3. LEARNING OUTCOME
LO2: Demonstrate an understanding of the concepts, theories and
practice of issues management and crisis communication
LO3: Analyse and develop strategies for organisational issues using
the theories, models and methods of issues management and crisis
communication
LO4: Gain the capacity to critique organisational and industrial
responses to issues and crises in terms of attitude and ethics
LO6: Identify and apply ethical standards of practice when dealing
with issues management and crisis communication
4. OVERVIEW
The best way to manage a crisis is to
prevent one:
seek crisis-warning signs
take measures designed to reduce or eliminate
the possibility of the warning sign evolving into a
crisis
seek to identify and cope with risks:
Risks: vulnerabilities that could develop into
crises
5. ENTERPRISE RISK MANAGEMENT
Enterprise risk management (ERM):
A form of business strategy based upon identifying, assessing, and
preparing for risks faced by managers that can interfere with the
organization’s objectives and operations
Integrated: a comprehensive risk management approach for
organizations designed to cover all risks, including physical (disasters)
and symbolic (reputation attacks)
A useful and ideal framework for crisis management
7. ISSUES MANAGEMENT
Issue:
“a trend or condition . . . that, if
continued, would have a significant
effect on how a company is operated”
(Moore, 1979, p. 43)
a type of problem whose resolution
can impact the organization
8. ISSUES MANAGEMENT
Issues management:
the identification of issues and actions taken to affect them
A systematic approach intended to shape how an issue develops and
is resolved in a manner that avoids a crisis
a proactive attempt to have an issue decided in a way that is
favorable to an organization
emphasis is on external issues
communication is used to influence an issue’s resolution
9. ISSUES MANAGEMENT
Jones and Chase (1979) model
Action step centers on communicating the
organization’s position on the issue to
stakeholders involved
Develop goals and objectives for the
communication program
Select the means and resources needed
Decide the specific messages, when to
communicate them, and the channels of
communication
10. ISSUES MANAGEMENT
Example
Legislation is proposed that
would threaten the financial
viability of the railroad by
making trucking companies
more competitive with rail
transportation.
The issues management effort
prevents a crisis by persuading
Congress to reject the legislative
proposal.
11. ISSUES MANAGEMENT
Example
How the railroad company use issues management to shape their environments:
Goal: to prevent passage of the pro-trucking legislative proposal
Targeted stakeholders: Legislators, the media, and voters
Message:
centers on the danger to automobile drivers created by the pro-trucking
legislation
must be sent immediately because a vote will be held in a few months
Communication channels: advertisements, publicity, and lobbying
12. ISSUES MANAGEMENT
Issues management can also involve
changing the organization
The best way to resolve an issue
would be to correct or improve
operating standards and plans
Airlines in Vietnam dealt with the government’s travel
restrictions during the Covid-19 pandemic by raising
the in-flight health safety standards
Image source: Bamboo Airways
13. ISSUES MANAGEMENT
Some issues can develop into crises, making issues management
relevant to crisis scanning
Issues management effort prevents an issue from developing its crisis
potential
Issues management can be a form of crisis prevention
14. ISSUES MANAGEMENT
A crisis or ineffective crisis management can spawn an issue, creating
the need for issues management.
Formosa Ha Tinh Steel discharged toxic
industrial waste illegally into the ocean through
drainage pipes, which led to an environmental
disaster (2016)
