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 Crisis Planning
A Profit, Not-For Profit,
and Individual Responsibility

Corporate officers, professionals, and executives must recognize that contingency planning is not a luxury. Planning to deal effectively with business crisis is nothing less than planning for the survival of the company or one’s career.

But, looking at contingency plans is like listening and reading along as a flight personnel go through the safety procedures. Most people pay little attention until it is too late.

Overview

In recent years we have seen many diverse organizational crises. There was the Three Mile Island accident in 1979, Bhopal Disaster in 1985, the Tylenol Crisis in 1985, the first Tylenol Crisis in 1982, and numerous fires and employee shootings. There are accidents, deliberate acts of mischief, conflicts and disagreements, and many of them show up at the top of the news. Crises, large and small have haunted business since business began, long before Murphy's Law

We can define crisis as any disruption in the primary business or support operations. It can affect the possession of goods, or the delivery of goods or services to your customers. It could entail disruption in the purchasing stream and also impact your company's image in the market. A crisis subjects business to three kinds of exposure. First, the financial loss or even loss of life. Second, the interruption of service which can affect a company's credibility. And third, legal responsibility. You or your officers may be legally responsible for protecting employees, resources, or vital documents. The company may have contractual obligations that are violated as a result of the crisis.

Crisis management as an essential part of standard business practice. By crisis management we mean the development of capabilities and procedures to reduce or offset the affects of crisis. These capabilities might be designed to maintain customers good will when a crisis cast doubt on a company's integrity. The procedures might be designed to expedite recovery of information or communications operations. Crisis management touches every facet of business. It requires a comprehensive coordinated response. And it should be part and parcel of business planning. In order to do that it must be recognized as necessary by top management.

In certain industries contingency planning is mandated, but in every industry contingency planning is needed. It is needed to minimize crisis, minimize potential legal liabilities when they do occur, and expedite the recovery of the essential operations. Crisis management restrains dollar losses in a crisis. But even before any crisis occurs it can provide value in the confidence and "peace of mind" that it brings to employees, management and company owners.

Crisis Management can ensure business survival, but unlike insurance it is dynamic rather than passive. And unlike insurance, it is not only an expense, it plays a part in the decisions made on a day to day basis for operations and support facilities. It is a smarter way of doing business. Corporate officers must recognize that contingency planning is not a luxury. Planning to deal effectively with business crisis is nothing less than planning for the survival of the company.

In a joint effort, we surveyed 102 of the largest worldwide corporations and 20 of the largest firms in Australia regarding their crisis plans. These corporations represented industries such as petroleum, consumer products, electronics, health care, finance and automotive just to name a few.

Findings

We discovered that there was a general:

The industries responding included fifty percent (50%) that were identified as being the automobile industry, seventeen (17%) were from banks, seventeen (17%) were from what we classified as consumer industries or firms, and seventeen percent (17%) were from the food business.

One of the questions we asked explored the interest in man-made crisis and natural disasters. One hundred percent (100%) of our respondents reported that they were more concerned with man-made crises than they were with natural disasters. Thirty three cent (33%) of the respondents were members of a crisis management team within the organization or a team that was starting to be developed. Fourteen percent (14%) of our international crisis management organizations where previous national studies showed a level thirty eight (38%) percent. Thirty three percent (33%) of the firms that we surveyed five used outside consulting firms in the process of establishing their crisis management plan.

Crisis Concerns

The international firms addressed in the study showed a significantly higher level of incidence regarding product defects (11.57), defects in plants and/or equipment 2.71), and copyright/license infringement (11.00). Higher levels were also noted in Computer breakdowns 2.00 and rumors-malicious slander (2.14). This data suggests a higher level of international incidences regarding threats to quality.

None of the firms reported incidences of industrial or environmental accidents, Bribery terrorism, or executive kidnapping. This finding was not predicted. The firms led did not report significant plans nor simulations for potential problems. The international firms indicated an incidence level of one point fifty seven (1.57) unknown conditions that cause safe products to become lethal. The level of damage to reputation (13.0) was rather high. Governmental intervention (.57) was low.

 Crisis Plan Areas

In evaluating the question of how international firms are addressing the issues of management, we found some similarities and dissimilarities. The level of undertaking or engaging in crisis planning ranged from not at all (0) to extensively (4).

The firms in this study (.50) and the reviewed literature showed a remarkable lack of concern regarding the psychological preparedness of their employees and the psychological stress associated with the crisis process. The reported plans addressed technical/economic and people/ social/organizational concerns. Significant differences (.50) were noted in packaging, plant , safety, hazardous materials, issues management, use of outside experts, emotional preparation, behavioral profiles, governmental relations, whistleblower, sharing plans, legislation, and activist groups.

 Recommendations

We have obtained and analyzed the data, conducted follow-up interviews, talked to people in the field, and reviewed the literature. There are four major threats to crisis management as a field as well as to your organization.

The first is that there is significant resistance to the entire issue of crisis management.

The second issue is that there is a significant denial of psychosocial factors in the crisis management literature.

The third area is that the published literature has a definite anti-[planning bias.

The fourth recommendation is that firms should address the issue of training.

The specific areas should include the following: