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Agenda
What are the differences between risk, problem, emergency, crisis, disaster, and catastrophe? How should an organization conduct a risk audit? How is a crisis team formed and what does it do? What are the stages of crisis management? What do managers need to know and do to facilitate a recovery?
Catastrophes
Casualty accidents Environmental Class action Consumer action Defects/recalls Discrimination Labor disputes White collar crime Workplace violence
Of those who have had a crisis, 42% STILL do not have a plan! yet97% felt confident that they could respond well to a crisis
less than 25% of Global 2000 Enterprises have a business continuity plan
only 50% have tested their disaster recovery plans only 63% of businesses with continuity plans have enterprise wide plans
652 companies occupying 28.6 million square feet of space were temporarily or permanently displaced by the destruction
200,000 Verizon Communication lines were knocked out by network failures 12,000 Con Edison customers had their power cut Indirect impact to U.S. businesses has been estimated at $151 billion in the first year
90% of businesses that lose data from a disaster down within 2 years of the disaster
shut
80% of businesses without a well structured recovery plan close within 12 months of flood or fire 43% of companies experiencing a disaster never recover 50% of a company experiencing a computer outage are forced to close within five years 43% of companies that have a business continuity plan do not test it annually
80% of companies have not developed CM to provide IT coverage for business continuity
25% of financial institutions have no continuity plan 40% of companies that have CM plans do not have a team dedicated to disaster recovery 58% of UK organizations were disrupted by 9-11, with 13% severely affected
Only 23% of businesses have no early warning of some kind; about 75% of crises result from inappropriate action or inaction by top management 13 months before the 3-Mile Island disaster a senior engineer warned of the pending accident Evidence of threats against the US, use of planes as weapons, and infiltration by Islamic terrorists to the US were all known before 9-11 Years before Enron collapsed, Arthur Anderson found $51 million of accounting problems in Enrons books Executives Cynthia Cooper of WorldCom and Sherron Watkins of Enron both tried to give warnings of accounting irregularities before the crisis Roger Boisjoly, O-ring engineer for Morton Thiokol warned that there was blow-by on the Challenger shuttle O-rings
When crises occur, they are disruptive. A survey of Fortune 500 execs showed:
72% crises escalated 72% were subject to close media scrutiny 32% received government scrutiny 55% interfered with normal business operations 52% damaged company bottom line
Companies that did not have a crisis plan performed poorly over time
Companies that have a crisis plan may have an increase in price share after an event
People
Gossip / Rumors Personal Networks The Culture Communities Special Interests Media Consumers
Internal
Personal Data Bases PCs IT Remote Sensing Government Monitoring Industry
External
Technical
A survey of Fortune 500 execs showed that 57% had identified warning signs in the previous 12 months, and 38% said it developed into crisis
troubling rumors;
more frequent quality control issues; labor unrest, including poor morale or tension among employees.
Ian I. Mitroff, Michael A. Diamond, and C. Murat Alpaslan (2008).How Prepared Are America's Colleges and Universities for Major Crises? Assessing the State of Crisis Management. URL: http://www.scup.org/knowledge/crisis_planning/diamond.html
Risk Assessment
To what kinds of crises (industry & organizational) is your organization most vulnerable? What is the likelihood of their occurrence? What would the degree of impact be?
You can also categorize types of risks in terms of their impact and probability
Risk Categorization
High Impact
Amber Zone
Red Zone
Low Probability
Hazard Likelihood
Green Zone
I
I I
High Probability
Low Impact
Hazard Severity
Gray Zone
Crisis breakout
Triggering event with resulting damage
Chronic
Lingering effects of crisis
Resolution
Crisis no longer a concern to stakeholders
Damage containment
Keep from spreading to uncontaminated areas
Recovery
Return to normal operations asap
Learning
Review & critique CM efforts for improvements
Ecomap of Stakeholders
An ecomap or ecological map of stakeholders can help to identify all involved parties in the crisis. Concentric circles are used to set parameters on primary or direct stakeholder involved, secondary or spillover effected, and tertiary or very indirect affected. These help prioritize response to them and ensure that no one is left out of consdieration.
Primary Effect
Tertiary Effect
1. What are the likely objections & barriers to implementing a Crisis Management Team (CMT)? 2. If you were going to prepare an argument promoting a CMT, what are the key points and sequence in your argument? 3. Who in an organization (general positions) should be selected as a CMT member? 4. What are the technical skills and personal qualities that members should have? 5. What training in CM and team process should be required? 6. What are the effects of stress on decision making and what countermeasures should be taken?
Key roles:
Executive/CEO responsibility & authority Team leader (may be CEO) keep team updated and focused Spokesperson public relations, central source of information, communications, rumor control Legal representative legal guidance & implications of actions Researchers gather facts & compile information for position statements
activities
of the crisis
CM Team Training
Team building
Ensure that all CMT members are trained before the crisis occurs
When the Johnson & Johnson Company faced the Tylenol poisonings in 1982 they applied the Four Cs quite effectively. They relied on the value and strength of their culture credo which also identified the stakeholders
Four responsibilities: To the customers To the employees To the communities they serve To the stockholders
Tylenol Case
Media reporter asked PR Asst. Dir Andrews about poisoned Tylenol then it hit the news! 7 people died in the Chicago area CEO James Burke refers to the Credo, alerts to the danger, & assigns team to discover the source Formed 7-member strategy team Stop the killings Reasons for the killings Provide protection & assistance to people
and snowballs!
J&J stock fell 7 points Market share dropped from 35% of pain-reliever market to 8%
2. Incentives: free replacement of caplets for capsules, special coupons ($2.50 off) easily obtained
3. New pricing program: discounts up to 25% 4. New advertising program: national 1 minute commercial, News & talk shows, 5. 2250 sales personnel made new presentations to medical stakeholders
positive press articles regarding J&J, products, & safety indications of regaining market share held up as positive example of ethics & responsibility 450,000 e-mail messages
Strategies
Most public recovery strategies incorporate the following five components:
Employee Response
Strong family-oriented culture, we care about our employees Open and current communication with employees; 4 video programs on the unfolding process Emphasizing plant workers were innocent CEO speech in a week to employees, Were coming back (wearing buttons) Idle employees given tasks to keep involved & reduce rumoring and boredom Indications of market recovery bolster spirits Congruence and consistency in demonstrating the Credo
J&J set a new standard for protection thereby requiring competitors to expensively follow suit J&J was viewed as a co-victim of the crime
(learning contd)
Report your own bad news dont wait for reporters to root it out Speak with one voice Be accessible to the media so they wont go to other sources Target communications to those most affected by the crisis, and can affect the media If you cant discuss something, explain why Provide evidence for your statements Record events via video and documents so you can later present your side of the story
Exedrin (1986)
Tylenol again (1986) Sudafed (1991) Goody's Headache Powder (1992)
Assume that your team has been invited to help a small campus of 1000 students recover from a shooting incident (similar to Virginia Tech). The school does not have a crisis management team or plan but now recognizes the need What are some recommendations you have for them regarding the following: How should they go about forming a crisis management team (who should they select and what kind of training might they need)? What should they expect as fall-out from the crisis (e.g., longer term impact on people and the organization)? What can they do to reduce the adverse impact of the crisis on the organization? How can the campus be better prepared for crises in the future?