Image source: tuoitre.vn
15. DISCUSSION
1. What does it mean to say a risk can develop into a crisis?
2. What is reputation? How does it relate to crisis management?
16. REPUTATION MANAGEMENT
Reputation:
an evaluation stakeholders make about an organization
favorable reputations
unfavorable reputations
are formed as stakeholders evaluate organizations based on direct
and indirect interactions
Reputation management: involves efforts designed to influence
stakeholder evaluations of an organization
17. REPUTATION MANAGEMENT
Direct interactions:
form the basics of the organization—stakeholder relationship
positive interactions build favorable reputations
unpleasant interactions lead to unfavorable ones
Favorable stakeholder relationships: a marker of a positive reputation
Organizations build favorable relationship histories that create positive
reputations by meeting and exceeding stakeholder expectations
18. REPUTATION MANAGEMENT
Indirect interactions:
mediated reports of how the organization treats its stakeholders
Important sources of information for evaluating organizations:
Stakeholders are more likely to draw on indirect than direct
experiences when crafting their personal views of an organization’s
reputation
news reports
online comments
comments from friends or family
messages sent by an organization
19. REPUTATION MANAGEMENT
Relationship:
the interdependence of two or more people or groups
A reputation is a reflection of the organization—stakeholder
relationship
A threat to the relationship is a threat to the reputation
Stakeholders: any persons or groups that have an interest, right,
claim, or ownership in an organization
21. REPUTATION MANAGEMENT
Primary stakeholders
People or groups whose
actions can be harmful or
beneficial to an organization
Can stop organizational
operations and trigger a crisis
Secondary stakeholders
(influencers)
People or groups who can
affect or be affected by the
actions of an organization
Cannot stop an organization
from functioning, but can
damage it
22. REPUTATION MANAGEMENT
Typical Primary Stakeholders
employees
investors
customers
suppliers
government
Typical Secondary Stakeholders
media
activist groups
competitors
23. REPUTATION MANAGEMENT
Stakeholders are interdependent with an organization
Links between stakeholders and the organization: economic, social,
and political concerns
Reputation management: management of the relationships between
the organization and its various stakeholders
Organizational success is predicated on maintaining an effective
balance in these relationships
Stakeholders can play an important role in crisis management
24. REPUTATION MANAGEMENT
Primary stakeholders
Failure to maintain a
continuing interaction with a
primary stakeholder could
result in the failure of the
organization
Secondary stakeholders
(influencers)
Problems in relationships
with secondary stakeholders
can also harm reputations
and trigger crises
25. REPUTATION MANAGEMENT
Example (Primary Stakeholder - Customer)
In 2008, United Airlines had broken the
Taylor guitar of the songwriter Dave Carroll
in checked luggage. After 8 months of
pestering the company for compensation,
he turned to his best tool—songwriting—
and vowed to create a YouTube video
about the incident.
4 days after its launching, the first million
people had watched “United Breaks
Guitars.” United stock went down 10
percent, shedding $180 million in value.
United relented.
26. REPUTATION MANAGEMENT
Example (Secondary Stakeholder - Media)
In 2019, HCMC Women Newspaper had
criticized a major Vietnamese property
firm, Sun Group, saying it was destroying
the environment through its
developments.
Within 2 months, the newspaper
published 7 stories in print or online
criticizing the company for harming the
environment. The stories featured Sun
Group's projects at the Ba Na-Nui Chua
nature reserve in the central city of Da
Nang and Tam Dao national park in the
northern province of Vinh Phuc.
27. REPUTATION MANAGEMENT
Mismanaging the organization—stakeholder relations:
damage an organization’s reputation
evolve into a crisis
Watching organization—stakeholder relationships contributes
to crisis scanning as a part of reputation management
Early problems related to reputations: signs that a crisis could
erupt
28. REPUTATION MANAGEMENT
Corporate social responsibility (CSR)
the management of actions designed to affect an organization’s
impacts on society
a key driver and integral part of reputation management
generate 2 distinct forms of reputation risk:
greenwashing
reputational attacks related to irresponsibility
29. REPUTATION MANAGEMENT
Negative reputation prior to
a crisis:
makes the crisis more
difficult to manage
increases stakeholder
perceptions that the
organization is responsible
for the crisis
increases reputation
damage
Positive reputation prior
to a crisis:
acts as a resource that
can make crisis
management easier
reputation suffers less
and rebounds more
quickly
Reputations’ effect on crisis management:
30. DISCUSSION
Is it accurate to say that reputation management is the larger
concept because of how the other functions can impact it?
31. RISK MANAGEMENT
Risk management: attempts to reduce the vulnerabilities faced by
an organization
Vulnerabilities are:
weaknesses that could develop
into crises
basically risks
32. RISK MANAGEMENT
Risk assessment:
the base for risk management
more of an internal rather than an external focus
attempts to
identify risk factors or weaknesses
assess the probability that a weakness will be exploited or
developed into a crisis
33. RISK MANAGEMENT
Risk factors: exist as a normal part of an organization’s operation
personnel
products
production process
facilities
competition
regulations
customers
34. RISK MANAGEMENT
Example - personnel risk:
On 30 January 2022, footballer
Mason Greenwood was accused
of assault against a woman, in a
series of posts on her social
media.
Following his arrest on suspicion
of rape and sexual assault, his
club Manchester United have
suspended Greenwood and
dropped all Mason Greenwood
merchandise from the club’s
online store.
