Strategic Management: Formulation and Implementation

Crisis Management

Corporate crises are disasters precipitated by people, organizational structures, economics, and/or technology that cause extensive damage to human life and natural and social environments.

The list of corporate disasters is virtually unending. It includes executives kidnappings; hijackings, both in the air and at sea; hostile takeovers; and such acts of terrorism as the bombing of factories and warehouses.

However, while the situation is grave, it is far from hopeless for management, researchers, and consultants who are prepared to confront the problem directly.

Exhibit 53 presents a basic model of crisis management. This model identifies the following phases necessary for effective crisis management:

Detections stands for the organization's early warning systems. Those systems (including computerized process control systems / plant / equipment monitoring systems, and environmental scanning systems) scan both the external and the internal environments for signals of impending crises.
This point of the model indicates that no organization can prevent every crisis from occurring. But constant testing and revision of plans should allow an organization to cope more effectively with crises that occur. Prevention and preparation take the form of safety policies, maintenance procedures, environmentalimpact audits, crisis audits, emergency planning, and worker training.
Point III represents the major structures and mechanisms an organization has in place for guiding recovery. These include emergency plans, public relations plans, crisis management teams, etc.
At this point, the organization assesses the effectiveness of its crisis handling strategies and identifies areas in which better crisis management capabilities need to be developed.

This model allows managers to draw the following vital lessons for effective crisis management: