Comprehensive Literature Review

CRISIS MANAGEMENT 12

Kiran

Loyola College

MBA 5013, Organizational Communications

Dr. Kevin

February 28th, 2021

Abstract

Organization have to deal with crisis and manage it effectively for it to be successful. There are several types of crisis. But, research on the crisis management is never a complete one because of the factors affecting it. It is always evolving and management should come up with effective responses in order to overcome the crisis. We review the core concepts from each perspective of crisis management and real examples of few organizations about their responses in different stages of crisis. We will also come across the ongoing crisis among the world and few organizations on how they are dealing with the crisis by following the guidelines of the organization.

Introduction

Crisis management is a process by which the organization can take necessary measures to deal with unexpected and difficult situations which can harm the organization or its stakeholders. Crisis management is used to deal with the threats before, during and after the crisis has occurred.

The most significant threats that can interrupt the natural flow of organization by crisis are categorized into the three: Public safety, financial loss and Reputation loss.

Each of the threats mentioned above results in the significant downfall of the organization if not taken care of by proper management due to crisis.

Crisis management can be divided into the three phases listed below:

Pre-crisis is where the planning is done for the crisis before it happens. This is the beginning phase of the crisis management. Prevention is better than cure. This phase involves in preventing the crisis by preparing and training the management ahead of the forthcoming crisis.

Crisis response is where the spontaneous actions are to be taken when crisis occurs. This phase is about the management responding to the ongoing crisis by communicating accurately and effectively. This is crucial phase among the crisis management.

Post-crisis is where the management responds to the crisis after the crisis has been occurred. This phase involves about the repairing, recovering from the crisis and making necessary precautions for the upcoming crisis. This is the last phase of the crisis management and is the decisive factor of the management response according the crisis which already happened.

Literature Review

According to the references mentioned below, crisis is low probability occurrence which leads to high impact event that is threatening the organization viability. There are several types of organizational crisis including extortion, product tampering, copyright infringement, security breach, computer tampering, malicious rumor, natural disaster that destroys organization, product of service and stakeholders, bribery, terrorist attack, sexual harassment, assault on personnel or customers, counterfeiting and so on.

The references provide key examples of Pepsi, Starbuck and Milliken and so on in which they take necessary measures in terms of communication, effective management procedures, technological redesign and surveillance in order to overcome the crisis.

There are few best examples for crisis response and Pepsi crisis is one of them. The Pepsi commercial was released on Tuesday, April 4, 2017 and it was taken down the following day. Pepsi apologized with the following public statement: “Pepsi was trying to project a global message of unity, peace and understanding. Clearly, we missed the mark, and we apologize,” Pepsi went on to say “We did not intend to make light of any serious issue,” (Smith 2017). In under 48 hours, Pepsi responded to the entire situation. Pepsi’s use of Crisis Management Theory helped the company respond to the situation quickly and effectively. While Pepsi didn’t have much of pre-crisis phase, the company responded when the crisis hit. Their crisis response strategy was on point. Pepsi immediately apologized and took corrective action by removing the ad. There was no placing blame and no playing the victim which made them to deal with the crisis easily. Pepsi could have avoided this crisis altogether through environmental scanning. Pepsi more than likely knew of the social situation going on, however, they did not look deep enough and taken it seriously. Pepsi did not identify any warning signs that the commercial would backfire. Pepsi has always used celebrities to sell their products. However, their choice of a white supermodel seemingly solving a societal issue between African-Americans and police was completely missed as a red flag. Social media impacts crisis management by limiting the amount of time an organization can respond because of how fast information can spread. Pepsi experienced this first hand because that is exactly how the backlash occurred. While social media can be a hindrance, it’s important to note that social media is how Pepsi was alerted of the issue. Pepsi’s quick action lends itself to helping ensure the company didn’t take too hard of a hit from the backlash. Apologizing and taking corrective action has allowed Pepsi to move on from the commercial.

Starbuck is another example of the crisis response which handled the crisis effectively. In April 2018, a Starbucks employee called 911 and reported two men standing in Starbucks without placing an order. The employee felt suspicious because the two men were dark skinned and reported them. The two men were arrested and escorted out of the coffee house even though they did not commit any crime. The incident was captured on camera and made viral causing a havoc by protests demanding a response from Starbucks. Within two days, the police department and the Mayor’s office launched separate investigations to inquire if the incident was an outcome of a racial bias. During the investigation, it was revealed that the two men who were arrested were waiting for a real estate investor who was supposed to meet them for a meeting at Starbucks. There were several protests two days later outside the Starbucks in Philadelphia where the incident took place. Initial response was from the CEO of Starbucks, who apologized to the two men who were arrested and promised to take the appropriate action to solve the situation. However, the initial apology did not address racial discrimination and action against the store manager resulting in multiple protests. Starbucks provided with a vague response and included that they are engaged in the investigation led by the police department which indicated that Starbucks is not taking responsibilities until the investigation is complete. Later there was second response from him about shutting down about 8000 locations of Starbucks on May 29, 2018 and conduct a training session for 175,000 employees. The agenda and contents of the training session were to be drafted by a wide range of experts to counter racial bias. Starbucks took a great leap and took appropriate action which party made up for the delay in responding to the situation. By shutting down almost all the locations to conduct training for their employees on the issue of racial discrimination, Starbucks sent a message that they are taking strong actions against the two racial discrimination incidents that took place in Philadelphia and California respectively. Subsequently, Kevin Johnson, the CEO of Starbucks, released a video statement and scheduled interviews with the media to discuss the situation and the action plan. However the last response from the chairman of Starbucks, Howard Schultz, mentioned that he was ashamed of the incident. More members of the executive team communicated with the media and provided statements of regret. Starbucks stood together during this duress and functioned as a team to convey their regrets and their action across all possible platforms including digital, mass and social media. The CEO also met with the two men who were arrested and offered to cover their tuition at the Arizona State University, where they were studying. Starbucks managed to retain the trust of their customers and the community by providing a grand gesture of closing over 8000 locations to train the employees against racial discrimination. Furthermore, Starbucks acted responsibly during the aftermath of the crisis situation. They conducted training at the designated date that was promised. Once Starbucks declared an action plan, they gained confidence and became more transparent about the situation and the measures they are taking to remedy the situation. They incurred a substantial loss in sales when they conducted training and additionally provided the two accused men sponsorship for their education. Starbucks went above and beyond to take corrective action for the incident that took place in Philadelphia. They showed the public, media and the protesters that they care and they want to make a difference in the community. By hosting a training session across the United States, Starbucks also addressed an ongoing social issue of discrimination and how they would like to be proactive by training all their employees to help the social cause.

The imminent threat of a Covid-19 surge overwhelming available resources for critically ill patients prompted many state-level public health officials to rapidly develop triage protocols for scarce resources, known as Crisis Standards of Care (CSC). It is important, however, for health care organizations to develop their own local CSC plans to address unique staff and community factors. In Massachusetts, a working group of experts at Brigham and Women’s Hospital (BWH) developed a CSC implementation plan by engaging the hospital community, providing support to staff, and responding to changes in state-issued guidance and feedback from the hospital and broader Boston community. This process decreased clinician anxiety and increased hospital-wide understanding of the CSC process. While challenges remain in both the conceptualization and operationalization of these guidelines, health care organizations may adopt elements of the BWH process and incorporate key lessons learned.

Research Agenda

Overcoming the crisis can be possible if necessary procedures are followed. Effective communication with correct information needs to be followed to overcome the crisis. If you take the example of COVID-19, if the correct information was send to everyone most of the lives could have been saved and damage could have been prevented. Effective communication with procedures need to be followed in order to prevent or overcome the unforeseen crisis either pre-crisis or during the crisis or the damage can be reduced after the crisis. Misinformation is main factor that affects the crisis management which is what happened during COVID-19. It took so much time to take necessary precautions to stop the spreading of the virus because of misinformation spreading about it. The crisis response was avoiding staying in groups and covering face with mask and quarantine for unhealthy people who show the symptoms of virus.

Consider the example of the Starbucks crisis response. Although they did not try to overcome the issue spontaneously which made them occur some loss they were able to come up with effective crisis response by effective communication. The issue was about racial discrimination which had to be taken carefully. The employee judgment prejudice the company. The company later came up with a response which reduced loss which occurred by the racial discrimination although it could have been better if they did it any sooner and took necessary precautions by closing several branches in order to train the employees on the racial discrimination which can in turn prevent it from happening again. As the saying goes prevention is better than cure. Effective communication is very important in managing the crisis.

Consider the example of Pepsi which also did not have any pre-crisis. They weren’t taking the ad involvement and social situation seriously which made them incur severe loss during the crisis. Although they came up with an effective crisis response later by apologizing very soon. Although the crisis happened fast because of the social media communication they came to know about the issue due to the same social media which proves that communication is key factor to the crisis and also the response.

Conclusion

Management with effective communication and procedures with strict guidelines are needed in order to overcome any crisis. Preventing the crisis beforehand is always better than solving the crisis but since most of the crisis is unknown crisis response and post-crisis plays vital role in the management.

References

Brecher, M., & James, P. (1988). Patterns of Crisis Management. The Journal of Conflict Resolution, 32(3), 426-456. Retrieved February 3, 2021, from http://www.jstor.org/stable/174212

Erika Hayes James, Lynn Perry Wooten, and Kelly Dushek, 2011: Crisis Management: Informing a New Leadership Research Agenda. ANNALS, 5, 455–493, from https://doi.org/10.5465/19416520.2011.589594

Hermann, C. (1963). Some Consequences of Crisis Which Limit the Viability of Organizations. Administrative Science Quarterly, 8(1), 61-82. doi:10.2307/2390887

Jonathan Bundy, Michael D. Pfarrer, Cole E. Short, W. Timothy Coombs: Crises and Crisis Management: Integration, Interpretation, and Research Development, from https://doi.org/10.1177/0149206316680030

Kouzmin, A. (2008). Crisis Management in Crisis? Administrative Theory & Praxis, 30(2), 155-183. Retrieved February 3, 2021, from http://www.jstor.org/stable/25610919

Longstaff, P., & Yang, S. (2008). Communication Management and Trust: Their Role in Building Resilience to “Surprises” Such As Natural Disasters, Pandemic Flu, and Terrorism. Ecology and Society, 13(1). Retrieved February 3, 2021, from http://www.jstor.org/stable/26267909

Pearson, C., & Clair, J. (1998). Reframing Crisis Management. The Academy of Management Review, 23(1), 59-76. Retrieved February 3, 2021, from http://www.jstor.org/stable/259099

Pearson, C., & Mitroff, I. (1993). From Crisis Prone to Crisis Prepared: A Framework for Crisis Management. The Executive, 7(1), 48-59. Retrieved February 3, 2021, from http://www.jstor.org/stable/4165107

Tugba Fener, Tugce Cevik, Leadership in Crisis Management: Separation of Leadership and Executive Concepts, Procedia Economics and Finance, Volume 26, 2015, Pages 695-701, ISSN 2212-5671, from https://doi.org/10.1016/S2212-5671(15)00817-5.

Yu Liang, Junzhuo Xu, Crisis response of nursing homes during COVID-19: Evidence from China, International Review of Economics & Finance, Volume 72, 2021, Pages 700-710, ISSN 1059-0560, from https://doi.org/10.1016/j.iref.2020.12.024