Managing The Crisis: A Brief Guide On Crisis Management

8 min read
Managing The Crisis: A Brief Guide On Crisis Management

There are countless stories in the corporate world on how companies are crumbling due to mismanagement. You can put the blame on crisis management or rather the lack of it.

“Losing your head in a crisis is a good way to become the crisis”. -C.J. Redwine

You must be thinking that C.J. Redwine probably restated the obvious. The reason people restate the same principle is that because of its obvious misinterpretation or rather lack of interpretation. Crisis management is one of the most crucial headaches of any top management.

Before taking the baby steps lets first learn how to crawl.

Crisis or Lemonade?

What exactly is a crisis? Cambridge Dictionary describes “crisis” as an extremely difficult or dangerous point in a situation. It seems like a pretty darn scary definition, right? Let's look at the root of this word. The word crisis comes from the Greek word “krisis”, which means a crucial decision at the event of a crisis.

So, it all boils down to your decision at the crucial point where things might go haywire.

What Is Crisis Management?

In a nutshell, crisis management or risk management is the series of actions taken by a company during the event of a crisis.

Not only does a crisis tend to demotivate employees but it also has direct effects. A negative event tends to hinder business and even harm people. On top of that crisis situations tend to harm the reputation of a company.

In order to manage a crisis properly, you will need a proper plan along with crisis management teams fully equipped to handle those challenges.

  • Out of 59% of businesses who have experienced a crisis, only 54% of them had a plan to deal with the potential crises.

  • Medium to large businesses tend to lose 22% of their customers when they read a bad review about the company.

So you see why a crisis management plan and also a proper response plan is so necessary.

Now that we have a basic idea of what crisis management is, let's look at different types of crisis situations that can take place.

1. Accidental Crisis

An accidental crisis is self-explanatory. Accidents caused due to human negligence or unintentional mistakes. One of the most common among accidental crisis is fire. No type of industry is exempt from this type of crisis. The after-effects are groundbreaking and can often drive a company to bankruptcy.

2. Natural Disaster Crisis

Natural Crisis are environmental disasters, generally beyond the control of humans. Earthquakes, floods, and hurricanes are a few good examples.

3. Conflict of Interest Crisis

This is most probably the most avoidable crisis. In fact, the majority of the article will surround this topic. And don’t let its nature of avoidability fool you with its level of complexity. This is probably the most complex kind of crisis to decipher. Some of the common conflicts of interest crisis are-

Internal Conflict- Sounds like a lesson in HR right? That is because it most probably is. Internal conflict among employees is one of the major reasons for losing top talents in a company. One way in which internal conflict arises is due to the spreading of rumors. Bad news generally travels fast and outward. Any disturbances in an organization can and will be reflected in the outside world. If that happens then intense cleansing of the image is required which ends up burning a hole the company’s wallet.

Talent Hunting- In head to head, cutthroat corporate competition, poaching of top talents or top management is a factor of extreme crisis in a company. Imagine your top management personnel who is one of the main factors of your company performing well has been poached by a fierce competitor by attractive perks or compensation increment. This will push your company to take extreme measures to recover from this loss and more often, recovery is not certain.

Product/Service Shamming- Opponents of a company might often resort to unethical or malicious attempts to defame a company. There have been countless instances where bulk products of a company are purchased in bulk, tempered with and released in the market. Probably the most famous is the attack on PepsiCo in 1993 where their products were released by their rivals with syringe needle in them. After thorough investigation and expenses, the culprits were caught. PepsiCo had to overcome an extreme crisis with extreme measures to reinstate its image.

4. Technical Crisis

You won’t find any industry in the current age which doesn’t have any digital presence. In most of today’s company’s technology plays a huge role. In these industries, any technological problem creates a crisis that makes the company standstill.

Some of these are caused by accident and some “not so accident”.

Under the technical crisis, we find these types of crises-
Intentional crisis- Sometimes individuals or a group of individuals might launch an intentional cyber or technological attack to disrupt an organization. Digital companies are most vulnerable to it as even one person in his garage can bankrupt an entire industry.
Unintentional crisis-These crises are self-explanatory. This type of crisis happens when an accidental error causes technological disruption. Some unintentional crisis causes larger harm than intentional ones. Unintentional technical crisis mostly affects MNC’s the most.

Add to the size of the company different time zones, and you have got a recipe for a potential crisis. A dedicated crisis team is a must for these kinds of companies.

5. Financial Crisis

This type of crisis happens when there is a sudden drop in the value of a company. What makes this a dangerous one is that it is a vicious cycle.

Since the value of the assets of a company drops, investors withdraw their investment and this again leads to a drop in value. Finally, the company has to file for bankruptcy. And in this generation, social media helps escalate issues like this to a whole new level.

Also, recession and economic slow down affect companies to a great extent. Take a look at Lehman Brothers. Lehman Brothers were one of the world’s largest investment bank with a history of 163 years.

