The past decade has been wrought with crises on both a domestic and international scale. It has been marked by a glut of organizational crises including natural disasters, technology disruption, and acts of terrorism, scandals, and financial mismanagement. Yet, many leaders are ill-prepared for the important role they may need to play in leading an organization through a crisis.
At the beginning of the decade people all over the world scrambled to tackle the potential technological disruption of the Y2K bug which was one of the utmost crises.Then in 2001 the US was thrown off balance by the terrorist attack on September 11, which led to a world wide upshot. A few years later the Hurricane Katrina disaster that hit the gulf coast region which led to an ineradicable images of a community and the government struggling to respond and also the Tsunami in 2004. The close of the decade was through the collapse of financial markets 2008 and the H1N1 virulent disease in 2009.
A glimpse of the events of the last decade suggests that crises are inevitable.In most instances the leadership team is not prepared to manage a crisis, and the mishandling of an organizational crisis can have negative, long-term consequences for an organization’s profitability, reputation, market position, and human resource management systems. It is very much necessary for the leaders and the organizations to manifest positivity in crisis. Although executives are aware of the negative consequences associated with organizational crises, their formal training and on-the-job learning experiences do not prepare them for leading a crisis situation.When leadership training addresses crisis situations, the focus is on communications to stakeholders and public relations. However, leading a crisis situation is more than communication and public relations since public speaking and positive spin alone will not solve the majority of crises that leaders deal with.
So there is a need for management to develop the competencies to lead in a crisis situation.Anticipating crisis is a matter of strategic planning and risk management, but each crisis that manifests itself, must be dealt with adeptly by leaders, who also must consolidate the lessons learnt and communicate the same to the people as rganizational learning and thus drive sense for initiating change in the organization. A leader must institutionalize the process of crisis management to anticipate, prepare and mitigate an impending crisis. To ensure an effective crisis management mechanism leadership support and involvement is absolutely essential. Defining Crisis: Dutton described a business crisis as a type of strategic issue that, in the absence of corrective action, can lead to a negative outcome.
Pearson and Clair defined a crisis as a low-probability, high-impact event that threatens the security and well being of the public, and is characterized by ambiguity of cause, effect, and means of resolution, and consequently requires decisions to be taken swiftly. Thus a business crisis can be defined as a rare and significant situation that has the potential to become public and bring about highly undesirable outcomes for the firm and its stakeholders, therefore requiring immediate corrective action by firm leaders.Crises are clearly complicated events. Although many crises seem to happen instantaneously, in truth they generally unfold over a period of time. There are primarily two types of crises situations- Sudden crisis and smoldering crises. Sudden crises are significant and unexpected events that disrupt the daily operations of business for some period of time.
Natural disasters and other potentially calamitous events represent typical examples of sudden crises in that they occur suddenly and with limited warning.Smoldering crises are business problems that start out as small, internal problems within a firm, which when they become public to stakeholders can escalate to crisis status as a result of inattention by management. Most of the business crises fall into smoldering crisis. Smoldering-like crisis situations typically result from the simple day to day work performed in an organization and often take the form of management mistakes that have built up over a period of time.Phases of crisis Management: Phase 1: Signal Detection While these are less evident in many crisis that occur suddenly and without warning (e. g.
, natural disaster), most other types of crisis have a number of early warning signs that lead an enlightened manager to know something is wrong. A slowly building increase in customer complaints or defect rates, for example, can be a sign of trouble in product quality. Phase 2: Preparation/Prevention The preparation and prevention phase is one in which managers engage in activities to plan for or avert a crisis.These activities may include developing crisis policies and procedures, identifying a crisis response team, performing crisis drills, and more. As the preparation and prevention stage of crisis management should not imply that the goal for managers is to prevent all crises, but rather engage in realistic planning in order to better position the organization to prevent some crises and to manage those that are unavoidable.
Phase 3: Containment/Damage The goal of the containment/damage control phase is to limit the reputation, financial, and other threats to firm survival in light of the crisis.This is achieved through activities that limit the encroachment of a localized crisis into otherwise unaffected parts of the business or the environment. Containment and damage control tend to preoccupy management time and attention when crises occur. Indeed, it is these activities that people associate with crisis management, and represent an important step toward the next phase: business recovery. Phase 4: Business Recovery: One of the ultimate goals of any crisis situation is to return the organization to its pre-crisis condition.Leaders constantly try to reassure stakeholders that, despite the disruption, business affairs are operating smoothly or will be returning to normal soon.
In the business recovery stage, crisis handlers should have a set of short- and long-term initiatives designed to return the business to normal operations Phase 5: Learning Organizational learning is the process of acquiring, interpreting, acting on, and disseminating new information throughout the firm. When it comes to managing crisis situations, however, firm leadership runs the risk of adopting a reactive and defensive posture that prevents learning.Firms taking a learning stance would still be subject to the earlier crisis phases and would be enhanced by an explicit attempt to understand the underlying organizational factors contributing to the crisis. Leaders could then leverage this insight to facilitate fundamental change in firm systems and procedures Leadership and Crisis Management: Leadership can be conceptualized as a collective phenomenon where different individuals contribute to the organization by strategizing a course of action for achieving organizational goals and mobilizing members to adapt their behavior to achieve goals so that an environment can thrive.Leaders transform their organization by inspiring followers to perform beyond expectations.
Leadership competency, in refer to a state of being well-equipped or capable to perform a task. A leadership competency is a dynamic process that evolves over time and is influenced by the individual’s attributes and the collective interactions of the leader within the context of the organization and external environmental circumstances.In a crisis situation, leadership evolves into creating a situation where organizational members make sense of the reality of the crisis and become reflective and proactive in preventing the crisis from escalating and resolving the crisis. This is a challenging task for executives since crisis leadership somewhat differs from leadership as usual.
This is because organizational crises are low-probability/high-consequence events, characterized by ambiguity, time pressures, some type of system failure, and limited authority.Role of leadership in each phase of crisis: Leadership in Signal Detection phase of crisis: Signals of a possible crisis are less evident in most of the sudden crisis but a smoldering crisis always leaves a trail of red flags or warning signals that something is wrong. Unfortunately these warning signals often go unheeded by the management. This likely occurs due to several reasons. First, is an illusion of exception leading people to think that serious problems only happen to other people. Second, are ego defense mechanisms such as denial that allow leaders to preserve a pristine image of themselves and their organizations even in light of information or evidence to the contrary.
Third is a failure in signal detection precisely because it is the decision making and behavior of organizational leaders that are contributing to the pending crisis. Consequently, this limits a leader’s ability for sense making or perspective taking by narrowing the set of people, resources, and other sources of data to those that he or she feel reasonably confident will support their viewpoints In the signal detection phase, the role of leadership is to interpret triggers that may alert the organization of an impending crisis. The ability to respond to a crisis signal demands scanning the internal and external environment.The early detection, processing, and responding to signals of a crisis can lead to an organization directing energy to prevent the crisis from occurring or the ignoring of the signals.
The task of crisis leadership includes sense making and perspective taking. In the framework of sense making the questions such as how does something come to be an event? What does the event mean? What should I do relative to the event? And answering these questions in the signal detection phase can result in effective actions that may prevent a crisis.In addition to answering these questions, leaders need the ability to make sense of a series of events that, superficially, may seem unrelated. In the case of the Ford-Firestone product crisis, where defective tires were used on their Explorer vehicles, there were also numerous signs of a pending crisis that went ignored or undetected by Ford’s leadership. Some of these warning signals included a memo about supplier quality problems, reports of accidents, complaints about the vehicles in overseas markets, and reports from their own risk management department that went unheeded.Leaders failed in their sense making by not adequately comprehending or taking the necessary actions on key events that presented themselves prior to the crisis.
Perspective taking, which is the ability to entertain or assume the perspective of another, has been identified as a key element of detecting crisis signals. During a crisis, one of the core responsibilities of a leader is that of ensuring the well-being of those affected by the crisis. Perspective taking allows leaders to better understand and empathize with others and, in turn, act in the best interest of stakeholders.However, when scanning for signals, leaders are inclined to focus on the perspectives of those who are most vocal in a crisis or who hold the most power of the organization (e.
g. , activists or shareholders). This potentially misplaced attention can result from narrow perspective taking and may lead the crisis handler to neglect other warning signals of a crisis. Taking the example of Ford, if the firm leaders put themselves in the place of the victims or victims’ families they likely would had a more empathic and strategic response before the crisis smoldered.During the signal detection phase of the crisis, Firestone’s leadership focused on the data (rather than the people) and interpreted the data as being of acceptable risk. In this case, the target of interest was the shareholder rather than the consumer.
Leaders should recognize that their own ability to detect a crisis can be accurate, but it should be talked about with others by soliciting perspectives from a variety of sources. This is particularly true if leaders are seeking input from subordinates.Leaders have to recognize the Peers and supervisors who may be more willing to challenge the assumptions of leaders and encourage them to think about the crisis signals from an alternative perspective. Effective crisis leaders examine all the signaling data with equal severity and pause and reflect. Moreover, these leaders specifically identify someone to challenge their point of view of the crisis signals by asking the person to play the devil’s advocate by countering or questioning the assumptions. Leadership in Preparation/Prevention phase of crisis:The preparation and prevention phase is one in which leaders engage in activities to plan for or prevent a crisis.
These activities may include developing crisis policies and procedures, identifying a crisis response team, and performing crisis drills. The preparation and prevention stage of crisis management should not imply that the goal for leaders is to prevent all crises. This would be impossible. However, with some realistic planning and expectations, leaders will be better positioned to prevent some crises and better able to manage those that are unavoidable.When an organization invests time and resources into preparing for a crisis, it becomes alert in its response to a crisis.
For an organization to be alert, its leaders must have a thorough knowledge of all aspects of the business, and how the work across organization or departments, or task functions. In preparing or planning for a crisis, the ability to be organizationally agile is critical because although a crisis event may initially affect one aspect of the business, ultimately the entire organization, including its reputation, may be at stake. Thus, when planning for a crisis, leaders should consider the organization in its entirety.When leaders understand all aspects of the organization and create networks in different areas, they can make more comprehensive crisis prevention plans and span organizational boundaries to get things done. For example, Wal-Mart demonstrated organizational agility in its preparation and management of Hurricane Katrina. In contrast to government agencies that did not react until days after Hurricane Katrina hit land, Wal-Mart lined up its extensive distribution network and stocked its stores with the frequent supplies that are normally purchased during a natural disaster.
Wal-Mart was able to serve gulf coast areas better than other companies or public institutions. Wal-Mart’s efficiency, in contrast to government agencies was the result of a CEO who used his previous logistics experience to manage stores Wal-Mart’s efficiency, in contrast to government agencies was the result of a CEO who used his previous logistics experience to manage stores during Hurricane Katrina and was able to assemble a cross-functional emergency operations designed to quickly bring together people from different groups in Wal-Mart for decision making and to set priorities for tasks.So Creativity can be one of the leadership competency associated with the preparation and planning phase of a crisis. The concept of creativity in the workplace most often refers to the production of new or useful ideas, products, services, processes, or procedures. Creativity is necessary during the crisis preparation and prevention phase because leaders need to think about how an organization is vulnerable to a crisis, and then plan for multiple contingency.
This requires an ability to brainstorm and imagine in ways that go beyond the traditional thinking about corporate concerns. Competent leaders go beyond brainstorming the organization’s vulnerability to identify full-fledged scenarios of possible events. Scenario planning for a crisis helps leaders create cognitive maps that provide a reference point and increase one’s ability to navigate unfamiliar conditions.Referenceshttp://www.icmrindia.org/casestudies/catalogue/Marketing/MKTG182.htmhttp://www.guardian.co.uk/business/1999/jun/19/11
