Corporate Crisis Management.pptx

Certified Business
Process
Practitioner
Certification Workshop
02 – CoRporate CRISIS MANAGEMENT

Created by R. Arya Dhieva Pratama, S.Kom, MEB
Table of Contents
2
1. Global Crisis & Modern Business
2. Corporate Crisis Management – An
Introduction
3. Corporate Business Process
4. Business Process Mapping
5. Business Process Analysis
6. Business Process Management – An
Introduction

Sub Content
3
2. Crisis Management
▫ Fundamental of Crisis Management
▫ Corporate Crisis
▫ Crisis Handling
▫ Corporate Crisis Management
▫ Edward Deming’s Theory

Crisis Management
4

Fundamental of Crisis Management
Crisis Management is the process by which an organization
deals with a major unpredictable event that threatens to harm
the organization, its stakeholders, or the general public. 4
(four) elements are common to most definitions of crisis:
1. Possible Threats to the organization
2. The element of surprise
3. A short decision time.
4. The need for change
Venette SJ, argues that “Crisis is a process of transformation
where the old system can no longer be maintained“. Therefore
the fourth defining quality is the need for change. If change is not
needed, the event could more accurately be described as a failure
or incident.
5

Common Symptoms of Corporate Crisis
No. Symptom Area Crisis Level
1 Revenue downturn caused by a weak economy Marketing Critical
2 Overly optimistic sales projections Sales Critical
3 Poor strategic decision choices Strategic Critical
4 Poor execution of a good strategy Strategic Critical
5 High operating costs Operation Critical
6 High fixed costs that decrease flexibility Operation Critical
7 Insufficient resources Strategic Critical
8 Unsuccessful R&D projects Strategic Critical
9 Highly successful competitors Marketing Critical
10 Excessive debt burden Financial Critical
11 Inadequate financial controls Financial Critical
6

• Corporate Crisis
7
CRISIS & RISK
MANAGEMENT

Fundamental of Corporate Crisis
Corporate Crisis can happen to
any corporation and at
anytime, destroy the
reputation and public trust,
paralyzed the business and
reduce the value of the
shares as well as the
investors.
It usually has sudden impact,
which cause the situation to
worsen significantly.
8
The goal of crisis management is to contain and or prevent
the impact on the various stakeholders that corporations
must recognize. The most affected stakeholders are
customers, employees, communities, government and
the shareholders.

Key Corporate Crisis
9

1. Strategic Crisis
Strategic Crisis depends on sound and swift
decision-making, and neither can happen without
corporate-wide and multi-agency pre-planning.
Expert analysis of business crisis find that rushed
strategic management decisions, governmental
authorities miss conducts, incorrect statements,
actions, or inactions have caused many of the
most newsworthy business crises during or
following an event.
Effective Strategic Crisis Management begins with
effective decision-making
10

2. Financial Crisis
The term financial crisis is applied broadly to a
variety of situations in which some financial institutions
or assets suddenly lose a large part of their value. In
the 19th and early 20th centuries, many financial
crises were associated with banking panics, and many
recessions coincided with these panics.
Other situations that are often called financial crises
include stock market crashes and the bursting of other
financial bubbles, currency crisis, and sovereign
defaults. Financial crisis directly result in a loss of
paper wealth. They do not directly result in changes in
the real economy, may indirectly do so, notably if a
recession or depression follows.
11

3. Operational Crisis
Typically, a crisis manager is called in when
owners/managers have lost control of the situation and are
in imminent danger of losing their company. This is a
traumatic decision for any owner or chief executive. They
believe they are admitting that they are unable to manage
the company, which is why they put off the decision for so
long.
The reality, however, is that management does not possess
the specialized skills needed for the extreme environment in
which the company finds itself.
For example: Crisis management in a manufacturing
environment can be handled using the Business Process
Management method (Transformation), but before this
transformation can begin, management must relinquish
control of the company to the crisis manager, and deal with
12

4. Organizational Crisis
An analysis of the true causes for the emergence of an
organizational crisis or serious troubles in the area of
organization within the company is of extremely critical.
It can also be affected by various interrelated external and
internal causes, the essence of this kind of crisis lies in the
management hierarchy and Leadership.
Long-term successful organizations always keep their
balance. A good company leader therefore often
synchronize direction. Consolidation follows a growth
phase, and stabilization follows change.
The leader corrects the course instead of over-steering. On
the otherside, organization’s members align their initiatives
and achievements.
13

One of the World Leaders said…
President of the Republic of Russia,
Vladimir Putin was asked:
“What role does faith play in your leadership
in overcoming the Russia’s Multi Dimensional
Crisis ?”
He was surprisingly answered:
“First and foremost, we should be governed
by common sense. But common sense should
be based on moral principles first. And it is
not possible today to have morality separated
from religious values“.
Time Magazine - 31 December 2007/ 7 December
2008 Edition
14

• Crisis Handling
15
CRISIS & RISK
MANAGEMENT

Crisis Handling is the way and method on how to deal
with the current crisis and what should be done after the
crisis has been contained.
At this terrible condition, you must completely realize and
aware that your business is on the way to its bankruptcy
(de-facto).
Thus, avoid any internal organization conflict (Blame each
other), release the hierarchical management authority and
form a special committee to take over managerial and
overall control of your business.
This is also means that you might deactivate the
organization rules and regulations in order to speed up the
decision making for a temporary period.
Crisis Handling
16

Crisis Handling Framework
17

1. Crisis Management
Deal with current Crisis. Start from
the Outbreak, identify the
causes, reduce the damaging
impact to company’s business
and gather all Strategic and
tactical team to manage the
current crisis inside their divisions.
2. Contingency
Builds the special plan to move
out (Exit Plan) from the current
Crisis along with its steering
committee. Do the awareness
campaign.
18

3. Business Continuity
Creates emergency plan to
keep the business running in
minimum requirements during
the current Crisis along with its
standard operation procedure.
4. Recovery
Execute the recovery action
and back to business.
19

Root Cause Identification (5M)
20
MATERIAL METHOD MEN
CUSTOMER
SATISFACTION
MONEY MACHINE
DELIVERABLE
GOOD VS
DEFECTS
CASHFLOW
(EARNING VS
SPENDING)
EFFECTIVENESS
& EFFICIENCY
CAPACITY VS
UTILIZATION
EDUCATION VS
COMPETENCIES

1. Downsizing
Selling off and or Closed down the unwanted
parts of the organization (Such as: Business
Unit, Subsidiary Companies or a Representative
office)
2. Outsourcing
Outsource the non core or supporting
business unit to other parties by building
strategic partnerships.
3. De-layering
Flattening the management structure,
Post Crisis Recovery Action
21

4. Restructuring
Complete re-think of the way the business is
organized, and rebuilds the internal business
process.
5. Accelerating
Improve the utilization and Accelerate all of
your existing Resources, Assets, Sales,
Distribution and Men Power in order to gain
High Productivity. Typically requires new major
investments.
Post Crisis Recovery Action
22

1. Design and implement your Business Strategy clear,
feasible and accountable.
2. Manage and Control your Business Process effectively.
3. Manage Investment and Cash Flow appropriately.
4. Identify and Mitigate any potential risks carefully.
5. Implement the Rewards and Punishment to the
employees objectively.
6. Enforce the Continuous Improvements in every line of
business.
7. Be Open Minded and Maintain Communications.
8. Maintain the Team Works and Brainstorming.
9. Be Process and Outcome Oriented rather than Profit
and Loss Oriented.
9 Secrets of Crisis Prevention
23

Through the 1980s, Welch worked to streamline
GE. In 1981 he made a speech in New York
City called "Growing fast in a slow-growth
economy".
This is often acknowledged as the "dawn" of the
obsession with shareholder value. Later, in an
interview with the Financial Times on the
Global financial crisis of 2008–2009, Welch
said,
“On the face of it, shareholder value is the
dumbest idea in the world.
Shareholder value is a result, not a strategy...
your main constituencies are your
24
Corporate Crisis Handling
Example : General Electric

He also pushed the managers of the businesses
he kept to become more productive.
Welch worked to eradicate perceived
inefficiency by trimming inventories and
dismantling the bureaucracy that had
almost led him to leave GE in the past. He
shut down factories, reduced payrolls and
cut lackluster old-line units.
Welch's public philosophy was that a company
should be either #1 or #2 in a particular
industry, or else leave it completely.
Welch's strategy was later adopted by other
CEOs across corporate America.
25

Each year, Welch would fire the bottom 10%
of his managers. He earned a reputation for
brutal candor in his meetings with executives.
He would push his managers to perform, but
he would reward those in the top 20% with
bonuses and stock options.
He also expanded the broadness of the stock
options program at GE from just top
executives to nearly one third of all
employees.
Welch is also known for destroying the nine-
layer management hierarchy and bringing
a sense of informality to the company.
26

During the early 1980s he was dubbed "Neutron
Jack" (in reference to the neutron bomb) for
eliminating employees while leaving buildings
intact.
In book Jack: Straight From The Gut, Welch
states that:
“GE had 411,000 employees at the end of
1980, and 299,000 at the end of 1985. Of the
112,000 who left the payroll, 37,000 were in
sold businesses, and 81,000 were reduced in
continuing businesses.”
In return, GE had increased its market capital
tremendously. However, Welch eliminated
basic research, closed or sold off businesses
that were allegedly under-performing.
27

