Crisis management, according to ReputationManagement.com, consists of a series of steps taken by an organization to deal with a catastrophic event. A catastrophic event is further defined as anything that could negatively influence a business’s reputation or bottom line.
Unavoidable large-scale emergencies—such as natural disasters, terrorist attacks, or global financial crises—are generally unlikely to damage a brand’s reputation. Of course, these situations must be handled promptly and correctly, but customers won’t automatically blame a business when these problems arise. Preventable crises that result from an oversight or a poor decision, on the other hand, can drag an organization’s name through the proverbial mud. Product recalls, stolen data, false accusations, the loss of key executives, and other glitches can turn into public relations disasters that, in the worst-case scenario, can destroy a business.
Statistically speaking, the likelihood of such an occurrence is relatively high. ReputationManagement.com notes that 59% of businesses have experienced a crisis. Despite this reality, surveys show that only 54% of businesses have a proactive crisis management plan in place. These numbers mean that when disaster inevitably strikes, 46% of organizations won’t be ready—and may suffer devastating consequences as a result. ReputationManagement.com further reports that companies are positioned to lose an estimated 22% of their business when potential customers find even a single bad review on the first page of internet search results.
Smart managers understand this reality. They expect that crises will arise and take steps to prepare. With a crisis management plan in place, they also know exactly what they need to do after a problem has occurred. It’s important to understand that this type of knowledge is not instinctual; it is learned.
One way to acquire this knowledge is through an advanced degree program, such as Washington State University’s Online Executive Master of Business Administration. An Executive MBA can provide the resources, background, and skills for effective crisis management, positioning those interested in becoming business executives to successfully navigate any eventuality.
What Is Crisis Management?
Crisis management is what a company does in response to unexpected, impactful problems. Considering that crises can take many forms, a company may have multiple crisis management plans at its disposal.
An airline, for instance, might have different crisis management strategies for handling a terrorist threat than for a weather-related incident such as a hurricane. Some crises are so large in scope that all companies must craft a response. For example, Investopedia points out that the COVID-19 pandemic forced countless businesses to shut their doors, and many of them never reopened. Meanwhile, other businesses were able to navigate the crisis by developing strategies that allowed them to continue safely conducting business. For a business, crisis management can prove to be the deciding factor in continuing to operate.
What to Include in a Crisis Management Plan
According to Smartsheet, 10 distinct elements should be included in a crisis management plan.
Risk analysis: A study of all potential crises a company may face. This includes both internal and external threats, such as acts of violence in the workplace, severe weather events, data breaches, and product failures that would warrant a recall.
- Risk analysis: A study of all potential crises a company may face. This includes both internal and external threats, such as acts of violence in the workplace, severe weather events, data breaches, and product failures that would warrant a recall.
- Activation protocol: A crucial aspect of a crisis management plan is clearly defining what events will trigger it.
- Chain of command: An organizational chart identifying key decision-makers.
- Command center plan: A plan identifying where those in charge of handling the crisis will work.
- Response action plan: A plan laying out who is responsible for which tasks as part of the response.
- Internal communication plan: A system (including a backup system) for communicating internally with employees.
- External communication plan: A system of communicating with the public and external stakeholders about the crisis and how it’s being handled. Typically, a company spokesperson is in charge of informing the media and deciding what will be posted on social media channels.
- Required resources: A list of necessary resources in the event of a crisis. This can include food, water, blankets, and backup generators. Depending on the nature of the crisis, external resources may also be required, such as public relations specialists and legal teams.
- Crisis management training: Companies should regularly perform drills that put their crisis management strategies to the test to look for weak spots and inefficiencies.
- Plan review: After running drills, those in charge of the crisis management plan need to find ways to optimize it.
7 Steps of Crisis Management
A sound crisis response doesn’t just happen. It is the result of forethought, planning, and understanding the necessary actions to undertake during a crisis. According to the website Inc., there are seven critical steps to crisis management that every company should have in place, regardless of its size.
