertainty increases in organizations,
R organizations whose core competencies
so does the likelihood of crises. Hence,
are tied closely to technology tendI to experience the greatest complexity and
instability. Following the terrorist G
attacks of September 11, 2001, airlines were
added to this category because of increased regulatory pressure and fears of
H
further attacks.
Organizations in environments T
marked by low uncertainty should be managed differently from those marked
, by high uncertainty. When uncertainty is
low, greater formality and established procedures can be implemented to increase
predictability, improve efficiency, and lessen the frequency of crisis events. When
uncertainty is high, however, procedures
are difficult to develop because proS
cesses tend to change more frequently.
In
this
situation, decision makers are often
H
granted more freedom and flexibility so that the organization can adapt to its
E information on the environment becomes
environment as it changes or as better
available. While this freedom and R
flexibility may be necessary, it can create a
crisis-prone environment. The reason is the possibility of experiencing what manR
agement scholar Karl Weick (1993) labels as “cosmology episodes.” Such episodes
Y in which the stakeholders involved have
are characteristic of many crisis events
encountered a situation unlike any that has been experienced before. Indeed, one
of the characteristics of a crisis is its low probability of occurring, and yet, if it
2
does occur, it can appear to be unique and unparalleled. The term cosmology epi7 forest fire at Mann Gulch, Montana, that
sode was originally applied to the 1949
resulted in the deaths of 13 smokejumpers.
The event consisted of a unique inter9
action of weather, fire, and geography that trapped the smokejumpers fighting the
3
fire (Weick, 1993). Despite the fact that the smokejumpers were experienced and
the original fire was not consideredBlarge, the events that unfolded were new to
those involved and ended in tragedy.U
A number of techniques are available for managing uncertainty in the environment. The first consideration, however, is whether the organization should adapt
to its environment or, in some cases, attempt to influence or change it. Urban hospitals represent a classic example of adapting to their environments when the surrounding neighborhoods where they are located become crime ridden, a common
problem for many urban facilities. Moving the hospital is usually not an option
because, geographically, it is located to serve a specific community. To keep it safe
from the crime in the external neighborhoods (and hence, free of specific crises),
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Chapter 4. A Strategic Approach to Crisis Management
measures are taken to ensure the safety of the buildings and the patients. Employing
extra security guards, installing perimeter lighting, using security cameras, and utilizing metal detectors are all methods of adapting to the environment.
Occasionally, a business may seek to change its environment to protect it from
a crisis. Farmers have been known to use special cannons to ward off approaching
hail that might damage crops. These anti-hail cannons send a loud popping noise
into the air, directed squarely at the storm at hand. Although the practice stems
back to the 1890s—and is not entirely validated by science—a resurgence of this
practice has occurred in both Europe and the United States (Griffith, 2008). Even
automaker Nissan has used this unusual method for dealing with hail. The company has a production facility in Canton, Mississippi,
with a storage area of 140
W
acres. Hail is a major concern because of the body damage it can cause to an autoR
mobile. To respond to this threat, Nissan installed its anti-hail system using soundI equipment—when conditions are
producing hail cannons. Using weather-sensing
right for hail—a sonic wave is fired into the air
G every five and a half seconds to
prevent the forming of hail (Foust & Beucke, 2005). Not everybody is happy with
H created a secondary crisis: local
the arrangement, however, as the cannons have
T noise and have petitioned the
neighbors have been complaining about the excessive
Madison County Board of Supervisors to make, Nissan stop the practice. However,
county officials have not found Nissan in violations of existing laws, although they
did ask the company to explain to the board how the cannons are supposed to work
(Chappell, 2005).
S
Other techniques for managing uncertainty
Hcan also be used. One is buffering, a common approach whereby organizations establish departments to absorb
uncertainty from the environment and therebyE
buffer its effects (Thompson, 1967).
Purchasing departments, for example, perform
R a buffering role by stockpiling
resources for the organization lest a crisis occur if they become scarce. Likewise,
R
even companies that follow lean management practices are learning that some buffering is necessary lest there be an interruption Y
within their supply chains (Ganguly
& Guin, 2007). Of course, establishing a crisis management team and engaging in
formal planning is also a form of buffering. If a crisis occurs, the team takes on a
2
mitigating role by managing the ordeal.
7 whereby the organization mimics
Another technique is imitation, an approach
a successful key competitor. Presumably, organizations
that imitate their competi9
tors reduce uncertainty by pursuing “safety in numbers.” The concept of imitation
3
is paramount in crisis management as companies seek to learn what other orgaB on high-reliability organizations
nizations are doing to avoid crises. The literature
(HROs) has helped to achieve this goal by extolling
U how those in high-risk environments manage to stay incident free (Bourrier, 2011; Roberts & Bea, 2001).
Imitating the successful crisis management techniques of other organizations
can be advantageous as well. The crisis management plans for many universities
and government agencies are publicly available on their websites. One can learn
much by studying the examples of these plans. However, imitation must be undertaken with an understanding of the differences that exist between the two organizations. Managers must account for the specific internal and external factors unique
to their own organizations, which is why assessing crisis risks must begin with an
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
examination of the organization’s internal and external environments. Imitating an
ineffective strategy or structure can also reduce the effectiveness of crisis management (Bertrand & Lajtha, 2002).
Environmental Scanning
Keeping abreast of changes in the external environment that can lead to crises
presents a key challenge. Environmental scanning refers to collecting and analyzing
information about relevant trends in the external environment. A systematic environmental scanning process reducesW
uncertainty and organizes the flow of current
information relevant to organizational decisions. In addition, scanning provides
R system about changes in the environment.
decision makers with an early warning
I
This process is also an important element
in risk identification. Because organization members often lack critical knowledge
and information, they may scan the
G
environment by interacting with outsiders, a process known as boundary spanning.
Environmental scanning is meantH
to be future oriented in that it provides a basis
for making strategic decisions. It also
T must not be too general in nature (Kumar,
Subramanian, & Strandholm, 2001),, but specific to the needs of the organization.
Hence, the goal is to provide effective environmental scanning to produce information relevant to the firm (Groom & David, 2001). Although managers may possess
information that could mitigate a crisis
S or prevent it from occurring, they still need
to act on that information and make the appropriate decisions.
H
The infamous crisis that erupted between Royal Dutch Shell and the environmenE that important cues can still be ignored by
tal activist group Greenpeace illustrates
management. In fact, this incident has
Rbeen labeled a “predictable surprise,” one that
had plenty of warning indicators, yet still caught the company off guard (Watkins &
R
Bazerman, 2003). The incident involved Shell’s plan to sink an obsolete oil platform,
the Brent Spar, in the North Sea. OnYApril 29, 1995, however, Greenpeace activists
boarded the platform and announced they would block its sinking because of radioactive contaminants that were stored on the structure. Shell responded by blasting
2
the protestors and their boats with water cannons, a move that turned out to cause
7 company. After the water cannon incident,
a major public relations crisis for the
opposition to Shell’s plans grew in Europe,
9 leading to a boycott of Shell service stations in Germany. Protestors damaged 50 German gas stations, firebombing two of
3
them and riddling one with bullets (Zyglidopoulos, 2002). Less than two months
B gave in and abandoned its plan to sink the
after the initial Greenpeace protest, Shell
Brent Spar.
U
Watkins and Bazerman (2003) note that Royal Dutch Shell was surprised by the
turn of public opinion against it. This occurred despite the fact that the company
had an abundance of information indicating that protests by Greenpeace likely
would involve the physical occupation of the platform by activists. Even other oil
companies protested Shell’s plans. The case illustrates that misreading external signals can still occur even when those signals prove to be reliable.
Environmental scanning should be viewed as a continuous process (Herring,
2003). Top managers must plan for and identify the types of information the
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Chapter 4. A Strategic Approach to Crisis Management
organization needs to support its strategic decision making. A system for obtaining
this information is then developed. Information is collected, analyzed, and disseminated to the appropriate decision makers, usually within the functional areas
of the firm. This information must be acted on, however, as the A. H. Robins case
illustrates.
In the early 1970s, A. H. Robins manufactured the Dalkon Shield, a plastic intrauterine contraceptive device (IUD). More than 4 million IUDs were implanted in
women by doctors who were swayed by the optimistic research reports offered by
the company (Hartley, 1993). However, warnings from the external environment
began to surface almost immediately after the product was introduced. Women
were afflicted with pelvic infections, sterility, septic
W abortions, and in a few cases,
death (Barton, 2001; Hartley, 1993). An analysis of information coming in from
R
the external environment would have prompted most companies to shut down
I
production of the IUD, but A. H. Robins persisted
in marketing the product. It
continued to promote the device as safe, even though
management
knew there were
G
problems. In the end, the company was sued by thousands of victims. Eventually,
H lawsuit payoffs led to a sale of the
the firm’s poor financial standings resulting from
company to American Home Products in 1989T(Barton, 2001).
Large organizations may engage in environmental
scanning activities by
,
employing one or more individuals whose sole responsibility is to obtain, process,
and distribute important environmental information to their organization’s decision makers. These individuals continually review
S articles in trade journals and
other periodicals and watch for changes in competitor
activities. They also monitor
H
what is being said about the company on the Internet, including blogs and other
E may contract with a research
social media outlets. Alternatively, organizations
organization that offers environmental scanning
R services and provides them with
real-time searches of published material associated with their organizations, key
R
competitors, and industries. In contrast, decision makers at many smaller organizaY such as the Wall Street Journal
tions must rely on trade publications or periodicals
to remain abreast of changes that may affect their organizations.
A potential lack of objectivity can be a concern when managers evaluate the
2
external environment because they perceive selectively through the lens of their
7
own experiences, professional expertise and operating
departments. Managers with
expertise in certain functional areas may be more
9 interested in evaluating information pertaining to their functions. The problem with this viewpoint is that key ele3
ments from the environment may be ignored—elements that may pose future risks
B the budget of a human resource
that could develop into a crisis. For example, cutting
(HR) department to trim overall costs may sound
U tempting to the chief executive
officer (CEO), but lapses in HR can lead to poor training and loosely enforced safety
rules, both of which can lead to industrial accidents (Sheaffer & Mano-Negrin, 2003).
In an example of functional bias based on CEO background, Massey Energy has
long suffered from a tarnished reputation based on its disregard for safety regulations set forth in the coal mining industry (Barrett, 2011). Under the direction of its
former CEO, Don Blankenship, the company performed well financially, but apparently at the expense of miner safety (Fisk, Sullivan, & Freifeld, 2010). The result was
a string of mining accidents, some involving fatalities. According to David McAteer,
91
92
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
a governor-appointed investigator of the company’s mining accidents between
2000 and 2010, “No United States coal company had a worse fatality record than
Massey Energy” (Barrett, 2011, p. 51). During that decade, Massey had 54 mining
fatalities. The company did not respond effectively to the external environment
for cues to prevent a crisis. Rather, Massey responded by alerting mine staff when
inspectors were about to descend on the mine (Fiscor, 2011) and by keeping separate books to cover up safety violations from in-mine safety reports required by
federal law (Ward, 2011).
A key problem associated with environmental scanning is determining which
available information warrants attention. This is why developing sensitive indicators that trigger responses is so important.
Consider the December 2004 Asian
W
tsunami. Although an earthquake had been detected, scientists were unsure of the
Rwere unable to share their observations with
exact size of the resulting tsunami and
I because the governments in those countries
countries that would soon be affected
lacked environmental scanning systems
G (Coombs, 2006).
H
Identifying Potential Crises Using
the SWOT Analysis
T
,
The first step in assessing the likelihood of a crisis specific to a particular organization is to conduct a survey of the internal and external environments. This
process involves the collection of data
S and perspectives from various stakeholders.
The data are then integrated into an overall assessment of specific crisis threats that
H
appear to be most prominent. Typically, each threat is ranked in terms of its likeliE
hood and potential impact on the organization.
Those crisis threats at the top of
the list become the focus of prevention
and
mitigation
efforts.
R
In strategic planning, the SWOT analysis is the tool used to determine an orgaR
nization’s strengths, weaknesses, opportunities, and threats. The SWOT analysis
should also be used to assess crisisYvulnerability during the strategic planning
process (Chong, 2004). For example, in 2003, the Pacific Area Travel Association
(PATA) provided a framework for its members to use to identify crisis threats to
2
their organizations, most of which are involved with destination tourism. The use
7 threats is a major planning tool in assessing
of the SWOT analysis to identify such
crises vulnerability (Parnell, 2013; Pennington-Gray,
Thapa, Kaplanidou, Cahyanto,
9
& McLaughlin, 2011). In the sections that follow, we identify the four facets of the
3
SWOT analysis and how they are linked to potential crises.
Strengths
B
U
Typically, internal strengths would not be thought to contribute to a potential
crisis. As Veil (2011, see p. 125) notes, however, a track record of organizational successes can blind management to perceiving warning signals from potential crises.
Location is a key strength in some organizations, particularly those in destination tourism. Certainly, lodging establishments can be worthy retreats for tourists
when they are located in exotic places, such as on islands and beaches. However, a
coastal location can turn into vulnerability when a hurricane, typhoon, or tsunami
occurs. Such was the case for many tourist hotels in South Asia when an earthquake
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Chapter 4. A Strategic Approach to Crisis Management
occurred off the coast of the island of Sumatra in Indonesia. This event triggered a
devastating tsunami that caused widespread damage and up to 250,000 fatalities in
the South Asian region. Many of the victims were staying at resort hotels that were
unprepared for such an event (Cheung & Law, 2006).
Management researchers Gilbert Probst and Sebastian Raisch identified a number of organizational strengths that can eventually lead to problems. For example,
excessive growth, what many would deem is a desirable performance outcome, can
be offset by problems with high debt and an overemphasis on expanding through
company acquisitions. In this respect, strength can lead to a crisis. Likewise, a strong
leader in the organization can lead to a top-down culture in which the followers
put blind faith in the leader and fail to approach
Wthe leader’s strategies with skeptical questioning (Probst & Raisch, 2005). This situation is further exasperated when
R
boards of directors rubber-stamp the CEO’s agenda, often failing to challenge top
management with tough questions and insteadIexhibiting groupthink, further putting the balance of power dangerously in favorG
of the CEO (Zweig, 2010).
Table 4.1 provides examples of internal organizational strengths that could
H
conceivably result in organizational crises.
Table 4.1
Examples of Internal
Crisis Events
Internal Strength
Extremely fast company
growth
Strengths and Potential
Corresponding S
Potential Crises


Unique differentiating
product or service
characteristic

Charismatic
organizational leader

Company both large
and successful
T
,
Organizational
Loss of managerial
H control over operations
can occur, particularly when the company has
E
multiple locations over a wide geographic area.
This condition R
can eventually result in defective
products and/or poor service quality. Franchises
R
are especially prone to this type of crisis.
Y also lead to high debt and cash
Rapid growth can
flow problems.
If the product or
2 service offering is new, its
uniqueness could later result in a product or
7 example, some types of elective
service defect. For
or unique surgeries
9 (such as gastric bypass)
can later lead to physical problems. Dietary
3 also come under attack.
supplements have
B leaders have led their
Some charismatic
organizations into
U financial ruin because their
boards did not challenge them.

Some leaders become so influential that they
take on a godlike status and are not challenged
by stakeholders. Some successful athletic coaches
exemplify this behavior.

Employees may feel they are not compensated
enough, particularly if the company is recording
“record profits.”
(Continued)
93
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
Table 4.1
Continued
Internal Strength
Corresponding Potential Crises

Environmental activists search for any evidence
that suggests the company is harming the natural
environment. Large companies make good targets
because they are more visible to the general
public.

Social-minded stakeholders claim the company
does not share its wealth with those who are in
need.

The government will watch the company more
Rand look for ways that it may be hiding
closely
income,
I polluting the environment, harming
natural resources, or hiring or firing employees
G
illegally.

W
H will look for any wrongdoing on
Lawmakers
the part
T of the company so they can establish a
reputation among their constituents.
,
Weaknesses
S
While the link between crises andHstrengths may not be obvious at first glance,
the connection between organizational weaknesses and crises is both intuitive and
E
well established. Weaknesses identified in the SWOT should be examined in light of
their potential for breeding crises in R
the organization. For example, an emphasis on
the human resource management (HRM)
R function is directly related to the potential for crisis events in the organization (Lockwood, 2005). Specifically, when good
human resources (HR) practices areYignored by an organization, a crisis is more
likely to occur. The infamous Rent-A-Center case illustrates how the link between
HRM and employee lawsuits can develop.
In this example, Rent-A-Center elimi2
nated its HR department when its new CEO, J. Ernest Talley, took over in August
1998. The company also changed to7
a less female-friendly workplace, according to
depositions from more than 300 company
officials over a 47-state region. Talley’s
9
own anti-female policy became well3known within the company, including several
quotes indicating that women should not be working at Rent-A-Center (Grossman,
2002). Without an HR department, B
women who felt discriminated against had no
internal recourse. Charges of discrimination
began to increase, plunging the comU
pany into a class action lawsuit on behalf of female employees, eventually resulting
in a $47 million verdict against Rent-A-Center (Grossman, 2002).
A related HR issue is the decision by some companies, particularly in the retail
and service sector, not to offer fringe benefits to their hourly employees. Typically,
this strategy is followed by companies that employ a cost leadership strategy, an
approach that seeks to offer basic, no-frills products and services to a mass market
of price-conscious consumers (Parnell, 2013). Hence, efforts are made to keep
costs as low as possible in the production and service-offering process. In the
manufacturing sector, companies typically have achieved lower costs via economies
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Chapter 4. A Strategic Approach to Crisis Management
of scale and automation of processes through technology innovation (Crandall &
Crandall, 2008; Parnell, 2013).
There are potential crises associated with this strategy. For one, there is the irony
that these same employees are on the front lines every day and offer the first contact
a customer has with the products and services of the company. Ceteris paribus,
organizations are better off when these employees are well trained, loyal, and reasonably satisfied with their employment. In addition, large and successful companies are more likely to be criticized for their wages and benefits, as the example of
Wal-Mart so often illustrates (Ehrenreich, 2001; Fishman, 2006; Institute for Crisis
Management, 2011).
Table 4.2 provides examples of internal weaknesses
W that could conceivably result
in organizational crises.
R
I
Table 4.2
Examples of Internal Organizational
Weaknesses and Potential
G
Crisis Events
H
Internal Weaknesses
Corresponding
T Potential Crises
Poorly trained employees
■ Industrial accidents
in the workplace
,
Poor relationship with a
labor union
Poor ethical orientation of
top management
Aging production facilities
and equipment
Understaffed or nonexistent
Human Resource
Department
Not offering a competitive
fringe benefit package to
employees

Poor service to the customer

In manufacturing settings, defective products

Labor strikes during contract negotiations
as well as aH
larger amount of grievances
resulting from
E day-to-day operations

A secondary
Rcrisis: negative publicity in the
media

White-collar crime and cash flow problems

If the organization is large, potential publicity
problems

A greater number of machine breakdowns,
resulting in7lost productivity and higher
operating costs
9

Likely industrial
3 accidents and poor product
quality

Discrimination against protected groups and
sexual harassment
charges
U

Higher operating costs due to industrial
accidents (a result of poor training),
employee absenteeism, and turnover

Negative publicity from both internal and
external stakeholders
S
R
Y
2
B
(Continued)
95
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
Table 4.2
Continued
Internal Weaknesses
Haphazard safety inspections
Corresponding Potential Crises

Lack of employee loyalty, which could lead to
hiring only marginal employees and a cycle
of turnover

Industrial accidents coupled with increased
workplace injuries

The larger the organization, the more likely
negative publicity may result
Employee substance abuse

Lack of a crisis management
team and plan


Opportunities
W
Increased
industrial accidents, workplace
injuries,
and
product quality problems
R
Slow and ineffective response to crisis events
I
G
Negative
public perception because the firm
isHseen as being unprepared
T
,
A SWOT analysis also looks at the organization’s opportunities existing in the
external environment. While it may not seem readily apparent that organizational
S
opportunities could be a potential source of crises, a closer examination suggests
H
otherwise. The assessment of opportunities
can generate strategic alternatives a
company may pursue to expand its market
share.
Problems can surface and escalate
E
into a crisis, particularly as the firm considers globalization options.
R
One opportunity that most businesses, both small and large, have acted on is the
R
expansion of the Internet, both technologically
and socially. Many have responded
to this opportunity by shifting to an
online
sales
format. Numerous firms have
Y
evolved to assist companies in making this transition, as the learning curve can be
quite steep. However, companies that generate online sales are open to crises associ2 of personal records of consumers as well as
ated with cybersecurity, including theft
denial of service attacks (DOS) by hackers.
7
Table 4.3 outlines three possible scenarios in which a strategic response to
9
opportunities may breed a crisis.
3
B
Threats
U of crisis. Some of these factors can be opporExternal threats are a common source
tunities in some organizations but threats in others. Consider the example of location
discussed earlier in this chapter. In some organizations, threats emanate from geographical
considerations. For example, in parts of the United States such as Florida, weather concerns
such as hurricanes are included as part of the risk assessment (Kruse, 1993). Other regions
of the United States such as California are vulnerable to earthquakes. Urban areas of any
country can be subject to crises that are different from less populated areas. Events such as
riots, power outages, and bad weather can be especially hard on more populated regions.
Certain industries also face external threats. One industry that may be on
the horizon for a host of health-related crises is the indoor tanning industry.
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Chapter 4. A Strategic Approach to Crisis Management
Table 4.3
Examples of External Organizational Opportunities and
Potential Crisis Events
Strategic Alternatives That
Emanate From Opportunities
Expand product availability by
moving from a brick-and-mortar
to a “brick-and-click” arrangement
Expand company manufacturing
facilities to another part of the
world (greenfield venture)
Outsource to another company
outside the home country
Corresponding Potential Crises

Offering products online can lead
to denial-of-service cyberattacks by
hackers.

Hackers are usually external to the
organization, but a disgruntled
employee could become one as well.

Here, the company builds and owns
R
its manufacturing
facility in a host
country.
While
the
quality and process
I
can be more controlled than through
G approach (see the next
a licensing
option),
H there is also the risk of outside
interference from the host country.

In some cases, companies have been
taken, over by the host country’s
government and become state owned.

Because jobs in the home country
S
are usually lost, the company could
incurH
negative publicity from external
stakeholders,
particularly former
E
employees, labor unions, politicians,
R
and municipalities
that hosted the
business.
R

If the outsourcing is through a
Y
licensing agreement, there is the
possibility that parties in the host
country
2 may pirate proprietary
information.

The product from the outsourced
9 may be defective. This
company
situation creates a two-pronged crisis.
3
First, the defective product itself
Bproblems received by the final
creates
consumer.
U Second, there is the public
image problem because of the firm’s
decision to outsource overseas in the
first place.
W
T
7
Evidence is growing of the health risks associated within this industry (“Indoor
Tanning,” 2005). In addition, there is an emphasis on keeping teenagers out of
tanning booths altogether because of the long-term risk of developing skin cancer
(Johnson, 2004; Rados, 2005). The industry has been likened to the tobacco industry, which has a history of denying that cigarettes were harmful to the consumer’s
97
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
health, despite a long string of research indicating otherwise. Like the tobacco
industry, the indoor tanning industry has been working hard to dispel any links
to skin cancer (Loh, 2008). As with tobacco processors, executives in the indoor
tanning industry downplay the health risks associated with moderate usage.
Nonetheless, the warning signs for crises are clear for this industry, with a dawn
of litigation about to begin.
Table 4.4 overviews various external threats that can evolve into a crisis.
Table 4.4
Examples of External Organizational Threats and Potential
Crisis Events
External Threat
Changing demographics of the
surrounding neighborhood
Severe weather
W
RCorresponding Potential Crises
■ The organization may become a target
I for crime, such as vandalism or robbery.
G■ Sales revenue may decline.
H■ The building and facilities where the
is located may be damaged
T organization
by wind, snow, or flooding.
,■ Sales revenue may be interrupted while
the building is being repaired.
Dysfunctional customers or
employees
Poor-quality components from a
supplier
Consumer activism due to poor
products or some other activity
of the company
Extortionists
Earthquake, wildfire, or other
natural disaster
Rumors/Negative publicity
S■
H■
E
R
R■
Y

2
7■
9
3■

B
U
There could be an incident of workplace
violence.
The components that are assembled into
the final product will cause that product
to be defective as well.
If the component was outsourced to an
overseas supplier, negative publicity is
likely to follow.
Consumer lawsuits may develop in the
case of poor-quality products.
Boycotts of the company’s products and
services can result.
Product tampering may occur.
Online extortionist may threaten the
company’s website with a denial-ofservice attack.

Structural damage to the building
and information technology systems
can occur.

Injuries and fatalities could occur to
employees and customers.

Loss of revenues due to boycotts and
negative company publicity may result.
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Chapter 4. A Strategic Approach to Crisis Management
Table 4.4
Terrorism
99
Continued

Negative attention could appear on the
Internet through hate sites, blogs, and
other social media outlets including
Facebook and YouTube.

Direct physical attacks on buildings can
result in damage, injuries, and fatalities.

In addition to the items mentioned,
attacks outside the organization may
disrupt the supply chain.
W
R
I
Organizational
Culture and Crisis Planning
G
Despite the fact that crisis planning is an important
H part of the strategic management process, not all managers are convincedTthat its role is important. And yet,
an organization’s crisis vulnerability is linked to its cultural norms and assumptions (Smith & Elliott, 2007). In other words, ,being diligent about crisis planning
involves a cultural shift. As a result, organizations often do not have effective crisis
management plans because their managers have not cultivated a mind-set that
S
values this process (Weick & Sutcliffe, 2001). Many managers are engrossed with
H have time to plan for tomorrow’s
“putting out today’s fires” and do not think they
contingencies. Therefore, they have not developed
E the critical tools needed for a
comprehensive crisis management plan (Simbo, 2003).
R
Thus, not all establishments have adopted a culture of crisis preparedness. At
R“It can’t happen to us” mentality
one end of the scale, many managers carry an
(Nathan, 2000; Pearson & Mitroff, 1993). Coupled
Y with this attitude is the notion
that “nobody gets credit for fixing problems that never happened” (Repenning &
Sterman, 2001). Other managers are reactive concerning crisis events by contem2
poraneously planning and managing as the problems
unfold. Some organizations,
because of their cultures, seem to develop blind7spots and completely miss the cues
that signal a crisis is on the move (Smallman & Weir, 1999).
9
Other managers are more proactive in their conduct. They plan for future
potential crises by presupposing what could be3their worst-case predicaments. Yet
another group of managers includes battle-scarred
B victims who have experienced
organizational crises and are now involved in proactive planning so they can manU
age future crises more effectively (Carmeli & Schaubroeck, 2008).
Indeed, there is a “way of thinking” and a “way things are done” in every organization. Long-term members understand it well and newcomers usually learn it quickly.
Organizational theorists refer to this phenomenon as organizational or corporate
culture. Culture refers to the commonly held values and beliefs of a particular group
of people (Weitz & Shenhav, 2000). Organizational culture is a more specific concept in that it refers to the shared values and patterns of belief and behavior that are
accepted and practiced by the members of a particular organization (Duncan, 1989).
100
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
An organization’s culture exists at two levels. At the surface level, one can observe
specific behaviors and artifacts of the organization such as accepted forms of dress,
company logos, office rituals, and specific ceremonies such as awards banquets.
These outward behaviors reflect the second level of organizational culture—a
deeper, underlying level that includes shared values, belief patterns, and thought
processes common to members of the organization (Schein, 1990). The underlying
level is the most critical to understand because it lies at the core of how organizational members think and interpret their work. Embracing a culture of crisis planning must occur at the underlying level first before it will be evident at the surface
level. Indeed, as crisis expert Timothy Coombs (2006) put it, crisis management
must become the DNA of the organization.
W
An organization’s culture serves as the basis for many day-to-day decisions in
R of an organization whose culture values
the organization. For example, members
innovation are more likely to investI the time necessary to develop creative solutions to complex problems than will
G their counterparts in organizations whose
cultures value short-term cost containment (Deal & Kennedy, 1982). An innovaH its homework” and take the steps necessary
tive organization is more likely to “do
T homework includes setting up crisis manto prevent crises from occurring. This
agement teams, developing plans, and
, practicing mock disasters, which are drills
to help the organization learn how to manage a crisis more effectively. Of course,
culture also contributes to the success of the firm’s crisis management response.
Indeed, as Marra (2004) points out,
Sorganizational culture helps determine the
success of crisis communications, aH
main facet of the overall crisis management
process.
E there appear to be “crisis-prepared” cultures
In the realm of crisis management,
that support crisis planning, as well R
as those that do not, sometimes labeled “crisis
prone” (Pearson & Mitroff, 1993). Managers should seek to develop and support
R
crisis-prepared cultures in their organizations.
Y
Summary
2
7
The entire crisis management process should be viewed from a strategic perspective
9
and should be part of the organization’s overall strategic planning process, includ3
ing (1) an external analysis of its opportunities
and threats, (2) an internal analysis
of the firm’s strengths and weakness,B
(3) a strategy formulation stage, (4) a strategy
execution stage, and finally, (5), a strategic control emphasis.
U
Analyzing the external environment presents a critical challenge for preventing
crises because it involves assessing environmental uncertainty. Uncertainty occurs
when decision makers lack current, sufficient, reliable information about their
organizations and cannot accurately forecast future changes. Uncertainty is lowest
in organizations whose environments are simple and stable and where the quality
of available information is high. It is highest in organizations whose environments
are complex and unstable and where the quality of information is low.
Environmental scanning refers to collecting and analyzing information about
relevant trends in the external environment. A systematic environmental scanning
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Chapter 4. A Strategic Approach to Crisis Management
101
process reduces uncertainty and organizes the flow of current information relevant
to organizational decisions while providing decision makers with an early warning
system for changes in the environment.
The SWOT analysis enables management to identify the crisis threats that are
specific to their organization. Ironically, it is not just organizational weaknesses and
external threats that can lead to crises. The firm’s internal strengths and external
opportunities, under the right circumstances, can breed crises as well.
Finally, the organization’s culture influences the enthusiasm that exists for crisis
management. Developing a crisis management plan may involve changes to the
company’s culture, including changing the way management and staff view crises
in general.
W
1.
2.
R
Questions for Discussion
I
G
Why should crisis management be part of an organization’s strategic planH
ning process?
T
What are the four types of uncertainty that exist in the external environ,
ment? How is each one linked to a potential
set of crises?
3. What is environmental scanning? What tools are available to help management scan the environment in such a S
way that it would yield information
useful to identify potential crises?
H
4. How can an organization’s strengths beEa source of crises?
R be a useful tool in identifying
5. How can organizational opportunities
potential crises?
R
Y
6. How can a company change its organizational
culture to better embrace
enthusiasm for crisis management?
2
Chapter Exercise
7
9
Identifying potential threats to an organization is an effective method to prepare for
3
future crises. Consider the college or university that you are attending and perform
B
a crisis vulnerability assessment of your institution.
Using the SWOT analysis approach, identifyUpotential crises that reside in each
of the four areas of strengths, weaknesses, opportunities, and threats. Assess each
crisis threat in terms of its likelihood and potential impact.
