The document discusses best practices for crisis management in organizations, including defining different types of crises, conducting risk audits, forming crisis management teams, and outlining the stages of crisis management from detection to recovery. It also examines case studies of real-world crises like the Tylenol poisonings and lessons learned around effective crisis response, communication, and organizational recovery.

1. Crisis Management in
Organization Development

2. Agenda
• What are the differences between
risk, problem, emergency, crisis,
disaster, and catastrophe?
• How should an organization
conduct a risk audit?
• How is a crisis team formed and
what does it do?
• What are the stages of crisis
management?
• What do managers need to know
and do to facilitate a recovery?

3. The Changing Nature of Business Crises
1990
2001
Catastrophes
5.5%
5.0%
Casualty accidents
4.8%
4.6%
Environmental
7.8%
1.8%
Class action
2.2%
23.1%
Consumer action
2.8%
2.6%
Defects/recalls
5.4%
14.9%
Discrimination
3.3%
2.7%
Labor disputes
10.3%
12.4%
White collar crime
20.4%
7.8%
Workplace violence
3.8%
12.3%

4. Crisis Survey of Fortune 500 Executives
•
89% of Fortune 500 execs believe that crises are
inevitable today
•
50% of F500 execs do not have a crisis management plan
• Of those who have had a crisis, 42% STILL do not have a plan!
• yet…97% felt confident that they could respond well to a crisis
• less than 25% of Global 2000 Enterprises have a business continuity plan
• only 50% have tested their disaster recovery plans
• only 63% of businesses with continuity plans have enterprise wide plans
• only 20% of plans are shared with critical third parties

5. WTC Business Fallout
•
An estimated 14,600 businesses inside and
around the World Trade Center were impacted
by the disaster
•
13.4 million square feet of space in six buildings
in and surrounding the WTC complex were
destroyed
•
36 miles of new cable had to be installed by
Consolidated Edison
•
652 companies occupying 28.6 million square feet of space were temporarily
or permanently displaced by the destruction
•
200,000 Verizon Communication lines were knocked out by network failures
•
12,000 Con Edison customers had their power cut
•
Indirect impact to U.S. businesses has been estimated at $151 billion in the
first year

6. …and the King’s business fares no better… (UK statistics)
•
90% of businesses that lose data from a disaster
down within 2 years of the disaster
•
80% of businesses without a well structured recovery plan close within 12
months of flood or fire
•
43% of companies experiencing a disaster never recover
•
50% of a company experiencing a computer outage are forced to close within
five years
•
43% of companies that have a business continuity plan do not test it annually
•
80% of companies have not developed CM to provide IT coverage for
business continuity
•
25% of financial institutions have no continuity plan
•
40% of companies that have CM plans do not have a team dedicated to
disaster recovery
•
58% of UK organizations were disrupted by 9-11, with 13% severely affected
shut

7. Early Warning Systems don’t work if you don’t use them
• Only 23% of businesses have no early warning of some kind; about 75% of
crises result from inappropriate action or inaction by top management
• 13 months before the 3-Mile Island disaster a senior engineer warned of
the pending accident
• Evidence of threats against the US, use of planes as weapons, and
infiltration by Islamic terrorists to the US were all known before 9-11
• Years before Enron collapsed, Arthur Anderson found $51 million of
accounting problems in Enron’s books
• Executives Cynthia Cooper of WorldCom and Sherron Watkins of Enron
both tried to give warnings of accounting irregularities before the crisis
• Roger Boisjoly, O-ring engineer for Morton Thiokol warned that there was
“blow-by” on the Challenger shuttle O-rings

8. When crises occur, they are disruptive.
A survey of Fortune 500 execs showed:
• 72% crises escalated
• 72% were subject to close media scrutiny
• 32% received government scrutiny
• 55% interfered with normal business operations
• 52% damaged company bottom line
• 35% damaged company’s reputation & image

