What is Crisis?
What does crisis management mean? In order to understand that, we must first understand what is a crisis? According to Merriam-Webster dictionary, crisis is an unstable or crucial time or state of affairs in which a decisive change is impending. In a business setting, a crisis can be defined as a crucial situation or time within an organization that disturbs processes and/or the employees in such a way that it can lead to organizational instability. This can also be called an organizational crisis. A crisis can affect an individual, group, organization, or society on the whole.
A crisis can happen as a result of an unpredictable event. It can also be an unforeseeable outcome of some event that was considered a potential risk. And sometimes, it is a risk that was contemplated and happened despite precautions to avert it. In any case, by their nature, crises almost always require that decisions are made immediately in order to limit damage to the organization.
What is Crisis Management?
Simply put, crisis management refers to collective decisions made and actions taken to curb the effects of a crisis. Put another way, Crisis management is the act of identifying a threat to an organization and its stakeholders and taking responsive, effective action to tackle it.
Due to the uncertainty of events around the world, many modern businesses try to identify potential crises before they occur. This is done in order to draw out plans to deal with them, putting the organization in a place to spring into action in the event of a crisis. If a crisis occurs, the organization must be readily able to quickly and effectively change course to survive.
The COVID-19 pandemic that started in late 2019 to early 2020 is a textbook example of an unforeseen crisis affecting virtually the entirety of the world’s economy. Businesses throughout the world were forced to shut their doors, restrategize how to stay afloat, and even rethink what it means to do business. Millions of employees were sent home with little or no idea on when or whether they will be able to return to work or how they were going to generate an income. Essential services struggled to function. The crisis management skills of businesses were stretched and tested like never before. Businesses and industries were affected in different ways and responded in a variety of manners. Sadly, many were unable to survive. However, a surprising number of organizations showed their ability to adapt, and in some cases thrive in response to a very challenging time.
Any business, large or small, may run into difficulties that can negatively impact its regular operations. A crisis can take many forms — an office fire, the loss of an important leader, a data breach, or a natural disaster can be the source of tangible and intangible costs to a company in terms of lost sales, damage to reputation, and a drop in income.
Businesses that create and put in place a crisis management plan to respond to unexpected incidents can not only reduce the effects of a negative event but in some cases can actually avoid them altogether.
What Are the Benefits of a Crisis Management Plan?
- Crisis management helps an organization’s staff handle unexpected situations and unfriendly circumstances with confidence and perseverance.
- Employees can adjust adequately to unexpected changes in the organization.
- Employees can examine and understand the causes of the crisis and cope with it in the best possible way.
- Managers can devise crisis management strategies to help the organization survive tough conditions and also decide on the next course of action to take.
- With Crisis management, managers can detect early signs of a crisis before it occurs, warn leadership and the appropriate employees against the aftermath, and take necessary precautions for the same.
Essential Characteristics of Crisis Management
- Crisis Management is a process that helps the organization’s managers, as well as staff, examine and understand events that can lead to crisis and uncertainty in the organization.
- Crisis Management enables managers and staff to respond appropriately to changes in the organization’s culture.
- It consists of effective coordination amongst the departments to overcome emergencies.
- It empowers teams and employees during a time of crisis to communicate effectively with one another and perform at their best in order to overcome tough times.
- It equips them with plans and preparation in order to avoid panicking and exercise patience.
- It provides a roadmap for management to be in control and in constant touch with staff, external clients, and stakeholders as well as media and the public.
- Crisis Management when done properly is not overly rigid allowing employees to adjust to constantly changing landscapes and new situations.
Types of Crises that Can Affect an Organization:
- Natural and environmental disturbances can lead to natural crises.
- These types of events are generally beyond human control.
- Earthquakes, Flood, Tornadoes, Landslides, Hurricanes, Tsunamis, Drought all result in natural disasters.
- When there is a failure in technology, this results in a Technological crisis.
- When there is an overall system failure, this can lead to a technological crisis.
- Machine breakdown, corrupted software, and other technical malfunctions can give rise to a technological crisis.
- Confrontation crises occur when team members engage against each other. Individuals who don’t agree with each other can eventually take on non-productive actions like boycotts, strikes for indefinite periods, and so on.
- In crises like these, employees tend to become insubordinate, even giving ultimatums and forcing them to act on their terms.
- Issues like internal disputes, poor communication, and limited coordination give rise to confrontation crises.
Crisis of Malevolence
- Crisis of malevolence happens in an organization when an employee or a group of employees commit one or more criminal acts, engaging in extreme actions in order to accomplish their demands.
- These include kidnapping company’s officials, or armed confrontations, etc.
Crisis of Organizational Misdeeds
- When the management of an organization takes up certain decisions that have harmful consequences toward stakeholders and/or third parties, this leads to Crises of organizational misdeeds
- In such cases, managers tend to ignore the after-effects of strategies and implement the same for quick results.
Crisis Due to Rumors
- When false and negative rumors are spread about the organization and brand, this can lead to a crisis.
- This can occur both through employees and staff or through third parties and can have dire consequences leading to significant public relations issues, regulatory scrutiny, or even worse.
- Although there are a number of reasons for an organization to seek bankruptcy protection, the public perception is almost always negative and significant.
- This can have a significant impact on an organization’s ability to function, damaging consumer confidence, employee retention and morale (especially with key employees), and more.
- As the name suggests, these kinds of situations happen unexpectedly and on extremely short notice.
- Managers most times either do not get warning signs or are ill-prepared to identify warning signs. This can result in significant upheaval and leave the business looking unprepared and disorganized.