Corporate crisis: the aftermath

Article Abstract:

Once a corporate crisis has been settled, and all unexpected costs (including possible legal settlements) have been paid, the company should establish a follow-up committee to identify and assess implicit costs of the crisis. Implicit costs usually involve restoring such difficult-to-measure things as lost employee morale, or a damaged company reputation. The committee should be small and be granted authority to investigate all areas of company operations. The investigation should: avoid becoming a 'witch hunt'; identify the actual long-term sources of the recent crisis (not just the precipitative event); and analyze all 'people problems' related to the settled crisis. The purposes are twofold: to facilitate the full corporate recovery from the crisis, and to prevent similar crises from recurring. Both of these goals can be accomplished by developing a long-range crisis plan that anticipates future crises; specifies actions to take should another crisis occur; assign decision-making authority and management responsibilities in the event of another crisis; and define crisis management priorities. Naturally, each company's crisis planning will be unique; however, appropriate aspects of the plan should be disseminated to all company employees and departments.

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Managing in a crisis

Article Abstract:

Corporations facing a crisis should verify that the situation constitutes a crisis and assess its effects, prior to attempting to manage the crisis. Crisis management techniques that have proven effective include: (1) assigning a team of executives who have experience in legal affairs, finance, personnel management, and company operations, (2) identifying (and assigning priorities to) the real issues of the crisis, (3) separating crisis issues from underlying causes, and (4) delineating crisis management from company management activities. When communicating the crisis situation or the company's plans in view of the crisis, the company should: (1) emphasize the effect of the crisis on the public, (2) assign one individual to act as company spokesperson, and (3) prepare communications in advance. Five rules to consider when making crisis management decisions are also discussed: (1) avoid short-term solutions, (2) research crisis information, (3) revise corporate strategies as the crisis data are obtained, (4) assign decision-making authority to one person (or power), and (5) act as quickly as possible.

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Crisis management: looking for the warning signs

Article Abstract:

Crisis management should commence well before a crisis develops, by looking for warning signs. Managers should engage in forecasting and imagine a "worst case scenario. Crisis warnings include: exceptions to expected company performance, observations of potential problems by employees and customers, judicial and legislative trends, and information on problems in similar companies. Effective communication (both in-house and with external sources) is vital to crisis prevention. Misinterpretation of crisis signals and overreactions should be avoided. Decisions made at the pre-crisis stage can seriously affect successful management of a crisis when it appears, so these decisions should be well thought out.

Analysis

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