Opening Case, Part 2: The Professor, “Angry Amy”
On February 12, 2010, Amy Bishop attended one of her last department meetings at
the University of Alabama at Huntsville. She had been denied tenure and felt betrayed
102
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
by her peers and department dean. She sat silently while various routine agenda items
were discussed, including the course schedule for the upcoming semesters. Thirty
minutes into the meeting, Dr. Bishop stood up and abruptly began shooting her colleagues across the table. Using her 9-millimeter handgun, she fired first at department
chairman Dr. Gopi K. Podila, killing him instantly. She then shot and killed professors
Maria Ragland and Adriel D. Johnson Sr. Three others in the room were wounded
in the shootout (Bartlett et al., 2010). When Dr. Bishop’s gun jammed, she left the
conference room, throwing the revolver and her blood-splattered jacket into the trash
in the restroom. She called her husband and instructed him to pick her up (Wallace,
2011). Those who survived the shooting moved the conference room table to the
door so she could not regain access. Within
W minutes, though, Bishop was apprended
by the police and taken away in a squad car.
R
I
A Checkered Past
G
After Bishop’s arrest, informationH
began to surface about her past. Of particular
significance was the fact she had shot
T and killed her 18-year-old brother in 1986.
At the time she was 21 and a student at Northeastern University. According to the
,
story given by her mother to the police, Amy accidently shot her brother while they
were in the kitchen of their home. After the shot was fired, Bishop ran out of the
house with the shotgun and headed S
toward town. At a Ford dealership, she pointed
her gun at an employee and told him she needed a car because she had been in
H
a fight with her husband and that he was looking for her. Bishop quickly left the
E her near a newspaper distribution agency,
dealership, though, and police found
still holding the gun. Police orderedR
her to drop the gun, which she refused to do.
Another officer snuck up behind her and disarmed Bishop. When she was taken
R
into custody, she told police that she had a fight with her father earlier in the day,
which was true (Dewan et al., 2010).Y
A fateful sequence of events then transpired. Police officers of the Braintree
(Massachusetts) Police Department began the questioning process as to what had
2
happened with the “accidental shooting.” During the questioning, her mother
arrived and told Amy not to answer 7
any more questions. The booking process was
stopped, and the investigation was never
9 continued. Amy Bishop was never charged
with a crime, and for 24 years, the event remained a secret to her employers. That
3
fact that it was her shotgun blast that killed her brother has never been disputed.
However, a formal investigation intoB
the death was never conducted either, leading
some to believe that the incident may
U not have been just an accident. On June 16,
2010, the case was reopened by the Norfolk District Attorney’s office in Canton,
Massachusetts, and a grand jury indicted Bishop on a charge of first-degree murder
in the death of her brother, Seth (Wallace, 2011).
While the death of her brother occurred in 1986, another bizarre event involving
Bishop occurred in 1993. A pipe bomb was sent to Paul Rosenberg, a former supervisor of Bishop’s at the Children’s Hospital Boston. Rosenberg had been in charge
of the lab where Bishop was working and felt that she was not up to the standards
of the workplace. He was instrumental in her departure from the lab, leaving both
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Chapter 4. A Strategic Approach to Crisis Management
Bishop and her husband angry with him. Bishop was on the verge of a nervous
breakdown, and her husband James wanted to seek revenge against Rosenberg,
according to records from the Bureau of Alcohol, Tobacco, and Firearms, which was
looking into the investigation.
Bishop departed from her job on November 30, 1993. On December 19, 1993,
a suspicious package, which the house sitter found inside the front storm door,
arrived at Rosenberg’s home. The package showed six 29-cent stamps but no postal
markings on them. The white cardboard box was a foot square and 3 inches deep.
Ironically, Rosenberg had been to a seminar on letter bombs earlier and suspected
the package might be a bomb. He called police and they confirmed his suspicions
(Wallace, 2011). Bishop and her husband Paul were
W both questioned but were never
charged due to lack of evidence.
R
An incident at an International House of Pancakes in Peabody, Massachusetts,
I Another woman in the restaualso revealed a tendency for dysfunctional behavior.
rant had taken the last booster seat when Bishop
G approached her and demanded
the seat for one of her children. Bishop shouted profanities at the customer and
then physically struck her in the head. When H
the manager asked her to leave she
T charged with assault and batresponded, “I am Dr. Amy Bishop.” Bishop was
tery and disorderly conduct. She pled guilty and
, was given six months probation
(Herring & Levitz, 2010).
S
The Problem of Background Checks H
E of it was uncovered in the backWhat is troubling about Bishop’s past is that none
ground check that was conducted by UAH as part
Rof her hiring process. This is not to
say that UAH was negligent, however; rather, the institution lacked the information
R
that would have revealed a troubling past. Normal background checks in academia
Y
usually reveal employment history, job responsibilities,
tenure in the prior position,
reason for separation, and names of references. When it comes to a candidate’s criminal history, it may be more difficult to uncover. This is because the federal Fair Credit
2
Reporting Act and many state laws restrict revealing a candidate’s criminal history.
7 and country levels, which makes
Furthermore, criminal records are kept on the state
information more difficult to find (Cadrain & Minton-Eversole,
2010).
9
For Bishop, the history of her past was even more elusive. No arrests or convic3
tions were ever made in the death of her brother or the questioning in the pipe
B of Pancakes did not appear on
bomb case. The incident at the International House
her record either. Police ran their own background
U check on Bishop after she had
been apprehended, which also came up empty (Jonsson, 2010).
Opening Case Part 2 References
Bartlett, T., Wilson, R., Basken, P., Glenn, D., & Fischman, J. (2010, February 26). In Alabama,
a scientist’s focus turns deadly. Chronicle of Higher Education, pp. A8, A12.
Cadrain, D., & Minton-Eversole, T., (2010). Campus violence reveals background screening
flaws. HR, 55(5), 13.
103
104
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
Dewan, S., Saul, S., & Zezima, K. (2010, February 20). For professor, fury just beneath
the surface. New York Times. Retrieved July 26, 2012, from http://www.nytimes
.com/2010/02/21/us/21bishop.html?pagewanted=all.
Herring, C, & Levitz, J. (2010, Feb). Alabama suspect had erratic history. Wall Street Journal,
p. A3.
Jonsson, P. (2010, February 17). Amy Bishop case: Why no red flags were waved before shooting spree. Christian Science Monitor, p. 1.
Wallace, A. (2011, February 28). What made this university researcher snap? Wired. Retrieved
July 26, 2012, from http://www.wired.com/magazine/2011/02/ff_bishop/.
Opening Case Part 2 Questions
W
1. If a criminal background check
R can only be conducted in certain states,
how can a university protect itself from a prospective professor with a
violent past? Research the Istate (or county) laws where you reside and
G
determine the process of conducting
background checks in your locale.
H Bishop’s case had not gone to trial. Provide
2. As of the writing of this book,
an update as to the status ofTher case.
,
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2
7
9
3
B
U
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CHAPTER 5
