Masters Thesis Chapter 4: DEVELOPMENT OF OWN CRISIS

MANAGEMENT MODEL

Chapter 4: DEVELOPMENT OF OWN CRISIS MANAGEMENT MODEL

In this chapter I will introduce my own model, which incorporates both the stress and
the crisis term. Before I do this, however, I will briefly discuss some of the evolutionary
aspects of crises and one of the current phase models of crisis management. Having
done this I will much clearer be able to demonstrate the differences in my model and
why it has superior explanation power. Throughout, the chapter I will consequently
argue why this model is better at explaining some of the hidden factors that affect crisis
situations and the overall dynamics of crises. Notably, the importance of the level of
personal control in the Stress phase will be emphasized as this can give insight into
possible ways that companies can manage to get crises under control. Before I begin, I
would like to repeat what I mentioned in the introduction to this thesis, that the model is
merely a theoretical construction and should be evaluated as such.

4.1 The Evolutionary Aspects of Crises

A crisis is often said to go through different stages as it evolves. Several theorists have
proposed phase-models that with few exemptions are very alike in structure and
content. The problem so far for these types of models have been that they have not been
sufficiently flexible in the sense that new examinations have shown that persons and
organizations can go back and forth between phases and even avoid some. This reduces
the educational and logical aspects of the models. Nevertheless, I believe that phase
models in principle can be very valuable and we stand to gain much from them as long
as the new discoveries within crisis research is implemented. Thus, I have sought to
develop a model that incorporates the possibility of avoiding the most traumatic phase.
In terms of going back and forth between phases I have chosen only to subdivide the
crisis into four phases that are so sufficiently broad in scope that jumping back becomes
rather impossible.

Before I start let me just recapture why it is I wish to include the psychological aspects
of crises into my model. It would be very tempting to apply a purely functional
approach to crisis management with a checklist for organizations to follow during a
crisis. This could have been developed on the basis of my three case analyses, however,
Masters Thesis Chapter 4: DEVELOPMENT OF OWN CRISIS
MANAGEMENT MODEL

most managers that have experienced crises at first hand agree that the most difficult
part of the crisis was to live through it (Lagadec, 1993). Furthermore, there is the whole
notion of perception. To some an event will be crisis whereas to others it will just be a
minor incident. The medical specialist A. Bolzinger emphasizes the following:
Without this feeling of being in crisis, there is no crisis; the mere clinical perception
of the symptom is enough to make the diagnosis
(Bolzinger, 1982, Quoted in Lagadec, 1993)
Lagadec elaborates on this by saying that because the event itself disturbs the individual
it may be the primary source of the crisis. And if this is true then it is also true for the
entire organization, as it is constituted of people (Lagadec, 1993). Thus the subjective
perception of an event is crucially important to the handling of crises. It is therefore not
enough to set up crisis management teams and make checklists. The organization must
recognize that it cannot face a crisis merely by applying a series of purely rational
technical measures. I will like to cite Bolzinger once again as I believe he substantiates
this aspect very well in the following quote:
The subjective experience consequently comprises the necessary and sufficient
condition for understanding the concept of crisis. It relegates any objective
comprehension and any observations made outside the crisis framework to a
secondary role. The concept of crisis is inseparable from its subjective foundation.
(Bolzinger, 1982, Quoted in Lagadec, 1993)

Having stated that the subjective reaction to crisis is of great importance it follows that
every individual of the top management can influence a crisis to his or her advantage
(or to the advantage of the organization, of course!). Although, it is the organization
that is hit by a crisis it is an individual that must have the courage to respond (Darling,
1994). In general the individuals that are to make decisions during a crisis must be in
excellent physical condition, with solid mental stability, and their intellectual ability at
its height. Only if this is the case will managers be able to handle the crisis effectively
and create new strategies that can seize opportunities and turn a crisis to something
positive or resolve a seemingly inescapable situation.

I will briefly describe one of many traditional phase models in crisis management. The
model was developed by Steven Fink. He emphasizes that a crisis can have as many as
four phases implying that there may be less (Fink, 1986, Quoted in Darling, 1994). The
phases are:
Masters Thesis Chapter 4: DEVELOPMENT OF OWN CRISIS
MANAGEMENT MODEL

Phase 1: Prodromal crisis stage

Phase 2: Acute crisis stage
Phase 3: Chronic crisis stage
Phase 4: Crisis resolution stage
Like myself he argues that if management can recognize these phases it will give them
a clear advantage with internal communication and when orders must be given. The
Prodromal Crisis stage is the phase where the warning or the traumatic event takes
place. Entering the next Acute Crisis stage means there is no point of return with
regard to crisis management. At this point it is very difficult to recover lost ground,
however, there is still a possibility of limiting the additional damages that may occur.
Control is very important in respect to this stage as the intensity is very strong and
everything happens with an incredible speed. The Chronic Crisis stage is one of
recovery and self-analysis. Here the managers should seek to heal the wounds and draw
on the experiences gathered in order to appropriate actions against new crises. If the
former two stages were handled well or new opportunities have been grasped, this stage
can also be a time of celebration. The final stage is the Crisis Resolution where
everything goes back to the ordinary business but where the management team is wary
of potential repercussion crises or new crises warnings (Darling, 1994).
My model differentiates itself from the classical phase-theories on crises.
Compared to the well known psychologist Johan Cullberg’s crisis theory I have placed
the Acute-phase under my Stress-phase, while the Shock- and Adaptation-phase to
some extent can said to be similar to my Crisis phase. In regard to Fink’s model I have
subdivided his Acute Crisis stage into my own Stress phase and Crisis phase as I
believe there should be a distinction between the two. On the other hand I have chosen
to place both of his last two stages, Chronic Crisis stage and Crisis Resolution stage in
my own Recovery phase.

In the following description of my own model a number of the aspects

just mentioned will be recognizable but the emphasis will be on the psychological
aspects of learning and dealing with crises.
G.C. Hayward summarizes the importance of learning how crises evolve by
stressing that (crisis) management teams may very well prepare itself for all kinds of
crises but the problem is that the list will easily become infinitely long. Instead it is
much better to spend the efforts on identifying the processes necessary for assessing
and dealing with future crises as they arise (Hayward, 1986, Quoted in Darling, 1994).
 Masters Thesis Chapter 4: DEVELOPMENT OF OWN CRISIS
MANAGEMENT MODEL

As mentioned above a crisis can only be dealt with efficiently if certain top
management individuals have the courage to respond to a traumatic event, and in doing
so they will need to know how crises evolve at the individual as well as the
organizational level.

4.2 Thoughts and Structure of My Own Model

My model is based on the observation, that not everybody who have been involved in
potentially traumatic events develops a crisis condition. Empirical studies have shown
that even during large catastrophes some people have been able to handle the situation
in such a way that the traumatic crisis effects do not occur. However, no theories seem
to have covered this interesting phenomenon in an adequate way. Both the Response-
based and the Stimuli-based approach assume that everyone will have a crisis, while the
State-based approach to some extent acknowledges that people react differently but
only in a side-comment states that crises are in fact avoidable. The lack of theoretical
examination of how crises can be avoided sparked my interest and became the centre of
the model that I will present in this chapter.
My curiosity was especially focused on the phase during and right after
the shocking event. There is hardly any doubt that all people react both physically and
psychologically on upsetting situations. But thereafter the reactions seem to vary in
such a way that they can be categorized into three groupings which I briefly mentioned
in the former chapter. Some people freeze and become paralysed while others will only
be mildly affected with small reductions in their ability to act. Finally, a small group of
people will actually initiate actions and seems relatively unaffected by the given event.
Thus between the three groupings reactions vary substantially from individual to
individual. To me it seems that right after the incident have taken place a division takes
place in regard to the person's psychic state, and it is this division that I believe should
be the core focus of crisis research.
The division that I speak of gives associations to a sort of a psychological
filter. The question is whether this filter is part of the crisis or something else. In order
to explain this I have decided to use both the stress and the crisis term, which may seem
a bit confusing for now, but I will try to show how these two aspects in a perceptible
and logical way can complement each other.
 Masters Thesis Chapter 4: DEVELOPMENT OF OWN CRISIS
MANAGEMENT MODEL