Image source: Sky News
35. RISK MANAGEMENT
Example - production process risk:
In 2019, a fierce fire broke out inside
a warehouse of Rang Dong Light
Source and Vacuum Flask Joint Stock
Company.
The total surface area of 6,000m2 in
the South-east was destroyed
beyond repair. 480,000 fluorescent
light bulbs that were burnt in the fire
released 15.2-27.2 kilograms of
mercury into the environment.
Image source: Sai Gon Giai Phong News
36. RISK MANAGEMENT
Example - product and customer risk:
In 2016, a six-year-old boy has
reportedly been rushed to hospital
after a Galaxy Note 7 exploded in his
hand. This accident follows a string of
reports of Galaxy Note 7s exploding,
either when being used or whilst
charging. Over 35 cases were
confirmed, including one which caused
a car to burst into flames.
Samsung had to globally recall 2.5
million handsets and suspend sales of
the phone.
Image source: Fox News
37. RISK MANAGEMENT
Risk aversion:
Elimination or reduction of a risk
Cost drives the use of risk-aversion decisions
use risk balancing to compare risk’s costs to risk reduction’s costs
may take no action when risk reduction’s costs outweigh the
costs estimated from the risk
ignoring risk can be a more costly move than anticipated
38. RISK MANAGEMENT
Risk aversion:
Risk management = crisis prevention
Actions are taken to
completely eliminate the risk
or reduce it to as low a level as reasonably possible
Exact action varies according to the actual risk
39. RISK MANAGEMENT
Example: The use of dangerous chemicals in a manufacturing process
Approach to designing safer chemical plants, storage facilities, and
chemical processes:
Using inherently safer practices:
reduce the amount of hazardous material on site
substitute a less hazardous substance
use a less hazardous process or storage condition
Training
40. RISK MANAGEMENT
Example: Computer risks (such as viruses)
Ways to prevent risks:
Antivirus software
Firewalls
Employee Internet use policies
41. RISK MANAGEMENT
When a risk becomes manifest, a crisis can occur
Crises often create new risks
Risk communication: a dialogue between the organization creating
the risk and the stakeholders who are asked to bear the risk
Organizations explain what the risks are, what can be done to
protect people from the risk
Stakeholders explain their concerns about and perceptions of the
risk
42. RISK MANAGEMENT
Traditional risks:
such as those related to
personnel and safety
easy to quantify
have close connections
with insurance
New risks:
CSR
social media
illustrate how closely the
proactive management
functions are interconnected
with one another
43. CONNECTION BETWEEN
PROACTIVE MANAGEMENT FUNCTIONS
Proactive Management Tetrahedron
All functions can contribute
to crisis scanning: provide a
broad radar system for
detecting warning signs
Challenge: how to integrate
them into an effective crisis-
sensing mechanism
44. CONNECTION BETWEEN
PROACTIVE MANAGEMENT FUNCTIONS
Crises will damage a reputation
Prior reputations can be an asset or a liability in crisis
communication
Exposure to risks can erode a reputation
Supporting or opposing an issue can enhance or erode a reputation
depending how stakeholders view the issue
Risks can manifest into crises
Crises can create the need to engage in risk communication
45. CONNECTION BETWEEN
PROACTIVE MANAGEMENT FUNCTIONS
Risks can become issues
Effective risk management can prevent a crisis
Issues can become crises when the issues threaten an organization
Crises can create an issue because people want government help to
control the risk related to the crisis
Effective crisis management can prevent an issue from emerging
46. CONCLUSION
Risk is the foundation for crisis management
Enterprise risk management (ERM) seeks to place all organizational
risks into one system
Crisis risks can be distributed through a variety of organizational
functions and departments, including issues management, risk
management, and reputation management
47. DISCUSSION
1. While this chapter separates issues, risk, and reputation
management, the three areas are interrelated. How can a risk
become an issue, an issue become a risk, a risk threaten
reputation, or an issue threaten reputation? How do you see
these three functions being interrelated?
2. Would you argue for an organization to create a separate
department to manage these functions? Why or why not?
48. INDIVIDUAL REPORT (AT HOME)
STAKEHOLDER AND ISSUE ANALYSIS
Topic: Choose an organisation and identify some of its key issues
and stakeholder groups
Type: Report
Weight: 15%
Length: 2,000 words
49. INDIVIDUAL REPORT (AT HOME)
Instruction
Task Grading
Investigate how the issues may impact, or have the potential to impact,
on the organisation’s relationship management and public image
40%
Examine a range of sources including organisational documents (e.g.
annual reports, website), media (e.g. news coverage and social media
platforms) and academic literature (e.g. journal articles and books)
30%
Write a 1500-word report which includes key recommendations for the
organisation that you have analysed
30%
The best way to manage a crisis is to prevent one. If the crisis does not occur, no stakeholders are harmed and the organization suffers no damage. Generally, people think of crisis management as reactive because they focus on what an organization does in response to a crisis. However, clever crisis managers are proactive as well in that they seek crisis-warning signs and take measures designed to reduce or eliminate the possibility of the warning sign evolving into a crisis—crisis managers seek to identify and cope with risks.
Risks are the foundation of crisis management and communication because risks are vulnerabilities that could develop into crises.
Enterprise risk management (ERM), because of its comprehensive view of risk, is a useful framework for crisis management. It is the integrated aspect of ERM that makes it ideal for crisis management.
Multiple units within organizations monitor and manage risk. The primary units involved with risk are risk management, issues management, and reputation management. Crisis management must be able to encompass risks associated with all three of these strategic functions, hence the value of the ERM framework.
Issues management includes the identification of issues and actions taken to affect them (Heath, 1990). It tries to lessen the negative impact of an issue and is a systematic approach intended to shape how an issue develops and is resolved. Issues management is a proactive attempt to have an issue decided in a way that is favorable to an organization.
While issues management can address internal concerns (Dutton & Jackson, 1987; Dutton & Ottensmeyer, 1987), the emphasis is on societal and political issues that populate the organization’s environment—external issues (Heath, 2005).
For instance, say that legislation is proposed that would threaten the financial viability of the railroad by making trucking companies more competitive with rail transportation. The issuesmanagement effort prevents a crisis by persuading Congress to reject the legislative proposal. Communication is used to influence an issue’s resolution.
The Jones and Chase (1979) model (issue identification, analysis, change strategy option, action program, and evaluation) is the classic model familiar to most people involved in issues management.
The action step centers on communicating the organization’s position on the issue to stakeholders involved with the issue. Goals and objectives for the communication program are developed, followed by the selection of the means and resources needed to achieve them. Decisions are made about the specific messages to be communicated, when to communicate them, and the channels of communication to be used (Jones & Chase, 1979).
The exact mix of communication strategies depends on the stakeholders involved in the issues management effort and the current stage of the issue’s progression (Crable & Vibbert, 1985).
Developing the previous transportation example can clarify the issue action program:
The railroad company decides the goal is to prevent passage of the pro-trucking legislative proposal.
Legislators, the media, and voters are the stakeholders to be targeted.
The message centers on the danger to automobile drivers created by the pro-trucking legislation, and the message must be sent immediately because a vote will be held in a few months. Advertisements, publicity, and lobbying are the communication channels used.
The focus in this example is on how organizations use issues management to shape their environments.
What should KitKat have done to better manage the issue of buying unsustainable palm oil?
KitKat Case study: http://edition.cnn.com/2010/WORLD/asiapcf/03/19/indonesia.rainforests.orangutan.nestle/index.html
https://www.brandsvietnam.com/congdong/topic/403-Ideas-Rendezvous-14-Dung-chet-vi-thieu-hieu-biet-mang-xa-hoi-Khung-hoang-tu-KitKat
Reputation are widely recognized as a valuable if intangible asset
Favorable stakeholder relationships can be taken as a marker of a positive reputation.
The relationship history—how the organization has treated stakeholders in the past—is a function of an organization meeting or failing to meet stakeholder expectations (Finet, 1994). Organizations build favorable relationship histories that create positive reputations by meeting and exceeding stakeholder expectations (Coombs, 2004a).
Being evaluative, reputations are based in large part on how stakeholders assess an organization’s ability to meet their expectations. How well an organization does this is a rough guide for determining whether a reputation will be positive or negative. In some respects, a reputation is a reflection of the organization—stakeholder relationship. A threat to the relationship is a threat to the reputation. It is important to dig deeper into the relationship to appreciate its connection to reputations.
For crisis management, a useful definition of relationship is the interdependence of two or more people or groups. This definition is a modification of one developed by O’Hair, Friedrich, Wiemann, and Wiemann (1995) and centers on interdependence, some factor that binds the two people or groups together. The interdependence definition of relationship is useful because it is consistent with the stakeholder theory that guides most business thinking (Rowley, 1997).
Stakeholder theory posits that an organization’s environment is populated with various stakeholders. An organization survives or thrives by effectively managing these stakeholders (Bryson, 2004; Clarkson, 1991; Wood, 1991).
Stakeholders are separated into two distinct groups: primary and secondary.
Typical primary stakeholders include employees, investors, customers, suppliers, and the government. For instance, organizations cannot operate without employees, and government officials may close a facility for a variety of legal or regulatory reasons.
Primary and secondary stakeholders are interdependent with an organization, thus the relevance of the earlier definition of relationship. Each of the stakeholders has a connection with the organization that links them in some way. The links include economic, social, and political concerns.
Reputation management is the management of the relationships between the organization and its various stakeholders, and organizational success is predicated on maintaining an effective balance in these relationships (Donaldson & Preston, 1995; Rowley, 1997; Savage, Nix, Whitehead, & Blair, 1991). It follows that stakeholders can play an important role in crisis management.
Conflict with an organization can lead primary stakeholders to withhold their contributions. As a result, an organization may stop operating if those contributions cannot be replaced. […] Primary stakeholders are powerful because it is difficult and often impossible to replace the contributions they provide to the organization.
For crisis management, it would be a mistake to focus solely on primary stakeholders. Problems in relationships with secondary stakeholders can also harm reputations and trigger crises. The media can expose organizational misdeeds or generate other negative publicity, competitors can instigate lawsuits that bind an organization's operations, and activists can launch boycotts or protests against an organization.
Crisis managers must now consider CSR activities as a form of crisis risk. CSR activities generate two distinct forms of reputation risk
Greenwashing: occurs when an organization’s environmental claims are shown to be false (Coombs & Holladay, 2015). The reputation is harmed when the organization is shown to be hypocritical.
Engaging in CSR makes organizations more vulnerable to reputational attacks related to irresponsibility. When an organization publicly engages in CSR, the organization is claiming to be socially responsible and makes socially responsibility a part of its reputation. If stakeholders can successfully argue the organization is socially irresponsible, there is greater potential to damage to the organization’s reputation than if the organization had not engaged in CSR.
Crisis experts agree that favorable organization—stakeholder relationships are a benefit during crisis management (e.g., Ulmer, 2001). As Alsop (2004) states, organizations “build up ‘reputation capital’ to tide them over in turbulent times. It’s like opening a savings account for a rainy day. If a crisis strikes . . . reputation suffers less and rebounds more quickly” (p. 17).
Like crises, not all risks can be avoided or completely eliminated. Hence, risk management involves a number of strategies that vary in their crisis-prevention potential.
Risk assessment has more of an internal rather than an external focus. The internal weaknesses identified through risk assessment provide vital information for crisis management scanning.
Every organization faces a variety of risk factors.
Once a risk is identified, decisions are made about risk aversion—the elimination or reduction of a risk.
Risk managers use procedures such as risk balancing to compare the costs of the risk (e.g., costs of deaths, injuries, litigation, and property damage) to the costs of risk reduction (e.g., equipment and actual work needed to prevent or reduce the risk).
If stakeholders discover their safety was sacrificed for profit, a different and much worse type of crisis erupts.
When managers choose to engage in risk aversion, risk management becomes crisis prevention.
Crisis communication may require the discussion of risk and the need to engage in risk communication, “a communication infrastructure, transactional communication process among individuals and organizations regarding the character, cause, degree, significance, uncertainty, control, and overall perception of risk” (Palenchar, 2005, p. 752).
Modern organizations face a wider array of risks when CSR and social media are added to the mix.
CSR is becoming a risk because of its importance to reputation. If an organization is shown to be irresponsible, the reputation is damaged. Hence, CSR becomes a risk for the organization. For instance, organizations manage CSR risk by auditing their suppliers to determine whether the suppliers are meeting the organization’s code of conduct regarding social and environmental issues.
While organizations turn to social media to build relations with other stakeholders, these channels and platforms are risks as well. As noted in Chapter 3, stakeholders can hijack social media (control the content of the messages) and damage an organization’s reputation. The utilization of social media platforms is a risk that must be managed.
Issues management, reputation management, and risk management all can contribute to crisis scanning. Combined, the three functions provide a broad radar system for detecting warning signs. The challenge for crisis managers is to integrate the three organizational functions into an effective crisis-sensing mechanism,