Are Organizations Ready for Crisis? A Managerial Scorecard Anne H. Reilly This exploratory study sought to develop and test a new construct, "crisis readiness," and to examine the relation- ship of organization size, prior experience with crisis, and managers' job level with crisis readiness. A survey methodology was used to measure managers' perceptions of their organizations' levels of readiness for crisis. In the sample of managers surveyed, the seventy.^nine respondents reported on average slight agreement that their organizations were ready for crisis, although they disagreed on average that they were well-informed about their organizations' crisis management repertoires. The study found strong support for the hypothesis that in- creasing size is associated with increasing crisis readiness, and partial support for the hypotheses that prior experi- ence with crisis and higher job levels are associated with higher crisis readiness scores. The implications of these results are discussed, together with some suggestions for organizations concerned with increasing their readiness for crisis. AS THE BUSINESS environment gets more complex, so do the crises ex- perienced by organizations. The ex- amples of Tylenol, Challenger, and Bhopal illustrate that major crises not only affect the organization involved, Anne H. Reilly is a doctoral candidate in the Department of Organization Behavior, Kellogg Graduate School of Management, Northwestern University, and a former commercial banker. Her primary research interests are organizational crisis, strategy, and change. She is presently at work on her dissertation, which focuses on strategic preparation for better crisis management in the banking industry. The author gratefully acknowledges helpful comments by Robert Duncan, Denise Rous- seau, Larry Cummings, and Robert Dewar on an earlier version of thispaper. SPRING 1987 but also have significant repercussions throughout the community, the in- dustry, and sometimes the world. Crisis management is becoming an increasingly important issue as man- agers seek ways to cope effectively with these high-magnitude threaten- ing events. To date, most of the organizational behavior research on crisis has focused on case studies of specific crisis events, frequently political crises (Her- mann, 1972; Allison, 1971; Starbuck, Greve & Hedberg, 1978). The study described in this paper uses a different unit of analysis. Instead of con- centrating on particular events, this study addresses the general issue of crisis readiness in organizations. The study surveys individual managers about their perceptions of .their firms' readiness for crises. Managers are an important component of an or- ganization's readiness for crisis be- cause managers are critical actors in any organizational change situation (Tushman & Romanelli, 1985; Ham- brick & Mason, 1984). This empirical study had several goals. First, .this study proposed a new construct, "crisis readiness," and.

1. Are Organizations Ready for Crisis?
A Managerial Scorecard
Anne H. Reilly
This exploratory study sought to develop and test a new
construct, "crisis readiness," and to examine the relation-
ship of organization size, prior experience with crisis,
and managers' job level with crisis readiness. A survey
methodology was used to measure managers' perceptions
of their organizations' levels of readiness for crisis. In
the sample of managers surveyed, the seventy.^nine
respondents reported on average slight agreement that
their organizations were ready for crisis, although they
disagreed on average that they were well-informed about
their organizations' crisis management repertoires. The
study found strong support for the hypothesis that in-
creasing size is associated with increasing crisis readiness,
and partial support for the hypotheses that prior experi-
ence with crisis and higher job levels are associated with
higher crisis readiness scores. The implications of these
results are discussed, together with some suggestions for
organizations concerned with increasing their readiness
for crisis.
AS THE BUSINESS environment gets
more complex, so do the crises ex-
perienced by organizations. The ex-
amples of Tylenol, Challenger, and
Bhopal illustrate that major crises not
only affect the organization involved,

2. Anne H. Reilly is a doctoral candidate in
the Department of Organization Behavior,
Kellogg Graduate School of Management,
Northwestern University, and a former
commercial banker. Her primary research
interests are organizational crisis, strategy,
and change. She is presently at work on
her dissertation, which focuses on strategic
preparation for better crisis management in
the banking industry.
The author gratefully acknowledges helpful
comments by Robert Duncan, Denise Rous-
seau, Larry Cummings, and Robert Dewar
on an earlier version of thispaper.
SPRING 1987
but also have significant repercussions
throughout the community, the in-
dustry, and sometimes the world.
Crisis management is becoming an
increasingly important issue as man-
agers seek ways to cope effectively
with these high-magnitude threaten-
ing events.
To date, most of the organizational
behavior research on crisis has focused
on case studies of specific crisis
events, frequently political crises (Her-
mann, 1972; Allison, 1971; Starbuck,
Greve & Hedberg, 1978). The study
described in this paper uses a different
unit of analysis. Instead of con-
centrating on particular events, this

3. study addresses the general issue of
crisis readiness in organizations. The
study surveys individual managers
about their perceptions of .their firms'
readiness for crises. Managers are
an important component of an or-
ganization's readiness for crisis be-
cause managers are critical actors in
any organizational change situation
(Tushman & Romanelli, 1985; Ham-
brick & Mason, 1984).
This empirical study had several
goals. First, .this study proposed a
new construct, "crisis readiness," and
conducted an initial empirical test of
the construct's validity. The concept
of crisis readiness merits examination
because of its implications for effective
crisis management: an organization
79
which is ready to cope with crisis
should be better able to manage it,
ceteris paribus, than an organization
which is not prepared. A survey in-
strument was developed to measure
perceived crisis readiness, and its
psychometric properties were assessed.
This instrument is a useful diagnostic
tool, enabling an organization to ex-
amine, from its managers' perspective,

4. the firm's ability to cope with tin-
expected threats. The instrument
identifies weak spots in the firm's
crisis management repertoire, and it
can sensitize the organization's mem-
bers to the possibility of crisis occur-
ring.
In addition, this study also sought
to explore the relationships between
certain key organizational character-
istics and perceived crisis readiness
rating. Data on these relationships
are useful in determining what factors
play a part in improving an organi-
zation's readiness for crisis. Testing
these hypotheses is also important for
purposes of integrating crisis readi-
ness into the existing organization
theory research. Finally, this study
represents exploratory research with
the goal of learning more about the
domain of organizational crisis. The
data generated from this study will
be useful in both theory-building and
future research, as it provides some
insights into managers' perceptions of
the general organizational crisis do-
main.
DEFINING ORGANIZATIONAL
CRISIS
A review of the organizational
crisis literature shows that crisis has
been defined in numerous ways, with

5. multiple criteria. According to Her-
mann's definition (1963, 1972), a
crisis is a situation incorporating three
conditions: (1) a threat to high
priority goals; (2) a restriction in the
amount of time available for response;
and (3) a surprise to decision makers
(1972:13). The managers inter-
viewed by Reilly (1986) suggested
that a situation represents an organi-
zational crisis if it manifests the fol-
lowing five attributes: high magnitude,
requires immediate attention, an ele-
ment of surprise, the need for taking
action, and is outside the organiza-
tion's control. Some researchers also
argue that an organizational crisis is
best viewed as a turning point (cf
Turner's "precipitating event" (1976);
Kanter's "galvanizing event" (1983)).
The definition of organizational
crisis used here draws from Milburn,
Schuler, and Watman's concept of
organizational crises as "situations in
which organizational survival is, and
is perceived to be, at stake" (1983):
1161). This definition implies ele-
ments of high magnitude, the need
for taking action, and the necessity
of a timely response. Specifically, the
survey instrument defined an organi-
zational crisis as a situation which
potentially threatens the existence of
the affected organization.

6. THE STRATEGY OF CRISIS
READINESS
Many researchers have noted that
an organizational crisis can serve as a
determinant of a firm's strategy, forc-
ing an abrupt change in a company's
strategic plans and orientation (Mintz-
berg and Waters' "imposed strategy,"
1985; Ouinn, 1977; Tichy, 1983).
Van de Ven and Hudson (1985), sug-
gest that crises may sometimes even be
necessary for an organization to reach
its action threshold for making needed
shifts in its strategic plan. As Pennings
notes, "it may be a crisis situation
that provokes a decision leading to a
change in the past strategy toward a
new direction in the future" (1985:
4 ) .
The view of organizational crisis
taken in this study adds a reciprocal
dimension to the relationship between
crisis and strategy. Not only does
crisis affect strategic outcomes, but
strategy affects crisis outcomes as
well. Like Hrebiniak and Joyce
(1985), this perspective proposes tiat
both environmental determinism (the
occurrence of threatening events) and
strategic actions (an organization's
crisis management repertoire) must
be studied in order to fully explain
the crisis outcome. An organization

7. which has strategically prepared for
potential crisis should be better able
to manage the threatening situation,
ceteris paribus, than an unprepared
counterpart.
Strategic preparation for crisis is
critical to effective crisis management
for numerous reasons. First, crisis
readiness strategies can improve the
environmental enactment process
(Pfeffer & Salancik, 1978) through
making potential crises salient to the
firm (cf Kahneman, Slovic & Tversky,
1982). Identifying potential weak
spots in the organization's crisis man-
agement repertoire, such as informa-
tion dissemination or media relations,
can serve to counteract any illusion
of invulnerability (Janis & Mann,
1977) to crisis.
In addition, scholars and practi-
tioners alike have argued for the bene-
fits of rehearsing for crisis (cf Milburn
et al, 1983; Fink, 1986), as the mili-
tary does with its war games. Kiesler
and Sproull note that the process of
preparing may be as important as
the content: "The plan itself may
not work, but planning activities pro-
vide an opportunity for cognitive re-
hearsal of coping with high uncer-
tainty" (1982:563). Finally, crisis
readiness can serve as an important

8. means of building slack (Thompson,
1967; Pfeffer and Salancik, 1978)
into the organizational system, slack
which can provide additional resources
at a time when resource availability
is critical. For example, if time and
managerial attention are assumed to
be crucial crisis management resources,
a crisis preparation plan can serve to
buffer the demands on those resources
during a crisis (Fink, 1986; Smart,
Thompson, and Vertinsky, 1978).
THE CRISIS READINESS
CONSTRUCT
The forms and natures of possible
organizational crises are infinite, and
bounded rationahty clearly prohibits
organizations and individuals from
developing specific contingency plans
for every conceivable crisis situation.
Crisis readiness is therefore defined
broadly here as the readiness to cope
with the uncertainty and change en-
gendered by a crisis. Crisis readiness
is an "umbrella strategy" (Mintzberg
and Waters, 1985): an umbrella of
crisis readiness general guidelines
which are appropriate for complex,
unpredictable, and uncontrollable en-
vironments (cf Mitroff, 1986).
The construct of crisis readiness is
proposed to have the six core com-

9. 80 COLUMBIA JOURNAL OF WORLD BUSINESS
ponents listed below. Each component
was operationalized in this study using
a separate subscale to assess managers'
perceptions of the particular dimen-
sion.
1. The organization's ability to re-
spond quickly to a crisis.
2. How informed the managers are
about the organization's crisis
management repertoire.
3. Managers' access to the organi-
zation's crisis management plans,
resources, and tools.
4. How adequate the firm's strate-
gic crisis planning is.
5. The organization's media man-
agement ability in a crisis.
6. The perceived likelihood of
crisis striking the organization.
Together, these components are pre-
dicted to denote how ready an organi-
zation is to deal with potential crises.
THE SIX FACETS OF CRISIS
READINESS

10. Organization's Quick Response
Ability
In general, an organization unable
to respond rapidly to a potential crisis
will be less ready to manage that
crisis effectively (cf Milburn et al.,
1983; Reilly, 1986). Most crises are
characterized by a sense of urgency;
a rapid response is therefore critical
in controlling the damage or avoiding
the losses engendered by the threaten-
ing situation. Response time in crisis
may be determined by numerous or-
ganizational characteristics or proced-
ures: e.g., its ability to make appro-
priate decisions quickly (cf Janis and
Mann, 1977; Kiesler & SprouU, 1982);
its flexibility (cf Harrigan, 1985); and
the level of organization members'
resistance to change (cf Staw, 1982;
Weick, 1982).
How Informed the Managers Are
If managers and other key em-
ployees know little about the resources
and tools allocated for crisis response,
they cannot be ready to deal with the
occurrence of unanticipated threats
(cf Turner, 1976). Their efforts to
respond to a crisis situation will be
short-circuited by the unavailability
of necessary information which can

11. be as basic as the home telephone
numbers of key managers or the
firm's legal counsel. Furthermore,
restrictions in communication and in-
formation dissemination processes, as
well as content, can also endanger an
organization's crisis readiness (Mirvis
and Marks, 1986; Staw, Sandelands &
Dutton, 1981).
Managers' Access to Crisis
Management Resources
An organization's readiness for
crisis depends as much on key per-
sonnel's access to its crisis manage-
ment repertoire as it does on their
level of infonnedness about that reper-
toire. Good decisions and knowledge
about crisis management plans are of
little use without effective deployment
of resources (cf Smart, Thompson
& Vertinsky, 1978). Organizational
structure (such as Kanter's integrative
versus segmentaUst organizations,
1983) may determine resource access,
as may power and politics. Managers
may vie for control over crisis man-
agement resources: "emergencies are
distinguishing for the actors involved
. . . Crises are occasions for managers
to demonstrate competence," accord-
ing to Kiesler & Sproull (1982:562).
The Adequacy of Strategic
Crisis Planning

12. This dimension aims to capture the
organization's overall focus on strat-
egically planning ahead specifically for
crisis. An organization with inade-
quate crisis planning may not be
attending to tiie abrupt shifts or ac-
cumulating problems in its environ-
ment (Turner's "failures of foresight,"
1976; Aldrich, 1979) which can pre-
cipitate a crisis. As Pfeffer and
Salancik (1978) note, if potential
crises are not salient to the organiza-
tion's selective perception mechanism,
and such "environmental changes are
consistently missed, the organization
will be unprepared to face ithreats to
survival" (1978:81). In addition,
a firm with inadequate crisis planning
is unlikely to have specific resources
allocated to crisis preparation—e.g.,
backup computer systems or a public
relations department, thus lowering its
readiness for potential crises.
Organisation's Media Management
Capabilities in Crisis
The fifth facet of crisis readiness
proposed in this study adds an ex-
ternal dimension to the crisis man-
agement repertoire. Efficient, rapid
internal operations may not be enough
to ensure effective crisis management;
the organization may also have to
interpret a major crisis event to its

13. environment. According to one ex-
ecutive interviewed by Business Week,
"If you aren't geared up and ready
to inform the public [about the crisis],
you will be judged guilty until proven
innocent." (12/23/85:75). Inmost
cases, the interpreter of the crisis will
probably be the media. Because the
potential consequences of mishandling
the media can be so high (cf Fink,
1986), media management ability is
proposed as an important component
of crisis readiness.
Managers' Perceived Likelihood of
Crisis Occurring
Assumptions of rational organiza-
tional behavior (cf Thompson, 1967)
would suggest that an organization
which perceives a high probability of
experiencing crisis would attempt to
deploy resources to prepare for such
an event, hence increasing its crisis
readiness. However, an organization
which is likely to be hit with a crisis
may not exhibit high levels of quick
response ability, informedness, access
to resources, media management cap-
abilities, and adequate crisis planning.
Even if an organization believes
that it is subject to potential crises,
it may not act on this attitude by
preparing for them. Perhaps the or-
ganization has fallen prey to an "illu-

14. sion of invulnerability" (Janis and
Mann, 1977) because of a sincere
belief that the firm can handle any-
thing the environment might throw at
it. Or the organization may play
ostrich, responding to a threatening
environment with unconfiicted inertia
(Janis, 1985; Janis and Mann,
1977) or threat-rigidity behavior
(Straw et al., 1981). Furthermore, the
perceptions of one manager may not
coincide with those of the organiza-
tion's dominant coalition (Thompson,
1967; Pfeffer & Salancik, 1978): al-
though an astute individual manager
SPRING 1987 81
may perceive a high probability of
crisis striking his organization, the
rest of the organization may assign
zero probability to the occurrence of
crisis.
The first five components of the
crisis readiness construct are all ex-
pected to be positively related to an
orgatiization's "crisis readiness" as
well as positively related with each
other. However, because of the rea-
sons outlined above, the sixth pro-
posed component — perceived likeli-
hood of crisis occurring — and the
other five dimensions are predicted

15. to be unrelated. Thus,
Hypothesis la:
Managers' perceptions of quick
response ability, informedness,
resource access, adequate crisis
planning and media management
win all be positively and signi-
ficantly related with each other.
Hypothesis lb:
Managers' perceptions of the
likelihood of crisis occurring to
their orgatiizations will not be
related to the other five com-
ponents of crisis readiness.
THE RELATIONSHIP OF CRISIS
READINESS WITH OTHER
ORGANIZATIONAL VARUBLES
This study also sought to test some
hypotheses concerning the relationship
between certain key organizational
variables and perceived crisis readi-
ness. Three factors were proposed
as important independent variables in-
fluencing managers' perceptions of
their organizations' crisis readiness:
(1) the orgatiization's size; (2) the
company's prior experience with crisis
(two organizational-level variables);
and (3) the manager's job level (an
individual-level control variable). As

16. will be discussed below, prior research
yields conflicting predictions concern-
ing the direction of these variables'
effects on crisis readiness scores.
An aggregate measxure of crisis
readiness consisting of the sum of all
item scores on the six subscales was
used as the dependent variable in
testing this model. A low score on
this aggregate measure denotes a high
degree of perceived crisis readiness.
Organization's Size
The substantial research on the re-
lationship between organizational size
and various organizational outcomes
provides conflicting implications re-
garding the association between or-
gatiizational size and managers' evalu-
ations of crisis readiness. Size was
operationalized in this study as a five-
level continuous variable according to
the number of employees. The five
levels used were 1-25; 26-100; 101-
1000; 1001-10,000; and over 10,000
employees.
On the one hand, some research
suggests that increasing size may be
associated with decreasing crisis readi-
ness. Large organizations may suffer
from cumulative control loss (Wil-
liamson, 1975), which restricts their
cotnmunication and itiformation dis-

17. semination ability, while resource ac-
cess may become highly centralized
and restricted in large firms (cf
Kanter, 1983). Hannan and Freeman
(1977) argue that large organizations
are more likely than smaller ones to
exhibit structural inertia; hence, com-
pared to small firms, big companies
could be less able to respond quickly
to a crisis situation. Big companies
in the life cycle stage of bureaucratic
decline may respond to potential
crises with formally rather than sub-
stantively rational behavior programs
(cf Dewar & Walsh, 1985). In Star-
buck's (1983, 1985) terms, they may
act as bureaucratic action generators,
responding with an tmreflective, in-
appropriate approach to a potential
crisis.
In contrast, other research on size
imphes that larger orgatiizations may
be more ready to cope with crisis than
smaller firms. Because bigger organi-
zations tend to have more slack re-
sources (Katz & Kahn, 1966), they
may be more able to survive the en-
virotmient resource scarcity engender-
ed by a crisis than may a small un-
dercapitalized organization (Aldrich,
1979). Increasing size has been as-
sociated with an increasing number
of specialized functions and standard-
ized procedures (cf Pugh, Hickson,
Child & coUeagties, 1963, 1972,

18. 1974); hence, big companies are
more likely to have specialized crisis
management teams and tools than
smaller organizations. Furthermore,
because of their larger resource pool
and specialized structure, bigger or-
ganizations will be more apt to have
specific boundary spatining activities
(Thompson, 1967; Pfeffer & Salanick,
1978), such as public affairs depart-
ments or economic and industry an-
alysts on staff. This focus on the
environment could increase crisis
readiness through improving the or-
ganization's quick response ability and
crisis preparation orientation.
Here, it is proposed that the bene-
fits of more resources, specialized
functions, and greater environmental
scanning will outweigh the disadvan-
tages of structural inertia and bureau-
cratic action generation in perceptiotis
of crisis readiness. Hence,
Hypothesis 2:
As organizational size increases,
crisis readiness scores increase.
Organisation's Prior Experience
with Crisis
As with the research on size, the
organizational theory literature has
some contradictory implications for

19. the relationship between prior experi-
ence with crisis and present level of
crisis readiness. A dummy variable
was used to operationalize past history
of crisis in this study.
Some research would suggest that
past experience with crisis may yield
some organization behavior which
makes the company less ready to cope
with future crises. For example, a
prior crisis may have strengthened de-
fensive routines (cf Argyris & Schon,
1978) or conflict, (cf Milburn et al.,
1983) within the organization, or en-
gendered the threat-rigidity effects
noted by Staw, Sandelands, and Dut-
ton (1981), all of which could lower
the firm's quick response ability as
well as restrict information dissemina-
tion and resource access. Further-
more, several researchers have argued
that organizational actions are char-
acterized by rigid tmderlying assump-
tions which are difficult to change (cf
Mitroff, 1984; Starbuck, 1985; Weick,
1982). Such assumptions (for ex-
ample, "money spent to prepare for
something which will probably never
occur is money wasted") may persist
despite strong historical evidence to
82 COLUMBIA JOURNAL OF WORLD BUSINESS

20. the contrary (e.g., poor performance
in prior crises), keeping the organiza-
tion's crisis readiness low.
However, other research provides the
opposite implications, suggesting that
organizations which have experienced
crisis in the past should exhibit
greater readiness for future crises.
Proponents of organizational learning
(cf Argyris & Schon, 1978) would
argue that an organization which has
been through a crisis should have
gained knowledge about how to re-
spond to future crises from the crisis
experience. For example, if the firm
mismanaged its media relations dur-
ing a prior crisis, the organization
would now be more knowledgeable
about dealing with the media. Vicar-
ious learning may also occur (cf
House & Singh, in press) from the
organization's industry competitors. If
the industry context is characterized
by recurring threats, the organization
may learn how best to cope with them
through both its own experience with
past coping behavior plus the observed
behavior of its industry competitors.
Furthermore, the sahence heuristic
(Kahneman et al., 1982) may affect
managers' evaluations of their or-
ganizations' crisis readiness. If the
company has had past experience with
an organizational crisis, especially re-
cent experience (cf Hambrick, 1981),

21. managers at all levels may be aware
of and informed about the firm's crisis
readiness repertoire.
The prediction made here is that
organizational leaming and salience
will outweigh threat-rigidity effects
and rigid assumptions in affecting
present crisis readiness levels. Thus,
Hypothesis 3:
An organization which has ex-
perienced a crisis in the past
will show a higher crisis readi-
ness score than an organization
which has not experienced a
crisis.
Manager's Job Level
Given the methodology of this
study, manager's job level was pro-
posed as an important individual-level
control variable because of its poten-
tial inflationary impact on organiza-
tional crisis readiness ratings. Studies
by Hambrick and his colleagues (cf
Hambrick, 1981; Hambrick & Mason,
1984) of the effects of top manage-
ment characteristics on organizational
outcomes have shown that job level
(along with other variables such as
age, education, and career experi-
ence) can affect an executive's per-
ceptions about his organization as a

22. whole. In this study, job level was
operationalized as a continuous vari-
able with six levels, ranging from (1)
owner/officer to (6) line or staff em-
ployee. The same coder assigned all
job level ratings in order to assure
consistency across levels.
Several reasons may explain why a
higher job level may be associated
with a higher rating of crisis readiness.
First, compared to lower level man-
agers, upper level managers tend to
have longer tenure with their firms,
and longer tenure has been related
to greater commitment (cf Salancik,
1977). Higher level executives who
are more commited to their firms may
tend to view their companies favor-
ably across the board; this halo effect
may spill over into the crisis readi-
ness rankings. Second, because of the
nature of their powerful positions and
their limited peer group, top execu-
tives may also be more prone than
middle or lower level managers to
the effects of illusion of control
(Langer, 1975) and group think
(Janis, 1985; Janis & Mann, 1977).
Upper level managers may thus be
more likely than lower level managers
to believe that they and their organi-
zation are ready to manage any crisis.
Finally, the salience heuristic (Kahne-
man et al., 1982; Kiesler & Sproull,
1982) may also play a part: the

23. higher an executive is in the organi-
zation, the more likely s/he is to
know about and have access to any
crisis readiness resources the com-
pany has in place.
This study attempts to control for
the predicted positive relationship be-
tween managerial position in the
hierarchy and the reported organiza-
tional crisis readiness ratings by in-
cluding job level as a control variable.
Thus,
Hypothesis 4:
The higher the job level, the
higher the crisis readiness score.
METHOD
Respondents
Seventy-nine individuals from sev-
enty different organizations located
primarily in the Midwest voluntarily
completed the survey instrument. A
wide range of industries and occupa-
tions was represented in the sample
(Kish's purposive sampling, 1965),
ranging from retail store manager,
newspaper editor, attorney, hotel pub-
lic relations executive, banker, pharm-
aceutical researcher, marketing con-
sultant, physician, academic admini-
strator, accountant, engineer, software
sales manager, to entrepreneur. All

24. respondents were employed full-time;
97% were coUege graduates. Their
career backgrounds were varied. Fifty-
two percent of the sample reported
job experience in sales, marketing, or
distribution at some point during their
careers; 44% had had experience in
general management; 32% had
worked in finance or accounting; 29%
in human resources or public rela-
tions; 27% had worked in production
and operations; 20% had job experi-
ence in engineering, design, or R & D;
and 10% reported experience in legal
work. The mean tenure in their
present position was 3 years, with a
range in tenure from a few months
to ten years. The respondents ranged
in age from 24 to 75, with a mean
age of 36.
Procedure
The survey instrument used in this
study was a four-page questionnaire.
For purposes of inducing a common
frame of reference, the cover letter
included the following definition of
organizational crisis: "A situation may
be considered a potential organiza-
tional crisis if it represents a significant
threat to the existence of the affected
organization." In addition, three ex-
amples of organizational crisis were
provided: Union Carbide's industrial
disaster at Bhopal, the Tylenol tamp-

25. erings, and a hypothetical small con-
struction company whose bookkeeper
embezzled the company funds and
fled to South America.
The first section of the survey in-
strument included twelve demographic
questions in three categories: organi-
SPRING 1987 83
zation (e.g., size, company's experi-
ence with crisis); job (e.g., occupa-
tion, tenure in position); and indi-
vidual (e.g., age, personal experience
with organizational crisis). The second
section of the survey consisted of
thirty items about organizational readi-
ness for crisis and six items about
specific crisis management tools and
procedures. The respondents were
asked to rate their level of agreement
or disagreement with items 1 through
24 using a five-point scale anchored
by 1 = Stron^y Agree and 5 =
Strongly Disagree. The remaining
twelve items also used five-point
scales, but the anchors were specific
to the questions asked (such as very
important to very unimportant, or
very accessible to very inaccessible).
The five-point response array was
judged adequate, as only 3 respond-
ents marked a few in-between values.

26. Two missing data values ("I don't
know" and "Not relevant") were
provided.
The crisis readiness items in the
survey instrument comprised six sub-
scales. Each scale originally con-
sisted of five items measuring the
respondents' perceptions of the six
proposed dimensions of crisis readi-
ness: quick response ability, informed-
ness, resource access, media manage-
ment ability, adequacy of crisis plan-
ning, and perceived likelihood of
crisis. One outlier item each was
eventually removed from the access,
media management, and likelihood
subscales.
RESULTS
Measures and Indices
Table 1 lists the mean values for
the instrument's six scales. As shown,
the respondents indicated strongest
agreement with the likelihood of a
crisis occurring to their respective or-
ganizations (mean response = 1.82).
The mean responses for the ability
to respond quickly, access to crisis
management resources, media man-
agement readiness, and crisis planning
scales were on the agreement side of
the scale ratings, with the mean values
relatively close to the neutral mid-

27. point anchor. And in general, the
respondents considered themselves
somewhat ill-informed about their or-
ganizations' crisis management reper-
toires (mean response ^ 3.16). The
reliability indices were calculated by
SPSS-X using Cronbach's alpha pro-
cedure (SPSS, Inc., 1986). As Table
1 shows, the reliabilities of these ex-
ploratory scales were good, particular-
ly the scale reliabilities for crisis
planning, informedness, and quick
response ability.
Intercorrelations
One of the goals of this exploratory
research was to examine the construct
validity of the crisis readiness concept,
testing how the proposed subscales
related to each other (Ghiselli et al.,
1981). Table 2 summarizes the in-
tercorrelations among the six proposed
dimensions of crisis readiness. The
table shows strong support for both
Hypotheses la and lb. As predicted,
quick response, informedness, access,
crisis planning, and media manage-
ment were all positively and signi-
ficantly correlated with each other,
and there was no statistically signi-
ficant relationship between perceived
likelihood and the other five dimen-
sions of crisis readiness.

28. Factor Analysis
The survey items were factor an-
alyzed in order to identify the com-
mon dimensions of perceived crisis
readiness underlying the measures.
The SPSS-X principal analysis pro-
cedure with a varimax rotation was
used (cf. Comrey, 1973). With 27
items, and using the "little jiffy" tech-
nique (Comrey, 1973), the factor
analysis yielded three factors. Given
that the crisis readiness construct pro-
posed six dimensions, the principal
analysis procedure was rerun with
four, five, and six factors. But the
three-factor structure remained clean-
est. These factors explained 53.2%
of the common variance in perceived
TABLE 1
Scale Means
Scale
Quick Response
Informed
Access to Resources
Crisis Planning
Media Management

29. Likelihood
and Cronbach's
No. Items
5
5
4
5
4
4
Alpha Reliability Coefficients
Mean*
2.66
3.16
2.61
2.69
2.54
1.82
Reliability

30. Coefficient
.858
.891
.772
.896
.744
.713
* On a five-point scale, with 1 = Strongly Agree
TABLE 2
Quickness
Informed
Access
Crisis Planning
Media
Likelihood
Scale
Inforined
. 7 4 * '

31. Intercorrelations
Access
. 6 2 * *
.77**
Planning
. 8 7 * *
. 8 8 * *
. 6 7 * *
Media
.28*
. 5 2 * *
.41 * *
. 3 9 * *
Liicely
.05
.09
.05
.02

32. -.04
** p < .01
* p < .05
(two-tailed tests) n = 79
84 CoLUMBLA. JOURNAL OF WORLD BUSINESS
crisis readiness. Table 3 presents the
results of this factor analysis. The
first factor generated explained 40.5%
of the common variance. As shown,
it appeared to be a general factor
comprising high factor loading on all
five Planning items, all five Quick
Response items, all five Informed
items, and all four Access items. The
four Media Management items loaded
together on Factor 2, while the third
factor was comprised of the four
Likelihood items.
Regression Analysis
This study also explored the rela-
tionship of crisis readiness ratings
with several organizational character-
istics. Table 4 summarizes the results
of the multiple regression analyses.
As shown. Hypothesis 2 was sup-
ported, as increasing organization size
was significantly related (P < .02)
to higher evaluations of crisis readi-

33. ness. The results showed partial sup-
port for Hypotheses 3 and 4, with
beta coefficients in the predicted di-
rection but not statistically significant.
As proposed by Hypothesis 3, a com-
pany which had experienced crisis in
the past was associated with a higher
level of current crisis readiness. Table
4 also shows that the higher the job
level, the higher the crisis readiness
score, as predicted by Hypothesis 4.
As discussed above, perceived
likelihood of crisis was predicted to
exhibit a different response pattern
than the other components of crisis
relationship; thus, this component re-
ceived special attention in the an-
alysis. First, size, experience with
crisis, and job level were regressed on
an aggregate crisis readiness score
which excluded the likelihood items,
but the same pattem of results was
observed. These three independent
variables were then regressed on the
likelihood subscale alone. In this
analysis, past experience with crisis
was shown to be a statistically signi-
ficant predictor of crisis likelihood
scores.
Managers working for an organi-
zation which had undergone a crisis
in the past rated their organizations
as more likely to experience crisis

34. than managers working for an organi-
zation which had never experienced
crisis. The other two independent
variables had a minimum effect on
these results.
DISCUSSION
Construct Validity
As discussed above, factor an-
alysis of the survey item pool yielded
TABLE 3
Item
Factor Analysis of Crisis Readiness Items
Dimension Communality FACTORS 1 2
35
33
21
14
2
22
15
31

35. 13
1
17
11
8
12
5
6
32
7
19
9
34
4
10
36
3
16

36. %
%
TABLE
Planning
Quickness
Planning
Planning
Quickness
Informed
Quickness
Informed
Quickness
Planning
Informed
Informed
Planning
Access
Informed

37. Access
Access
Quickness
Media Management
Media Management
Media Management
Media Management
Likelihood
Likelihood
Likelihood
Likelihood
Variance Explained
Variance Cumulative
4
.82
.72
.71
.72

38. .67
.73
.63
.65
.57
.56
.66
.70
.44
.58
.44
.42
.39
.23
.77
.55
.24
.26

39. .73
.37
.31
.26
.86
.84
.84
.83
.82
.80
.76
.75
.74
.73
.71
.68
.66
.63

40. .59
.55
.55
.48
40.5
40.5
REGRESSION COEFFICIENTS
Variable
Aggregate Crisis Readiness Score
Size
Past Experience
Job Level
• T h e
Beta
-.279
-.105
.172
lower the score, the higher the crisis readiness

41. P
.02
n.s.
n.s.
.49
.61
.71
.47
.47
6.8
47.3
R2
.08
.84
.61
.55
.50
5.9

42. 53.2
n = 79
SPRING 1987 85
a three-factor structure explaining a
total of 53.2% of the common vari-
ance. Although this study proposed
six facets of crisis readiness, this
three-component factor structure may
be explained if crisis readiness is con-
ceptualized as comprising both in-
ternal and external elements. Factor
1 was a general factor loading on aU
the Quick Response, Resource Access,
Informedness, and Crisis Planning
items. This pattern may imply that
an organization's crisis readiness may
include a four-facet concept compris-
ing the firm's internal functionings.
Perhaps these dimensions are per-
ceived as too similar or too. closely
related for managers to distinguish
among them: e.g., quick response
ability may be determined by level of
informedness, resource access, and
adequate crisis planning. This poten-
tial explanation is strengthened by
the statistically significant intercorrela-
tions among the four subscales; as
Table 2 shows, no intercorrelation is
less than .62.

43. The remaining two scales broke out
cleanly in the factor analysis. All
four media management items loaded
together on the second factor; all four
likelihood items loaded onto Factor 3.
These two dimensions reflect an ex-
ternal dimension of crisis readiness:
the ability to interpret environmental
demands (perceived likelihood) and
the ability to communicate with the
environment (through media manage-
ment) . Therefore, among this sample
of managers, an organization was per-
ceived as ready for crisis if its internal
house was in order—as reflected in
the Quick Response, Informedness,
Access, and Planning dimensions—
and if its external activities were
under control—Media Relations and
Crisis Likelihood Assessment.
The subscales themselves showed
good reliability, as Table 1 illustrates,
and they exhibited the predicted pat-
tern of interrelationships. Table 2
indicates support for Hypothesis la
and convergent validity (Cook &
Campbell, 1979), with the first five
dimensions positively correlated with
one another (P < .05); in fact, nine
of the ten intercorrelations were signi-
ficant at the P < .001 level. In addi-
tion. Table 2 showed that, as Hypo-
thesis lb predicted, there was no

44. statistically significant relationship be-
tween an individual's expectation of
crisis occurring and his rating of any
dimension of his organization's readi-
ness for crisis. The results of both
the scale intercorrelations and the
factor analysis show clearly that man-
agers can and do distinguish between
assessing the probability or organiza-,
tional crisis and assessing the level of
organizational preparation for it.
Relationships with Other
Variables
As shown in Table 4 above, the
results of the multiple regression an-
alyses provided strong support for
Hypothesis 2, concerning the positive
relationship between organizational
size and perceived crisis readiness;
partial support for Hypothesis 3,
which predicted that a company
which had experienced crisis in the
past would be more ready for crisis
at present; and partial support for
Hypothesis 4 concerning the role of
job level as a control variable in the
equations.
The link between organizational
size and crisis readiness found in this
study is a strong one supported by
both the regression and the correla-
tional analyses. No sigiiificant rela-
tionship was found between size and

45. past history with crisis, or size and
likelihood of future crisis. Hence,
among this sample of managers, large
organizations are not perceived to be
more subject to crises; they are per-
ceived to be more prepared for them.
Furthermore, the correlation between
size and job level was not significant,
so the observed relationship between
size and perceived crisis readiness is
unlikely to be a sampling artifact due
to job level of respondent.
The fact that Hypotheses 3 and 4
received support in direction but not
in significance may be a function of
this study's methodology. For ex-
ample, managers whose organizations
have experienced crisis may rate their
organizations more harshly in terms
of their present crisis readiness be-
cause they remember the problems
and mismanagement during past crises.
Managers in companies who have not
experienced crisis may therefore be
rating their organizations' crisis readi-
ness from a different baseline (Ghis-
elli et al., 1981). Job level may not
have emerged as a statistically signi-
ficant predictor of crisis readiness
evaluations because of this survey's
sampling plan. The manager re-
spondents differed across levels as
well as across organizations, and they
were expected to differ in their knowl-

46. edge of their firms' crisis management
repertoires.
IMPLICATIONS AND
CONCLUSIONS
Crisis readiness data generated from
managers' perceptions of their organi-
zation is important. This data is use-
ful at the level of the single organiza-
tion for measuring the managers'
knowledge of the organization's crisis
readiness procedures and plans, or
assessing their access to crisis man-
agement resources. This survey can
be used to identify weak spots in an
organization's crisis management rep-
ertoire (e.g., media relations or com-
munication networks), thus highlight-:
ing potential difficulties in crisis man-
agement plan formulation or imple-
mentation. In addition, managers'
perceptions about their organization's
crisis readiness can be compared with
the firm's public stance on crisis man-
agement planning, as one means of
contrasting desired crisis readiness
with actual crisis readiness.
Furthermore, the results of this
study have some broader implications
for those firms concerned with in-
creasing their readiness for crisis. Ac-
cording to this sample of managers,
there is a strong likelihood that their
firms may experience a crisis in the

47. future. This high probability assess-
ment implies that crisis management
merits the attention of a rational or-
ganization (Thompson, 1967). How-
ever, despite these managers' overall
opinion that crisis is a likely con-
tingency for their firms, this sample
of managers reported only slight
agreement that their organizations
were ready for crisis. This gap be-
tween high likelihood and low readi-
ness suggests that prudent organiza-
tions should: (1) reassess their as-
sumption about the likelihood of crisis
occurring, and (2) move to increase
their readiness for crisis.
The dimensions of crisis readiness
proposed in this study can provide a
86 COLUMBIA JOURNAL OF WORLD BUSINESS
useful framework for accomplishing
these objectives. The first step is
diagnosing the particular weak points.
According to the study's results, while
quick response ability, resource access,
crisis planning, and media manage-
ment ability are generally adequate,
managers did perceive substantial
room for improvement in these areas.
Furthermore, this study revealed that
organizational communication pro-
cesses are clear candidates for in-

48. creased attention in most firms. The
manager respondents reported on
average that they were not well-
informed about their organization's
crisis management repertoires. Qr-
ganizations may be restricting crisis
management information to all but a
select few managers, a policy which
has the advantage of confidentiality
but the disadvantages of reduced in-
formation fiow and fewer contributing
decision makers.
The next step is to determine how
organizational characteristics, such as
the firm's strategy, structure, culture,
and leadership, may be contributing
to the specific suboptimal crisis readi-
ness dimensions. For example, a slow
crisis response ability may be a func-
tion of a highly bureaucratic organi-
zation which delays the crisis decision-
making process through rigid proce-
dures and red tape. Step three involves
modifying the organization's activities
so as to improve its crisis readiness
along the focal dimensions. For ex-
ample, an internally-focused, produc-
tion-driven organization may be able
to strengthen its strategic crisis plan-
ning process through adopting a long-
term organizational strategy which
focuses on external contingencies,
such as industry changes and tech-
nological shifts, as well as internal

49. issues of efficient production.
This project's findings about the
relationship of size and past history
with present crisis readiness also im-
ply some tentative suggestions for or-
ganizations trying to improve their
readiness for crisis. The managers
surveyed in this study reported in-
creasing size and past experience with
crisis as positively associated with
present crisis readiness. While these
attributes may not be manipulable
organizational characteristics, organi-
zations may nevertheless be able to
select some relevant aspects of large
size and past history and incorporate
them into their current crisis prepara-
tion activities. For example, smaller
organizations interested in raising their
level of crisis readiness can copy
larger firms by allocating resources
and people to environmental scanning
and boundary spanning activities, thus
speeding response time to external
events. Organizations who have never
experienced crisis can learn about
crisis readiness techniques by carefully
examining the organizational systems,
procedures, attributes and behaviors
of competitors who have undergone
a crisis.
The issue of strategic crisis man-
agement warrants such future study,

50. and the field is open for research at
multiple levels, from managers' per-
ceptions of their organizations' crisis
management repertoires to organiza-
tions' tactics in responding to crisis
situations. Given the increasing fre-
quency of high-magnitude organiza-
tional crises, perhaps the first step is
to challenge our existing assumptions
about an organization's susceptibility
to crisis in today's complex environ-
ment. According to Mitroff and
ICilmann, "The phenomenon of cor-
porate strategies forces us to acknowl-
edge that our earlier images of the
corporation and its relationship to the
surrounding world are no longer suf-
ficient to make sense of and to cope
with the world in which we now live"
(1984:18).
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