Crisis management is a crucial aspect of running a successful business. It involves a series of proactive steps taken by organizations to handle catastrophic events that could negatively impact their reputation or bottom line. While large-scale emergencies like natural disasters or terrorist attacks may not directly damage a brand’s reputation, preventable crises resulting from poor decisions or oversights can lead to public relations disasters and potentially destroy a business.
Statistics show that 59% of businesses have experienced a crisis, yet only 54% have a proactive crisis management plan in place. This means that almost half of organizations are unprepared to handle a crisis and may face devastating consequences as a result. Companies are also at risk of losing 22% of their business if potential customers come across even a single negative review on the first page of search results.
Smart managers understand the importance of crisis management and take proactive steps to prepare for potential crises. Acquiring knowledge in crisis management is crucial, and one way to do so is through an advanced degree program like Washington State University’s Online Executive Master of Business Administration (MBA). This program equips future business executives with the skills, resources, and background necessary for effective crisis management.
What Is Crisis Management?
Crisis management refers to the actions a company takes in response to unexpected and impactful problems. Different crises may require different management strategies. For example, an airline may have different plans for handling terrorist threats compared to weather-related incidents like hurricanes. Some crises, such as the COVID-19 pandemic, affect all businesses and require a comprehensive response. Effective crisis management can be the deciding factor in a company’s ability to continue operating.
What to Include in a Crisis Management Plan
A well-crafted crisis management plan should include the following elements:
- Risk analysis: Identify potential internal and external threats, such as workplace violence, severe weather events, data breaches, and product failures.
- Activation protocol: Clearly define events that will trigger the crisis management plan.
- Chain of command: Identify key decision-makers within the organization.
- Command center plan: Establish a designated location for crisis management operations.
- Response action plan: Assign responsibilities for specific tasks during a crisis.
- Internal communication plan: Develop systems for effective communication with employees.
- External communication plan: Establish channels for communicating with the public and external stakeholders, including media spokespersons.
- Required resources: Compile a list of necessary resources, both internal and external.
- Crisis management training: Regularly conduct drills and exercises to identify weaknesses and inefficiencies in the plan.
- Plan review: Continuously optimize the crisis management plan based on lessons learned from drills and real-life situations.
7 Steps of Crisis Management
Effective crisis response requires careful planning and understanding of the necessary actions. Here are seven critical steps to crisis management that every company should follow:
- Have a plan: Develop a written plan with clear objectives and specific actions to be taken during a crisis.
- Identify a spokesperson: Designate one voice to deliver a consistent message during media interactions.
- Be honest and open: Emphasize complete transparency through all communication channels.
- Keep employees informed: Minimize internal rumors and ensure smooth business operations.
- Communicate with customers and suppliers: Proactively share information with stakeholders before they learn about the crisis through other channels.
- Update early and often: Issue frequent updates, action plans, and new developments to keep stakeholders informed.
- Don’t forget social media: Establish a team to monitor and respond to social media activity throughout the crisis.
Following these steps can significantly improve a company’s ability to manage crises and mitigate potential damage.
The Effects of Poor Crisis Management Plans on Business
A poorly managed crisis can have severe consequences for businesses. Here are three primary ways in which a crisis can impact a company:
- Damage to reputation: Negative press and digital content can tarnish a brand’s image, leading to lasting consequences.
- Business operations disruption: Crisis management efforts may require reallocating resources, potentially causing disruptions in vital functions and increasing employee turnover.
- Revenue loss: Constant negative media attention can drive away potential customers, resulting in decreased revenue.
Crisis Management Cautionary Tales
Countless cautionary tales illustrate the pitfalls of poor crisis management. Some notable examples include:
Deepwater Horizon
British Petroleum’s handling of the Deepwater Horizon explosion in 2010 is often cited as a major crisis management failure. Former CEO Tony Hayward’s insensitive statement during a press conference caused public outrage and further damaged the company’s reputation.
United Airlines
In 2017, United Airlines faced a public relations disaster when a passenger was forcibly dragged off an overbooked flight. The CEO’s initial response, blaming the passenger and using inappropriate language, worsened the situation and led to significant backlash.
In 2021, Facebook (now Meta) faced a crisis when evidence emerged that the platform harms children. Rather than taking responsibility and addressing the issue, CEO Mark Zuckerberg shifted blame and accused the media of conducting a smear campaign, resulting in additional negative attention.
Crisis Management Success Stories
Conversely, companies that effectively manage crises can avoid significant damage to their brand and reputation. Some examples include:
Johnson & Johnson
In 1982, Johnson & Johnson faced a crisis when cyanide-laced capsules of Extra Strength Tylenol caused multiple deaths. The company’s CEO at the time, James Burke, responded swiftly by recalling and replacing millions of bottles of Tylenol. His transparent and open communication earned the public’s trust and helped the company recover.
Southwest Airlines
When a tragic incident occurred during a Southwest Airlines flight in 2018, the company demonstrated successful social media crisis management. It quickly responded to online communications, changed its imagery and website, and communicated its concern for customer safety. The airline’s prompt and empathetic response garnered public praise.
Procter & Gamble
When faced with the Tide POD Challenge, where individuals ingested Tide laundry detergent pods, Procter & Gamble took immediate action. The company developed an ad campaign featuring Super Bowl champion Rob Gronkowski to raise awareness of the dangers and made changes to packaging and warnings. Procter & Gamble’s proactive response helped address the issue and protect its brand.
Learn How to Address Critical Business Challenges With an Executive MBA
Acquiring the skills necessary for effective crisis management is crucial for aspiring business executives. Washington State University’s Online Executive MBA program equips students with the knowledge, strategies, and resources utilized by today’s high-profile business leaders.
By understanding crisis management and developing proactive strategies, professionals can ensure the continued success of their businesses. Visit the WSU Executive MBA Online page for more information.
Recommended Readings:
- What Is a Sales and Marketing Strategy?
- How an MBA Curriculum Prepares Students for the Workplace
- How to Plan a Corporate Event
SOURCES:
- CNN Money, Forbes, Inc., Investopedia, The Hill, The New York Times, ReputationManagement.com, Right Attitudes, Smartsheet, Sprout Social, Time