9. Companies that did not have a crisis plan performed poorly over time

10. Companies that have a crisis plan may have an increase in price share
after an event

11. Crisis Mechanisms
Types of Signals
People
Communities
Special Interests
Gossip / Rumors
Personal
Networks
The Culture
Media
Consumers
Internal
External
Personal Data
Bases
PCs
IT
Remote
Sensing
Government
Monitoring
Industry
Technical

12. A survey of Fortune 500 execs showed that 57% had identified warning signs in the
previous 12 months, and 38% said it developed into crisis
Red flags may include
• increasing numbers of consumer complaints;
•a growing number of safety problems or accidents;
•a rash of lawsuits;
•troubling rumors;
•more frequent quality control issues;
•labor unrest, including poor morale or tension among employees.

13. Survey of colleges and comparison of training (preparation) vs actual
crisis experience
Ian I. Mitroff, Michael A. Diamond, and C. Murat Alpaslan (2008).How Prepared Are America's Colleges and Universities for Major Crises?
Assessing the State of Crisis Management. URL: http://www.scup.org/knowledge/crisis_planning/diamond.html

14. Risk Assessment
• To what kinds of crises (industry & organizational) is your
organization most vulnerable?
• What is the likelihood of their occurrence?
• What would the degree of impact be?

15. Risk Categorization
You can also categorize
types of risks in terms of
their impact and
probability
High Impact
Red Zone
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Amber Zone
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Green Zone
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Hazard Likelihood
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Low Probability
Low Impact
Hazard Severity
Gray Zone
High Probability

16. Stages of Crisis Management
Like most human events, crises can be described in terms of stages, or relatively identifiable
sequences of events and reactions. Stages enable planners to monitor risks, progress, target
stakeholders, and take strategic action appropriate to the stage. There are many models;
below are two prominent ones:
Fink’s Crisis Lifecycle
Prodromal
Risk cues that
potential crisis can
emerge
Crisis breakout
Triggering event with
resulting damage
Chronic
Lingering effects
of crisis
Resolution
Crisis no longer a
concern to
stakeholders
Mitroff’s Five Stages of Crisis Management
Signal
detection
Warning signs &
efforts to prevent
Probing &
prevention
Search risk factors
& reduce potential
for damage
Damage
containment
Keep from spreading
to uncontaminated
areas
Recovery
Return to normal
operations asap
Learning
Review & critique
CM efforts for
improvements

17. Ecomap of Stakeholders
An “ecomap” or
ecological map of
stakeholders can help to
identify all involved
parties in the crisis.
Concentric circles are
used to set parameters
on primary or direct
stakeholder involved,
secondary or “spillover”
effected, and tertiary or
very indirect affected.
These help prioritize
response to them and
ensure that no one is left
out of consdieration.
Primary Effect
Secondary (Vicarious) Effect
Tertiary Effect

18. Crisis Management Team
Formation– selling the idea

19. Team discussion questions
1. What are the likely objections & barriers to implementing a Crisis
Management Team (CMT)?
2. If you were going to prepare an argument promoting a CMT, what are
the key points and sequence in your argument?
3. Who in an organization (general positions) should be selected as a CMT
member?
4. What are the technical skills and personal qualities that members
should have?
5. What training in CM and team process should be required?
6. What are the effects of stress on decision making and what
countermeasures should be taken?

20. Presenting the CM Concept
•
What are the risks in your industry &
examples of crises?
•
What are the adverse outcomes of not
preparing, and advantages to preparing?
•
How would CM be compatible with the mission & vision of the organization?
•
What would it take to implement a CM team?
•
What are the downsides to implementing a team and how can such
objections be overcome?
•
What special areas of representation, knowledge, and skill are necessary for
selection?
•
What kinds of skill training are necessary in CM and teamwork?
•
What kind of resources and allocation would be necessary for a CM system?
•
What would a comprehensive system of CM look like and how would it
change the organization?

