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Lesson 10 and 11: Crisis management - Coggle Diagram
Lesson 10 and 11: Crisis management
What is a crisis
Traditional view
An event that can destroy or affect an entire organisation
Crises are defining moments
Present threats and opportunities
Test management and organisation (learning)
Define company’s public image (reputation)
Strategic view
A decisive moment, a turning point for better or worse
Trust radar
Expertise
sense of confidence that company knows what needs to be done
Is the organization competent to do the needful?
For-profits: usually not an issue (contrast: motivation to do the right thing). Question is: will companies do the right thing?
Not-for-profits & government institutions: may be perceived as caring but not competent. Question is: will trust that they will do the right thing, but whether they can?
Bringing in third-party experts with credibility may assist
Commitment
Communicating that a problem is being addressed or that a process for improvement is moving forward
Signalled most effectively by senior management (in most cases): demonstrates accountability & sends message that the crisis is the company’s top priority
Doesn’t always require the CEO – depends on the magnitude of crisis. When in doubt, use someone a little higher in the hierarchy than necessary. If too low, may be perceived as carelessness/disinterest
Transparency
Gives the sense that you're being honest
Not the same as full disclosure
Competitors can take advantage of full disclosure, leads to serious finger pointing, and too much info is dangerous
Is considered violated when the audience believes that relevant information was wilfully withheld (e.g. “no comment”)
Possible approach: Tell what you do know, what you do not know, and when you will follow up
Information needs to be understood: speak plainly, not in technical jargon or legalese
Empathy
Not the same as an apology, although an apology is a means of expressing it --> Send the signal that you empathise with them
Must be warm and authentic and not formulaic, insincere or calculative e.g.
Easiest to overlook
Crisis Management
Imperative that they capture the decisive moment
corporations/CEO do not have large “trust reservoirs” to draw upon
Impact of global news and especially social media
Questions of guilt are secondary
Tendency of executives is to narrow focus on expertise, and ignore transparency, commitment and empathy
Approaching a crisis
Assess the situation
What is the nature of the challenge facing the firm?
Who are the stakeholders?
What is the institutional risk environment?
Execute quickly
Implementation steps: short and long term
Consider challenges
Vulnerability to activist action- some consideration
Do the company’s product have “credence good” qualities, E.g. organic food, fair trade coffee, free range
Are there activists who care a lot about the credence good aspects of the product?
Does the company sell consumer products?
Are close substitutes available and easy & inexpensive to switch to
Does company have a valuable brand name that can be damaged
Is the company a multinational firm with global presence
Is the company’s value chain vulnerable to any of the above?
Develop multiple viable solutions
Project short and long term outcome
Choose (consider criterion for decision; e.g. reinforcing core values)