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Home > Operations Management Checklists > Understanding Crisis Management

Operations Management Checklists

Understanding Crisis Management


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Checklist Description

This checklist provides an overview of how organizations can deal with events that threaten their survival and outlines some of the strategies which can be employed to tackle such threats.

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Definition

Although any development that poses a serious threat to a business and/or its shareholders can be thought of as a crisis of some kind, events that require rapid and far-reaching action by management to avert significant damage to the organization require some form of crisis management. All businesses should expect to face major challenges from time to time, but the precise form of possible threats to the survival of an organization are very difficult to predict, with the need for the right solutions to be identified and implemented within a tight timescale often adding to the severity of the crisis.

The immediate threat of bankruptcy is an obvious situation that requires crisis management, though struggling companies in need of urgent corporate restructuring or debt refinancing could also employ crisis management techniques. Similarly, companies facing major problems such as a catastrophic computer systems failure, a large-scale industrial accident, a major product recall, or a sudden collapse in sales due to a health scare can also benefit from the implementation of crisis management strategies.

Though the precise nature of potential crises facing businesses varies considerably according to their operating environment, in all cases crisis management presents significant challenges for senior management. When preparing outline crisis management plans in advance, executives should ensure that appropriate personnel structures are in place to help deal with major events that could threaten the business. Management should also impress on their crisis management teams how the company’s core values should be reflected in the methodology employed to steer the organization through the crisis. Additionally, emphasis should be placed on how the organization intends to communicate with parties such as employees, clients, and investors during a possible crisis, bearing in mind that loss of support from any of these could in itself pose a grave threat to the business.

In many cases, companies can also improve their state of readiness to deal with potential future crises by testing the mechanisms they have put in place to handle potential threats such as computer failure or product recalls. However, the procedures employed to handle an immediate crisis should integrate effectively with a strategic plan to help the company’s overall recovery plan.

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Advantages

  • Robust crisis management plans can equip organizations to withstand threats to their survival better.

  • Awareness of potential threats can put an organization in a better position to take early action, often helping to avoid more serious problems.

  • Effective crisis management plans can help companies to achieve improved levels of regulatory compliance.

  • Appropriate planning for potential industry-wide crises can give a company the upper hand over ill-prepared competitors.

  • Effective communications during a crisis can help determine how the company’s core values and beliefs have helped it to overcome a major challenge, potentially enhancing public perception of the company.

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Disadvantages

  • Crisis management planning may seem expensive.

  • Attempts to plan exhaustively for every conceivable threat can be counterproductive.

  • Excessive focus on potential threats can divert management focus on how to capitalize on growth opportunities for the business.

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Action Checklist

  • Prepare an overall crisis management plan that encapsulates the company’s core values and beliefs.

  • Establish a crisis management team structure and define roles and responsibilities.

  • Define and clarify lines of authority reporting.

  • Ensure that effective structures are in place for communications with key stakeholders.

  • Link the crisis management plan to a business recovery program.

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Dos and Don’ts

Do

  • Recognize the increased operating safety levels associated with effective crisis management planning.

  • Appreciate that robust planning to deal with major threats can give a company a competitive advantage.

  • Plan for business recovery, not just how to handle the immediate crisis.

Don’t

  • Don’t ignore the potential long-term benefits of effective crisis management in terms of improved corporate reputation, as doing so can be costly.

  • Don’t become obsessed with every conceivable challenge that faces the business, as this can be counterproductive.

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Further reading

Books:

  • Devlin, Edward S. Crisis Management Planning and Execution. Boca Raton, FL: Auerbach Publications, 2007.
  • Fink, Steven. Crisis Management: Planning for the Inevitable. Lincoln, NE: iUniverse, 2002.

Articles:

  • Chong, John K. S. “Six steps to better crisis management.” Journal of Business Strategy 25:2 (2004): 43–46. Online at: dx.doi.org/10.1108/02756660410525407
  • Sturges, David L. “Communicating through crisis: A strategy for organizational survival.” Management Communication Quarterly 7:3 (February 1994): 297–316. Online at: dx.doi.org/10.1177/0893318994007003004

Website:

  • Federal Emergency Management Agency (FEMA; US): www.fema.gov

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