My model is created as a dynamic crisis-model with four phases. Every individual will
go through the first two phases and the last one, but some may be able to avoid the
middle third phase. The model here visualized and will afterwards be explained in
details:
 Masters Thesis Chapter 4: DEVELOPMENT OF OWN
CRISIS MANAGEMENT MODEL

Figure 10: Own model of the phases the individual goes through during
a crisis.

CRISIS

CRISIS
High control

Traumatic Stress Recovery

Phase Phase
Event

Low control Crisis

Phase

Phase 1 Phase 2 Phase 3 Phase 4

Source: Own Creation

It is important to point out that the entire process is called a crisis and should not be
confused with the Crisis-phase, which is only a subdivision of the whole crisis.

4.2.1 Traumatic Event described

Traumatic Event is the actual event or situation and can be everything from a traffic-
accident to a death within the family or a devastating fire at the factory floor. In
Fink’s stage model he called this phase the Prodromal Crisis and in the case analyses
that will follow in chapter 6 the Traumatic Event is the cyanide poisoning of Johnson
& Johnson’s Tylenol capsules, the Exxon oil-spill, and the Greenpeace occupation of
Shell’s Brent Spar rigg respectively. In any case it is an event which the individual or
the organization is seldom prepared for. The Traumatic Event is a stimulus that should
be viewed as a strain, which will, at least in the beginning, bring the person out of his
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CRISIS MANAGEMENT MODEL

own psychic equilibrium. The time span of the Traumatic Event (phase 1) is often
very short but can last from a few minutes to a couple of hours depending on the type
of event.

4.2.2 Stress phase explained

The individual will be strained in the Stress-phase both physiological and

psychological. The well known physiological symptoms will show as an increase in
blood pressure and an increased production of adrenaline among other symptoms.
This is the way the system mobilizes extra resources so that the performance of
person can be maximized. We recognize this state of mind if we feel threatened or
become afraid in the dark for instance. Psychologically this phase is often
characterized by a state of shock where the person attempts to keep the reality away in
an attempt to protect him- or herself. This can be a very reasonable reaction if the
event is especially traumatic as it limits the flow of stimuli and gives the person time
to understand and incorporate the facts in a slower pace.
It is also seen that some people in this short period of time are capable
of handling the impressions and complications so well that they do not proceed into
the Crisis-phase. I have no empirical estimation of the percentage of people that can
avoid the Crisis-phase but the number is likely to be less than 30 percent and chances
are naturally dependent on the intensity, meaning, and characteristics of the Traumatic
Event to the person. I mentioned earlier that 30 percent of people involved in crises
act surprisingly well in the Stress phase but this does not mean that they automatically
manage to avoid the Crisis phase. Later in this chapter I will show how personal
control plays a major part in determining whether a person goes on to this phase or
not.
The Stress-phase can last from a few moments to a couple of days and
the person's strength and reaction is in this phase critical to the next phase. Therefore
the process often takes up most of the psychic energy but it is relatively seldom that
the phase locks and becomes a permanent psychosis (Cullberg, 1993a). Finally, I
should point out that freezing is common in the sense that the person feels paralysed
both in terms of mind and physical motion. I will elaborate on this in section 5.4.
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4.2.3 Crisis phase described

It is important to emphasize once again that not everyone continues into the Crisis-
phase and in the next chapter I will go into detail why this is. But until then I will
assume that the Crisis phase follows the Stress phase.
Personally, I do not think that the Crisis phase starts before the person
has had an opportunity to relate to the traumatic event. As mentioned above, the
coping and response in the Stress phase may be so successful that the Crisis phase can
be avoided altogether but normally the Crisis phase will follow because the person is
not able to handle the consequences of the situation with his current capabilities. This
view is also different from classical crisis models.