Forming the Crisis
W
R
Management Team
and
Writing the Plan IG
H
T
,
Landscape Survey
The
Internal
Landscape
The
External
Landscape
Strategic Planning
Chapter 4: A Strategic
Approach to Crisis
Management
Chapter 2:
The Crisis
Management
Landscape
Chapter 3:
Sources of
Organizational Crises
Chapter 5:
Forming the
Crisis
Management
Team and
Writing the
Plan
S
H
E
R
R
Crisis
Y
Chapter 6:
Organizational
Strategy
and Crises
Crisis Management
Chapter 7:
Crisis
Management:
Taking Action
When
Disaster Hits
Chapter 8:
Crisis
Communications
Organizational
Learning
Chapter 9:
The
Importance
of Organizational
Learning
Chapter 10:
The
Underlying
Role of Ethics
in Crisis
Management
2
7
9
3
Opening Case: Roof Party
B College Goes Terribly Wrong
at Local
U
Years ago an odd and obscure event occurred at Concord College, a small public
institution nestled on top of a mountain in southern West Virginia. Four students
somehow gained access to the roof of the student union building and proceeded
to have a small party of their own. With lawn chairs, a bit of music, and of course,
some alcohol, the little get-together seemed harmless and uneventful until two
of the students got a little too close to the edge of the roof, and fell. Although the
ground was only 12 feet below, both students were knocked unconscious and lay
motionless, just underneath a window to the faculty dining room.
107
108
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
Almost immediately, emergency providers were on the scene tending to the
injured students. Meanwhile, another student who was passing by noticed the commotion and became very distraught, as she knew one of the victims. This student
was in her third trimester of pregnancy and suddenly began to have contractions.
With the emotional excitement of the events, and her impending delivery of her
own baby, it appeared she had gone into labor. Now, three students—not two—
were receiving attention from emergency providers. Because of the commotion,
traffic began to move slowly on the road in front of the student union. Campus
police moved to the area and redirected traffic.
The college’s crisis management team arrived on the scene and was looking into
matters as well. After confirming theW
identities of the students involved, they began
to monitor the activities of the emergency providers. The situation was highly
unusual. To make matters even moreR
perplexing, one of the two remaining students
I union had disappeared. Emergency prowho had been on the roof of the student
viders and the police were told of this
Gmissing student, but he could not be found.
It turned out that he had become distraught and was sitting by himself at the stairs
of the administration building, someH300 feet away. The head of the crisis management team—not the police—eventually
T found this student.
But there was more to come. Approximately
one hour after the students had
,
fallen off the roof, the two student victims, the pregnant student, and the distraught
student suddenly appeared perfectly functional again. The police and firefighters left
the scene and the crisis managementS
team calmly went back to their normal duties.
Concord College had just completed its annual mock disaster training exercise.
H
E
Opening Case Discussion Questions
R
R
1. Could this crisis have been averted if the university had an effective security
Y
management system?
2. What is your reaction to the crisis management team’s response?
2
7
What crisis management insights can we gather from this incident?
9
3
B
U
3. What improvements could you suggest for future incidents like this one?
4.
Introduction
The crisis management team (CMT) and the crisis management plan (CMP) are
the core of an organization’s crisis planning efforts. The team meets together first
and then develops the plan. Later, the plan can be tested through mock disaster
drills such as the one discussed in the opening case. This chapter explores all three
of these processes in detail. We begin with the mechanics involved in forming the
crisis management team. Next, the crisis management plan is outlined. We close
the chapter by examining the components of crisis management training, including
guidelines on how to conduct a mock disaster.
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Chapter 5. Forming the Crisis Management Team and Writing the Plan
109
Forming the Crisis Management Team
Before any crisis planning can occur, the crisis management team must be formally organized. While discussion about crises can take place at any time without
a team, the CMT is the most effective and appropriate starting point for serious
crisis planning.
Goals of the CMT
W
The basic mission of the CMT is to plan for potential crises and manage the ones
R involved five specific goals. These
that eventually occur. Encompassing this mission
are overviewed in Figure 5.1.
I
1. The CMT identifies the crisis threats theG
organization is facing. Every organization faces threats that are unique to its
H industry and in some cases, to its
geographical location. The CMT considers these factors as it evaluates the
specific risks that are likely candidatesT
for a crisis. In planning for a crisis,
the team cannot formulate a response ,for every potential crisis, so it must
be flexible (Clark & Harman, 2004). Most threats cluster into crisis families
(Coombs & Holladay, 2001; Pearson & Mitroff 1993). This understanding can simplify the threat assessmentSphase because managers can plan
responses to potential families (categories)
H of crises rather than to each
individual crisis that might erupt.
E
2. The CMT develops the crisis management
R plan. The CMT develops a crisis
management plan that addresses the potential crisis threats identified in
R
the first step. The plan also contains key contact information of vendors
Y cases, the plan is posted on the
and other important stakeholders. In many
organization’s website.
The
Internal
Landscape
The
External
Landscape
2
7
Landscape Survey
Strategic Planning
9
2. The CMT develops
3
the crisis
management plan.
B
1. The CMT
U
identifies the
crisis threats
the
organization
is facing.
3. The CMT
leads training
in the area of
crisis
management.
Crisis
Crisis Management
4. The CMT
actively
manages
a crisis
when one
occurs.
Figure 5.1 Goals of the Crisis Management Team (CMT)
Organizational
Learning
5. The CMT
leads the
postcrisis
evaluation so
that learning
can occur.
110
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
3. The CMT leads training in the area of crisis management. The CMT oversees
the crisis training efforts in the organization. Two levels of training are
made available, one for the CMT, and one for the organization members
at large. Team training should occur at regular scheduled intervals. The
content of training usually revolves around reviewing the crisis management plan and conducting simulated drills (Coombs, 2007). Simulated
drills are necessary because the team really does not know how well it can
function in a crisis unless the plan is tested periodically (Clark & Harman,
2004). Training activities need to be coordinated between the internal and
external landscapes. For example, it is necessary when setting up a mock
disaster drill to contact stakeholders
in the external landscape, such as fire
W
departments and emergency medical service (EMS) organizations.
R
4. The CMT actively manages a crisis when one occurs. When a crisis does
I
occur, the CMT is activated and placed in charge of managing the event.
G
This phase of the team’s experience
is most crucial because it reveals performance levels in two areas:
H (1) How well was the crisis handled, and
(2) how well did members of the team work together? The evaluation of
T
these two areas is addressed in the fifth goal, mentioned next.
,
5. The CMT leads the postcrisis evaluation so that learning can occur. After the
crisis, a postevaluation session is recommended to determine how well the
S the CMT seeks to find answers to the folcrisis was managed. Specifically,
lowing questions:
H




What did we learn fromEthis crisis that will help us prevent a similar
one in the future?
R
If the same crisis did occur again, what could we do differently to mitiR
gate its impact?
What aspects of the crisisYresponse were performed well?
What aspects of the crisis response need improvement?
Scheduling the evaluation sessions
2is the most important factor in the postcrisis
evaluation phase. Such sessions must be held soon after the event while the details
7 Waiting too long can lead to forgetfulness
of the crisis are still familiar to everyone.
(Kovoor-Misra & Nathan, 2000). This
9 forgetfulness can lead to the loss of valuable
insights on how to make crisis management function better in the future.
3
B
U
Team Member Characteristics
The CMT has been referred to as the “nerve center of the crisis management process” (Gilpin & Murphy, 2008, p. 134). As a result, CMT members must have a specific
and complementary set of individual characteristics that allow them to work well
in a group setting. To accomplish this difficult task, a team is necessary, one whose
composition is diverse and includes members from different parts of the organization (Barton, 2001). The characteristics of an ideal CMT member are discussed next.
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Chapter 5. Forming the Crisis Management Team and Writing the Plan
Ability to Work in a Team Environment
CMT members must like people and enjoy working in a group. This is not an
assignment for an employee who prefers to work on projects independently. Above
all, CMT members must realize they are part of a team working toward shared goals
(Coombs, 2007).
Ability to Think Under Pressure
CMT members should be able to think under pressure (Clark & Harman,
2004). Employees react to stress in different ways, and some do not manage
W
it effectively. For CMT members, however, stress should be a motivator, a
R to manage a crisis environment
sort of adrenaline shot that makes them want
(Chandler, 2001).
I
G
H
We always prefer to make decisions whenTall needed information is readily
available. However, in a crisis situation, decisions are typically made in conditions
of uncertainty. Ambiguity tolerance enables a ,decision maker to be effective, even
Ambiguity Tolerance
when desired information is not available (Chandler, 2001).
S
H
Team members need to be able to listen effectively
to the stakeholders and vicE
tims presenting their sides of the crisis story. Listening for what is said is important,
R
but being intuitive and listening for the untold story is equally critical.
R
Y
Verbal Skills
Good Listening Skills
Good speaking skills are a must. Some of the team members may be assigned
to talk to members of the media, an assignment2that requires excellent verbal skills.
Among team members, communication intentions
7 should also be clear. This ability
goes back to stress tolerance, because some team members may not communicate
9
as effectively when they are under stress.
Critical Thinking Skills
3
B
U analyze
to
This characteristic includes the ability
problems and evaluate
alternatives by examining the pros and cons of each option (Coombs, 2007;
Gilpin & Murphy, 2008). Understanding the accumulation of details to an
event and how they lead to a crisis is essential (Roux-Dufort, 2009). Critical
thinking is a savvy skill that implies one does not believe everything he or she
hears. Instead, combined with the skill of good listening, one is able to understand the hidden messages that many people convey in their verbal and written
communications.
111
112
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
Team Composition
Team members should represent the major functional areas (e.g., marketing,
production, finance, etc.) of the organization (Coombs, 2007). Representatives
from the following areas are recommended:
Company Chief Executive Officer or President
The chief executive officer (CEO) or president should always have an active interest in the CMT, although the size of the organization will dictate the capacity in which
the top executive should serve. In smaller
W organizations, this person would be on the
CMT. In larger organizations, a vice president for administration or operations may
R
serve as the representative of upper management (Barton, 2001). Podolak (2002)
advocates that this person should alsoI serve as the team leader; however, not all crisis
management experts agree on this. The
G CEO does not always serve as the company
spokesperson during a crisis, although that is certainly an option. This role is often
H
held by a member of the public relations department or the designee who typically
T might not need to address the media if a
communicates with the media. The CEO
better-trained staff person is available.
, “Only in the most egregious of crises—when
lives are lost, when the story remains on the front pages for days—does the media and
the public even expect to see the CEO” (Pines, 2000, p. 15).
S
H
Human Resources
It is always advisable to have aErepresentative from human resources (HR)
serving on the CMT. First, HR serves
R as the liaison with employees. Individual
employees can be affected by a crisis in a number of ways, and HR is there to ensure
R
their interests are represented in the crisis management process (Lockwood, 2005).
Y can be useful during a crisis. These areas
Second, HR has knowledge areas that
include next-of-kin details, number of employees in each site of the facility, and
language and cultural barrier knowledge that is especially important if the com2
pany operates globally (Millar, 2003). HR should also have a network of trauma
counselors on contract in the event7of a major crisis involving injuries and/or a
loss of life.
9
3
B
A crisis can have affect on cash U
flow, stock valuation, and cash disbursement,
Accounting and Finance
so a representative from finance is appropriate. There may also be a need to secure
funds quickly for relief operations. This accountability becomes particularly critical
if funds are to be disbursed abroad.
Security
The head of the organization’s security or police force should be a member of
the CMT. Many crises will involve the services of this department, such as in the
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NOT FOR DISTRIBUTION, SALE, OR REPRINTING.
ANY AND ALL UNAUTHORIZED USE IS STRICTLY PROHIBITED.
Copyright © 2014 by SAGE Publications, Inc.
Chapter 5. Forming the Crisis Management Team and Writing the Plan
case of a workplace violence incident. This department also serves as a liaison with
law enforcement departments outside the company whose help may be needed.
Public Relations
This functional area goes by different names in different organizations, such
as public in…
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