21. Team Composition: Membership should be based
on representation, knowledge, and skill.
Key roles:
Typical team composition:
•
Executive/CEO– responsibility &
authority
•
Facility management
•
Team leader (may be CEO)– keep team
updated and focused
Legal department
•
Risk management
•
Information technology
•
Human resources
•
Financial services
Legal representative– legal guidance &
implications of actions
•
Real estate management
•
Corporate security
Researchers– gather facts & compile
information for position statements
•
Public relations/
communications
•
•
•
•
Spokesperson– public relations, central
source of information, communications,
rumor control

22. Define the duties of the team:
• Coordinate all crisis related
• Gathering and reviewing facts
activities
of the crisis
• Determining crisis response activities
• Allocate resources
• Specifying internal and external communications
• Training staff
• Establishing working relationships with external stakeholders
• Monitor progress and continuing situation assessment

23. CM Team Training
Ensure that all CMT members are trained
before the crisis occurs
• Team building
• Acquaintance & awareness of styles
• Openness & trust
• Cohesion, constructive team norms, groupthink countermeasures
• Understanding of risks & crises, impact & consequences unique to the
organization & industry
• Understanding of key crisis concepts and practices
• Overview of crisis planning and management process

24. When the Johnson & Johnson Company faced the Tylenol poisonings in 1982 they
applied the Four C’s quite effectively. They relied on the value and strength of
their culture credo which also identified the stakeholders
Four responsibilities:
• To the customers
• To the employees
• To the communities they serve
• To the stockholders

25. Tylenol Case Analysis
Background
•
In the mid 1950’s Tylenol became a needed and popular substitute for aspirin
for such conditions as flu and chicken pox, since aspirin was related to Reyes
Syndrome (liver degeneration, brain edema, 20-30% fatality)
•
Large market: 100 million users, 19% of corp profits, 13% of year to sales
growth, 37% market share of painkillers, outselling other top analgesics
combined
•
J&J was one of the “Best 100” companies to work for
•
Tylenol became a product trusted by physicians and families alike
•
Numerous other Tylenol products were developed for an active market
•
J&J strong “family” corporate culture

26. Tylenol Case
The Crisis Begins…
•
September 1982 Extra Strength Tylenol
at least 6 pharmacies and food
opened, & capsules were
(10,000 x fatal dose)
•
Media reporter asked PR Asst. Dir Andrews about poisoned Tylenol–
then it hit the news!
•
7 people died in the Chicago area
•
CEO James Burke refers to the Credo, alerts to the danger, & assigns
team to discover the source
•
bottles of
stores were
filled with cyanide
Formed 7-member strategy team
•
Stop the killings
•
Reasons for the killings
•
Provide protection & assistance to people

27. …and snowballs!
Poison Madness in the Midwest
--Time Magazine
•
Police drove through streets with loudspeaker warnings
•
Chicago hospital received >700 calls in one day
•
Immediate stories in major magazines and newspapers
•
Over 100,000 separate news stories ran in US papers
•
Hundreds of hours of national and local TV coverage
•
>90% of Americans had heard of the Chicago deaths
•
Widest coverage since Kennedy assassination & Viet Nam
•
Copycat tampering– 270 reported incidents (36 true)
Tylenol, killer or cure?
-- Washington Post
•
•
The Tylenol Scare
--Newsweek
J&J stock fell 7 points
Market share dropped from 35% of pain-reliever market to 8%

28. Initial Response– Phase 1 Crisis response
•
Immediate alert to consumers not to use any type Tylenol product or resume use
until extent determined
•
Live TV satellite feed of press conferences; media exposure via 60 Minutes,
Donahue, etc.
•
800# Hotline for customers (30,000 calls in Oct-Nov)
•
Toll-free phone for news organizations; pre-taped messages and updated
statements for distribution
•
Strict production, different lot $, & crisis only in Chicago indicated post-production
tampering
•
Withdrew bottles from Chicago area; ordered recall of >31 million bottles nationally
at a cost of >$100 million (against FDA & FBI)
•
It temporarily ceased all production of capsules
•
High public profile and repeated reassurance by Burke
•
Working relationship with law enforcement agencies
•
Notification of health professionals nationwide & FDA

29. Initial Response—Phase 2, PR Rebound
Five-Point Plan
1. Replaced them with tamper-resistant caplets (triple safety seal within 6
months)
2. Incentives: free replacement of caplets for capsules, special coupons ($2.50
off) easily obtained
3. New pricing program: discounts up to 25%
4. New advertising program: national 1 minute commercial, News & talk shows,
5. 2250 sales personnel made new presentations to medical stakeholders
•
•
•
•
positive press articles regarding J&J, products, & safety
indications of regaining market share
held up as positive example of ethics & responsibility
450,000 e-mail messages

30. Strategies
Most public recovery strategies incorporate the
following five components:
• Forgiveness: win forgiveness from stakeholders and create
acceptance for the crisis
• Sympathy: portray organization as unfair victim of attack by outside
persons; willing to accept losses
• Remediation: offer compensation for victims and families
(counseling & financial assistance)
• Rectification: take action to reduce recurrence (triple sealed &
increased random inspection)
• Effective leadership: clear, visible, consistent role-modeled message
from beginning by CEO

31. Employee Response
•
Strong family-oriented culture, “we care about our employees”
•
Open and current communication with employees; 4 video programs on
the unfolding process
•
Emphasizing plant workers were innocent
•
CEO speech in a week to employees, “We’re coming back” (wearing
buttons)
•
Idle employees given tasks to keep involved & reduce rumoring and
boredom
•
Indications of market recovery bolster spirits
•
Congruence and consistency in demonstrating the Credo

32. Consequences– what was learned
•
J&J showed that they were not willing
public safety even at excessive cost
•
J&J could be trusted all the way to the top–
Credo & having a functional credo worked
•
J&J set a new standard for protection thereby requiring competitors to
expensively follow suit
•
J&J was viewed as a co-victim of the crime
•
Stakeholder involvement and relationships is essential
•
One must anticipate and prepared for crises; expect the unexpected
•
Cynicism: Be aware that 75% of people don’t believe companies take
responsibility for crises or tell the truth
•
“No matter what you do in the beginning, in the end you will have to tell the
truth”
•
React fast, openly and decisively
to risk
they lived their

33. (learning cont’d)
•
Report your own bad news– don’t wait for reporters to root it out
•
Speak with one voice
•
Gather facts and disseminate from one info center
•
Be accessible to the media so they won’t go to other sources
•
Target communications to those most affected by the crisis, and can
affect the media
•
If you can’t discuss something, explain why
•
Provide evidence for your statements
•
Record events via video and documents so you can later present your
side of the story

34. “Déjà vu all over again”
Following the Tylenol crisis, several other tamperings
plagued other companies. Impact could have been
reduced by learning from J&J’s experience.
Copycat tamperings:
•
Lipton Cup-A-Soup (1986)
•
Exedrin (1986)
•
Tylenol again (1986)
•
Sudafed (1991)
•
Goody's Headache Powder (1992)

35. Virginia Tech Shooting
Columbine Shooting

36. Post-Campus Shooting:
Revising the organization
• Assume that your team has been invited to
help a small campus of 1000 students recover from a
shooting incident (similar to Virginia Tech).
• The school does not have a crisis management team or plan but
now recognizes the need
• What are some recommendations you have for them regarding the
following:
• How should they go about forming a crisis management team
(who should they select and what kind of training might they
need)?
• What should they expect as “fall-out” from the crisis (e.g.,
longer term impact on people and the organization)?
• What can they do to reduce the adverse impact of the crisis on
the organization?
• How can the campus be better prepared for crises in the
future?