But even with such a legacy, you will not survive without a crisis management plan. Lehman Brothers got hit hard in the 2008 US subprime mortgage induced financial crisis.

Lehman Brothers filed for bankruptcy on September 15, 2008, with $619 billion in debt.

How does these crisis spring up?

If we look at these crises, we can probably classify these into two categories depending on their cause.

Abrupt Crisis

These crises, as the name suggests are abrupt in nature. They occur without any warning and are a little difficult to anticipate. Accidental and Natural crisis can be categorized under this domain.

Incipient Crisis

Just like a smoldering fire, these occur without any warning. Even if even detected in the initial stages they are generally ignored because of their insignificant levels. But they soon the smoldering fire that is difficult to deal with and cause a huge blow in the pockets of the company. Conflict of interest can be referred to as an incipient crisis.

The Plan

Now that we are clear with the categories we can now think of how to deal with the negative impact of a crisis.

“ If I have to make a tackle then I have already made a mistake” - Paolo Maldini

Paolo Maldini is one the greatest defender in the history of football. This statement of his takes a good approach to the crisis. If you have to think about how to deal with your crisis then you probably made a mistake. The key here is proactive management.

1. Identify Potential Crises

Does the earlier part of the article make sense now? One of the most important parts of any corporate activity is identification.

Crisis management is not an exception.

Your company should identify all the types of crises that can affect your company. You should factor in all the types and identify how it can tie up with your industry. Have a crisis communications plan as to how different crisis occurs. Educating all your employees is a must.

Identify oil spills before they happen.

This is not all. You need to identify how different types of crises can affect your company.

Different ways in which your company can get affected in the event of a crisis are-

  • Drop-in sales figures.

  • Dissatisfied customers.

  • A black mark on reputation.

  • Increase in financial and non-financial expenses.

This step of quantifying the potential harm of a crisis is very important. It helps you understand every angle of the crisis and helps immensely in preparing for the crisis.

This prepares you for the type of measures you need to take for the potential crisis.

2. The team

Maybe this will seem like an unnecessary luxury but there is a reason why many top-notch companies are including this in their management. Because it yields results. A Crisis Communication Team is a hint you are looking for. The main focus of this team will be conducting an intensive brainstorming session for all possible crises that can occur at your company.

In these sessions, there will be a few points to take away.

First, that these “Incipient Crisis” are generally avoidable when precautions are taken properly.
Secondly, you will know the do’s and don’ts when the crisis actually occurs.
One important point is to be noted is that your Crisis Communication Team need not be a fully dedicated team. It can be a quarterly cyclic team.

3. Employees

No surprises for you here. It might be very evident to you regarding what you should avoid headhunting.

Yes, you are right! You need to keep your employees and top talents satisfied. According to Barron’s, millennials prefer perks over a salary increase. So if you are thinking of providing fat paychecks for your talents, it won’t do the trick. If you are confused regarding how to go about it, fret not for there are employee engagement platforms to your rescue.

In a nutshell, employee engagement platforms provide special and exclusive perks and discounts for your employees. Vantage Circle, one of the largest employee engagement platforms, is a great platform. They are tied up with 250+ major brands worldwide. But there are a few things you should know before going for an employee engagement program. Here is a detailed article on how you should go about it.

On top of perks and benefits, there are a few more points you should look out for.

  • Keeping your employees well informed helps in the smooth running of your company and maintains transparency.

  • Early updates regarding any event that might be relevant in the future are of utmost importance.

  • A monthly or quarterly review of your employees will help you identify any conflict in the workplace.

Good employee engagement platforms provide the following benefits-

4. Update Your Plans Regularly

Twenty years ago, there was no cybersecurity crisis. A year ago, no one had an idea of the global economic slowdown.

You can see where I am going here.

Business Continuity planning involves updating your plans regularly. Also over time, your business will grow and your company will expand. That is exactly the moment where you should revise your crisis management plans.

And of course, you should always learn from your experience. When you go through a crisis, make sure you analyze the results of your crisis management plan. That is when you will understand whether to revise your plans or not.

Final Touches

In any organization, irrespective of the size, a crisis is bound to happen. The key takeaway here is how you manage to deal with the crisis or how to put out the fire before it occurs.
One area which no one deals with or no one talks about is what to do post-crisis.
You should identify the stakeholders here affected by the crisis and the compensation should be on point and in full swing. Proper identification and appreciation of the stakeholders can go a long way in the rebranding of your brand image in case it has gone downhill.

The next thing and the most important in fact is the way you absorb the key takeaways from the crisis. Communicating the message to your stakeholders and keeping them well informed is the key here.

Most of all companies suffer because they maintain an “It won’t happen to us” attitude. This sets the ball rolling for the demise of the company.

  This article is written by Iftekar Ahmed. Iftekar is working as a content writer and digital marketer at Vantage Circle.He is a music aficionado and loves eating dhokla.
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