The Crisis phase is a condition where the individual as a consequence of a traumatic

event finds itself in a psychological dis-equilibrium that gives the person a sensation
of being threatened on his/her basic assumptions, subjective sense of self, social
identity, and existential core.
The Crisis phase in my model is not divided up in phases as many scholars
do it and should rather be viewed as a state in which the individual begins a slow
process of coping with the traumatic event, which will eventually heal like a scar.
Based on other psychological crisis theories, I will assume this phase to last from
everything between a couple of weeks to several years. For organizations it may last
somewhat shorter. This said, it took J&J eight months to regain their original market
share and Exxon had to face legal suits for several years not to mention the almost
two years it took to clean up after the spill. And Shell still have not decided what to
do with Brent Spar 2½ years later.
The reason I do not subdivide my Crisis phase into more phases is based on
two findings. First of all, current research has rejected that individuals go through
several sub-phases and this have been backed up by scholars who claim that it must
be possible to go back and forth between these sub-phases and even avoid some of
them (Davidsen-Nielsen, 1989 & Christensen, 1997b). And even though it may sound
contra dictionary in relation to my own model, I find it damaging that some scholars
are still attempting to force phase-models on to people. In my view it is much more
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CRISIS MANAGEMENT MODEL

likely that a company or an individual is actually dealing with several crises rather
than jumping back and forth between phases. John R. Darling brings up the same
point in the following quotation:
Because crises are not tiered on a convenient plateau system the crisis cycle often
makes it difficult to see where and when one crisis ends and another begins. This
is especially true in situations where the ripple-effect complications of one crisis
set off other crises within the business firm.
(Darling, 1994)
From my point of view there is no gain in dividing a crisis up into too many phases if
it implies that it is possible to jump back and forth. I rather prefer, as I have done in
my own model, a fewer but distinct phases that follow each other in a sequential
order.
The second source of criticism is that the phase-models have some inherent
therapeutic dangers. If the therapist expects to see the specific phases and they do not
show he or she may not only initiate a wrong treatment but also cause the patient to
interpret these signals in a negative way. The patient may feel that he does not follow
the "normal" crisis-process and that the therapist takes on a "teacher-student"
approach where he does not listen enough to what the patient is saying (Christensen,
1997b). The reason for the success of phase-models does not seem to come from
therapeutic results but rather from the educational benefit of clear-cut answers. In my
point of view, the phase-models have not only caused much confusion about crises
and stress but they have also damaged the soundness of the theories to such an extent
that I believe the crisis-field must look for theories that have distinct definitions but
are flexible in structure. Cullberg, who is one of the leading proponents of the division
in phases, states that the phase-view may itself be in a crisis!
Naturally, they (the phases) are not clearly distinct from each other and
sometimes one of them may even skipped or its course may be mixed with
another phase. The distinction is also artificial because every crisis turns
out to be a number of crises...
(Cullberg, 1993a)
What is interesting in the above statement seen in relation to my model is that
Cullberg points out that a phase can be missing. However, he does not go into debt
with this but I will attempt to do this in my own model. As mentioned before I have
include Cullberg's acute phase (Stress-phase) and the Recovery phase, but I will show
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CRISIS MANAGEMENT MODEL

in the next chapter why some people are able to avoid the shock- and coping-phase of
his model (Crisis-phase).

Of those who cannot avoid the Crisis-phase typical symptoms are:

Recurrent re-experiencing of the traumatic event in various forms (dreams, play,
flashbacks etc.), loss of appetite, psychic numbing reactions (diminished interest in
significant activities and feelings of detachment and estrangement etc.), drug- and
alcohol abuse, difficulties in falling asleep, concentration difficulties and much more
(Solomon & Flum, 1988). Having experienced a large catastrophe the person will
typically also suffer from a high degree of self-blame which can harm the subjective
self or, said in a psychoanalytical way, Freud's Super-ego cannot be sustained
(Christensen, 1997a). This can lead to an even larger crisis that can trigger a
development-crisis and in worst case result in deep psychosis. In cases of assault like
rape it is often seen that the trust in the surroundings and other people have been
damaged and the social identity and contact stands at risk of being permanently
damaged. Furthermore, the crisis reaction is especially bad if the event seems
meaningless, out of control, or has caused harm or deaths to children (Christensen,
1997b). The crisis does not necessarily need to be of such a grave nature for
individuals to react this way. Business crises often involves an almost lynch-type
attitude from the media and that in itself may be enough to trigger this kind of
reaction, especially if the media crusade is personalized against managers.

4.2.4 Recovery phase described

The individuals and the organization will in the Recovery phase be able to return to
the ordinary life and business routines as the Traumatic event at this stage has been
handled in such a way that a reestablishment of the inner equilibrium position has
been attained. The interesting aspect is whether this new equilibrium state is the same
as the old one or if it is strengthened or weakened. Unfortunately enough, very few
scholars have dealt with this phase in detail on the individual level and that is why I
have chosen to look elsewhere for ways to analyse it. Neither have there been many
studies of the effects on companies, however, Arie de Geus points out that 1/3 of all
companies in the U.S. Fortune 500 had vanished in a thirteen year period from 1970
to 1983. The number includes many mergers but also hostile takeovers and other
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types of deadly and terminal crises (Geus, 1997). Furthermore, the average lifespan of
companies in Europe is 12½ years, regardless of size, which suggests that most
companies leave the Recovery phase relatively weakened compared to the pre-crisis
state.
I will return to this discussion as I have chosen to use Catastrophe-
theory to explain the whole notion of states of equilibrium in the next chapter 5.
However, at this point I can say, that it is impossible to return to the same state of
equilibrium even if the Crisis-phase is avoided, but I think it makes sense that a
company or a person cannot be the exact same having experienced a Traumatic event.
For organizations as well as the individual the phase is also characterized by a period
of self-analysis or self-doubt and of healing.

An interesting aspect in respect to this is whether individuals who have been through
the Crisis-phase reach a relative higher level of inner equilibrium in the Recovery
phase or not. If they do, then crisis experienced managers should stand relatively
stronger in light of new crises, and the given organizations should thus be better off.
In order to evaluate this statement it is worthwhile to take closer look at individuals
who went through the Crisis phase and individuals that were capable of avoiding it.
One could expect that managers that avoided the Crisis phase would come out of the
Recovery phase relatively much stronger than the crisis experienced managers,
however, this is not necessarily so. Naturally, this depends on the specific individual
but it is certain that the new personal inner equilibrium will not be the same as in the
pre-crisis state. It may be either stronger or weaker.
Managers in large companies who have been able to handle and guide a
company and its employees through a crisis without being personal affected seem to
be strengthened psychologically. Two well-known examples of this are Lee Iacocca
the Chrysler Executive of the early 1980s, and (naturally) J&J’s Chairman James E.
Burke. Iacocca managed to save Chrysler out of the Crisis phase and away from
bankruptcy, and he consequently became legendary in helping companies out of
crises. Burke had learned from the 1982 Tylenol poisoning and used his experiences
very effectively to yet again avoid the Crisis phase when another case of poisoning
surfaced four years later. These types of managers collect and evaluate the
experiences and learn from them in such a way that they themselves are strengthened
to such a degree that they may in the future be able to avoid some potential crises
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CRISIS MANAGEMENT MODEL