- Have a plan. A written plan should include clear objectives and specific actions that will be taken in the event of a crisis.
- Identify a spokesperson. Having one “voice” during a crisis will help a company deliver a clear, consistent message during media questioning and interviews.
- Be honest and open. Complete transparency, through all communication channels, can stop rumors and defuse a potential media frenzy.
- Keep employees informed. This can minimize the internal rumor mill and ensure that business continues to flow as smoothly as possible.
- Communicate with customers and suppliers. Ideally, customers and suppliers shouldn’t learn about a company crisis through the media. Businesses should make sure information comes from them first.
- Update early and often. Companies should issue summary statements, updated action plans, and new developments as frequently as possible. Social media and cable news outlets operate on a 24/7 news cycle. A business’s crisis plan must do the same.
- Don’t forget social media. Social media is a critical communication channel. Businesses should establish a team to monitor, post, and react to social media activity throughout the crisis.
Following these steps is not guaranteed to solve every problem, but not following them can open the door to public relations issues. Between good planning and prompt, appropriate responses, businesses give themselves the best possible chance of managing crises—no matter how unexpected or severe.
The Effects of Poor Crisis Management Plans on Business
A look at the potential damage from poorly handled crises illustrates the importance of a proper crisis management plan. ReputationManagement.com explains that crises can affect businesses in three primary ways.
- Damage to reputation. Constant negative press can corrode a brand’s image. Damaging stories can flood traditional media, and digital content from websites and social media adds to the problem. A company’s mistakes, actions, and inactions will be criticized and broadcast around the globe—and thanks to the enduring nature of internet posts and search engines, this material will continue popping up for a long time.
- Business operations disruption. A business may need to pull people from their usual jobs to handle a crisis. This response can cause vital functions, such as customer service or production, to be short-staffed. If a crisis continues for a long time, elevated work stress and a poor reputation may increase employee turnover and hiring costs. If chief executives leave the company on short notice, the entire organization will be affected in unpredictable ways.
- Revenue loss. Constant negative media attention can drive away potential customers, which in turn leads to lost revenue.
Crisis Management Cautionary Tales
Most people think companies, particularly large corporations, should have the resources to successfully deal with a crisis and straighten things out with minimal damage to the brand. That’s not necessarily the case.
According to a Forbes article from global crisis, risk, and reputation strategist Davia Temin: “The core reason that so many big companies, who should know better, fail in crisis is because the best crisis management is counterintuitive, sometimes even illogical, and they absolutely do not understand that.”
Companies often end up listening to the wrong people, don’t consider the ramifications, ignore what she calls “the zeitgeist of the moment,” and as a result, dig themselves into some pretty deep holes.
Deepwater Horizon
There are countless cautionary tales of crisis management gone wrong. Perhaps the most frequently cited is British Petroleum’s handling of the Deepwater Horizon explosion in 2010, which caused the worst oil spill disaster in U.S. history, along with multiple deaths.
In the wake of the incident, former CEO Tony Hayward made a shockingly insensitive statement during a press conference. “There’s no one who wants this thing over more than I do. I’d like my life back,” he infamously stated. The public was outraged over Hayward’s self-centered perspective, which has gone down in history as one of the biggest public relations blunders on record.
United Airlines
In 2017, a United Airlines passenger was forcibly dragged off an overbooked airplane after refusing to give up his seat. Another passenger captured the incident on video and posted it to the internet, where it went viral.
Instead of apologizing during the ensuing firestorm, United CEO Oscar Munoz first complained about having to “reaccommodate customers,” and then doubled down, blaming the passenger for being “disruptive and belligerent.” He struck a softer tone later—but thanks to poor crisis management, the damage had already been done.
Another recent example of poor crisis management planning was illustrated by Mark Zuckerberg, CEO of Meta (formerly Facebook) in 2021, when employees and whistleblowers went public with evidence that the platform harms children. Zuckerberg did the one thing no one should do during a crisis—he ignored it.
Rather than taking responsibility or committing to looking into the matter, Zuckerberg shifted blame and accused the media of conducting a smear campaign. This brought additional negative media attention. Even after rebranding Facebook to Meta and attempting to direct focus to the company’s newest project, the Metaverse, the stain on the brand’s—and Zuckerberg’s—reputation remains.
Crisis Management Success Stories
In stark contrast, companies with effective crisis management skills have avoided some potentially business-crushing disasters.
Johnson & Johnson
One prime example occurred in 1982 when seven people died after taking cyanide-laced capsules of Extra Strength Tylenol. Experts predicted that Johnson & Johnson, the medicine’s manufacturer, would never recover from the incident. But the company’s response was pitch-perfect.
Then-CEO James Burke ordered the immediate recall and free replacement of 31 million bottles of Tylenol. He also began working with the U.S. Food and Drug Administration (FDA) to develop tamper-proof packaging for future sale. During the process, he communicated frequently with the public and was completely open and forthright about all developments. Thanks to Burke’s leadership, Johnson & Johnson not only weathered the storm—it earned the public’s trust and thrived.
Southwest Airlines
Johnson & Johnson didn’t have to consider social media, which did not yet exist during the Tylenol crisis. For an example of successful social media crisis management, Southwest Airlines’ handling of a tragic 2018 incident is often cited.
When an airplane’s window broke during a flight, killing a passenger, other passengers shared the images and information on various platforms. Southwest immediately put a social media team in place to monitor and respond to these communications. The airline also quickly changed its online imagery, website, and marketing efforts.
The organization sent a loud, clear message that it was devastated by the disaster and concerned about its customers—and it was heard. Instead of being attacked for negligence or poor maintenance, the airline was praised and respected for its response.
Procter & Gamble
Another recent example of successful crisis management comes from Procter & Gamble, producers of Tide laundry detergent. After complaints that their Tide POD products could be confused for candy, a viral “Tide POD Challenge” swept YouTube in 2017, with people posting videos of themselves ingesting the pods.
Tide promptly responded, developing an ad campaign with Super Bowl champion Rob Gronkowski. The spot directly addressed the problem and used Gronkowski’s celebrity to communicate the dangers of consuming the product. Tide also made its product warnings more pronounced and made the packaging more difficult for children to access. Rather than shy away from the issue or blame the consumer, Procter & Gamble faced the problem head-on.
Learn How to Address Critical Business Challenges With an Executive MBA
A crisis management plan can be critical to preserving a business’s image, brand, and continued success. The right education can help you learn how to develop crisis management strategies that are valued by the business world, as professionals with these problem-solving skills will continue to be in high demand.
Washington State University’s Carson College of Business delivers one of the top-ranked executive MBA programs in the nation. The WSU Online Executive MBA curriculum is designed to equip students with the tactics, knowledge, skills, strategies, and other MBA resources utilized by today’s high-profile business leaders.
For more information, visit the WSU Executive MBA Online page.
Recommended Readings
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How an MBA Curriculum Prepares Students for the Workplace
Sources:
CNN Money, “United Airlines Shows How to Make a PR Crisis a Total Disaster”
Forbes, “Great Crisis Management Is Counterintuitive: That’s Why Boeing, Wells Fargo Are Getting It So Wrong”
Inc., “7 Critical Steps to Crisis Management”
Investopedia, “Crisis Management”
The Hill, “Best and Worst Crisis Management in 2021”
The New York Times, “Tylenol Made a Hero of Johnson & Johnson: The Recall That Started Them All”
ReputationManagement.com, “Crisis Management & Communication – 7 Steps to Control a Crisis”
Right Attitudes, “Tylenol Made a Hero of Johnson & Johnson: A Timeless Crisis Management Case Study”
Smartsheet, “Step-by-Step Guide to Writing a Crisis Management Plan”
Sprout Social, “5 Successful Crisis Communication Examples Brands Can Learn From”