altogether. Basically, they will be able to detect warning signals better and know the
value of setting up crisis preventive measures. Should the crisis strike anyhow, they
will typically be able to draw on their former crisis experiences and regain control
much faster during the Stress phase and thereby possibly avoid the Crisis phase.
The organization with all its employees may also be strengthened in another
way. When a company has been through the hard and stressing period of a crisis it is
often seen that there develops an esprit de corps among the employees. The sense of
survival and having been through hard times together can have substantial positive
effects for the company and as Gerald Meyers and John Holusha say, the single most
important recipe for success in business is a strong leader backed by a loyal and
inspired team (Meyers & Holusha, 1986).
A different example where people have come strengthened out of the Recovery
phase is that of soldiers. Surveys made by a branch of the Life Event (part of the
Stimuli-based approach) theory field have shown that with moderate war experience
soldiers actually become emotionally and psychologically stronger (Solomon & Flum,
1988). However, the opposite view has been argued in respect to empirical studies
from the Vietnam War and the 2. World War where PTSD seems to be rather
common (Kets De Vries & El Hajj, 1992). Interesting, though tragic, is the statistical
fact that approximately 58,000 U.S. soldiers died in Vietnam while 100,000 Vietnam
veterans have committed suicide since the war! (BBC, 1987). This indicates a clear
weakening of the inner equilibrium or that the psychological wound was never healed.
Below I have shown the Recovery phase in more detail with the two types of
reactions:
 Masters Thesis Chapter 4: DEVELOPMENT OF OWN
CRISIS MANAGEMENT MODEL

Figure 11: Recovery phase

Strengthened

Recovery phase

Crisis phase

Weakened

Source: Own creation

It can be argued that people who have been all the way through a Crisis phase may be
psychological strengthened. The argument is that these people will have tried the
anxiety provoking reorganizing-process and have been strengthened by being forced
to look into and evaluate their own core self in order to cope with the crisis. This is
true for some people but according to Korsgaard Christensen most people seem to
become more vulnerable to new crises if they have been through the Crisis phase once
before (Christensen, 1997). This means that these individuals will be relative more
likely to go through the Crisis phase once again if faced by a new traumatic event.
The reason being that a new crisis will evoke so many bad memories that the manager
or person will almost certainly freeze up and thus the chances of seizing opportunities
and control passes by. Managers that have been through a Crisis phase before will
sometimes carry with them a psychological scar, which can easily be ripped up again
and cause the freezing. An example of this is the mentioned suicides after the
Vietnam war, where it has been proved that most of these suicides were not so much
caused by the war-experiences but rather by the hostile welcome they received by
their fellow countrymen when returning home. Because they were expecting a "hero-
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like" welcome this Traumatic event is likely to have ripped up the scar and thrown
them out of their new inner equilibrium and straight into a new Crisis phase1.

4.3 Summary

I have in the past five sub-sections accounted for my own model and its four phases. I
began by explaining some of the evolutionary aspects of crises and introduced the
phase model by Fink. Although his model is of good use and easy to understand it still
fails to explain why some business crises follows a different pattern and what causes
it.
My own model seeks to account for this fact. By dividing a crisis up into
four specific and distinct phases (Traumatic Event, Stress phase, Crisis phase,
Recovery phase) I believe it will yield better explanation power. The model was
constructed as follows. The Traumatic Event, which causes the whole crisis, will
normally be of very short duration. The event is the stimuli to the Stress phase where
the person or the organization is thrown out of the initial inner equilibrium but
attempts to recapture it through the gaining of control. If this is successful the
organization or the person will proceed straight to the Recovery phase where a new
state of equilibrium is established. However, if control is not seized, a Crisis phase
will commence, which will very likely cause damages that may become fatal or at
least permanent. As time passes by the organization or the person will slowly seek to
establish a meaning of the Traumatic event and use different types of coping-
strategies in order to return to a more normal state of equilibrium.
The Recovery phase will then follow wherein the crisis will slowly fade away and
(business) life returns to normal, with the organization or the person being either
strengthened or weakened as a result.
The cardinal point of the model is the Stress phase. Opportunities appear
in this phase and if taken can turn the crisis into a positive experience both on
existential and financial terms. For opportunities to be seized it takes a high level of
control, which will be very difficult to gain during the Stress phase. Most companies

1
Naturally, many of the Veterans had not yet reached the Reorientation-phase when
returning to the U.S. and it is therefore in these cases more relevant to speak of a
widening and deepening of the scar.
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will due to lack of crisis management planning not gain it and will consequently be
confronted with the Crisis phase. The question becomes where is the dividing line of
control and what is control at all? I will look into this in the next chapter by exploring
the powers of Catastrophe theory.