In 1980, the year before Welch became CEO,
GE recorded revenues of roughly $26.8
billion.
In 2000, the year before he left, the revenues
increased to nearly $130 billion. When Jack
Welch left GE, the company had gone from a
market value of $14 billion to one of more
than $410 billion at the end of 2004, making
it the most valuable and largest company in
the world.
During the 1990s, Welch shifted GE business
from manufacturing to new 4 (four) segments:
Energy, Technology Infrastructure, Capital
28

• Edward Deming’s Theory
29
CRISIS & RISK
MANAGEMENT

The Father of
Out of the Crisis Strategy
Dr. William Edwards Deming is known as the
father of the Japanese post-war industrial
revival and was regarded by many as the
leading quality guru in the United States.
He passed away in 1993.
Trained as a statistician, his expertise was
used during World War II to assist the
United States in its effort to improve the
quality of war materials.
He was invited to Japan at the end of World
War II by Japanese industrial leaders and
engineers.
30

The Father of
Out of the Crisis Strategy
They asked Dr. Deming how long it would
take to shift the perception of the world
from the existing paradigm that Japan
produced cheap, shoddy imitations to one
of producing innovative quality products.
Dr. Deming preached that to achieve the
highest level of performance requires more
than a good philosophy, the organization
must change its behavior and adopt new
ways of doing business.
31

Deming 14 Points – Out of the Crisis
1. Constancy of Purpose
Create constancy of purpose for continual
improvement of products and service to
society, allocating resources to provide for
long range needs rather than only short term
profitability, with a plan to become
competitive, to stay in business, and to
provide jobs.
32

2. The New Philosophy
Adopt the new philosophy. We are in a new
economic age, created in Japan.
We can no longer live with commonly
accepted levels of delays, mistakes, defective
materials, and defective workmanship.
Transformation of Western management style
is necessary to halt the continued decline of
business and industry.
33

3. Cease Dependence on Mass Inspection
Eliminate the need for mass inspection as the
way of life to achieve quality by building
quality into the product in the first place.
Require statistical evidence of built in quality in
both manufacturing and purchasing functions.
34

4. End Lowest Tender Contracts
End the practice of awarding business solely on the
basis of price tag. Instead require meaningful measures
of quality along with price. Reduce the number of
suppliers for the same item by eliminating those that
do not qualify with statistical and other evidence of
quality.
The aim is to minimize total cost, not merely initial
cost, by minimizing variation. This may be achieved by
moving toward a single supplier for any one item, on a
long term relationship of loyalty and trust. Purchasing
managers have a new job, and must learn it.
35

5. Improve Every Process
Improve constantly and forever every process for
planning, production, and service. Search continually
for problems in order to improve every activity in the
company, to improve quality and productivity, and thus to
constantly decrease costs. Institute innovation and
constant improvement of product, service, and process.
It is management's job to work continually on the
system (design, incoming materials, maintenance,
improvement of machines, supervision, training,
retraining).
36

6. Institute Training on the Job
Institute modern methods of training on the
job for all, including management, to make
better use of every employee.
New skills are required to keep up with
changes in materials, methods, product and
service design, machinery, techniques, and
service.
37

7. Institute the Leadership
Adopt and institute leadership aimed at helping
people do a better job. The responsibility of managers
and supervisors must be changed from sheer numbers to
quality.
Improvement of quality will automatically improve
productivity.
Management must ensure that immediate action is taken
on reports of inherited defects, maintenance
requirements, poor tools, fuzzy operational
definitions, and all conditions detrimental to quality.
38

8. Drive Out Fear
Encourage effective two way communication
and other means to drive out fear throughout
the organization so that everybody may work
effectively and more productively for the
company.
39

9. Break Down Barriers
Break down barriers between departments
and staff areas.
People in different areas, such as Leasing,
Maintenance, Administration, must work in teams
to tackle problems that may be encountered with
products or service.
40

10.Eliminate Exhortations
Eliminate the use of slogans, posters and
exhortations for the work force, demanding
Zero Defects and new levels of productivity,
without providing methods.
Such exhortations only create adversarial
relationships, the bulk of the causes of low
quality and low productivity belong to the
system, and thus lie beyond the power of the
work force.
41

11.Eliminate Arbitrary Numerical Targets
Eliminate work standards that prescribe
quotas for the work force and numerical
goals for people in management.
Substitute aids and helpful leadership in order to
achieve continual improvement of quality and
productivity.
42

12.Permit Pride of Workmanship
Remove the barriers that rob hourly workers,
and people in management, of their right to
pride of workmanship.
This implies, among other things, abolition of the
annual merit rating (appraisal of performance)
and of Management by Objective. Again, the
responsibility of managers, supervisors,
foremen must be changed from sheer
43

13.Encourage Education
Institute a vigorous program of education,
and encourage self improvement for
everyone. What an organization needs is not
just good people, it needs people that are
improving with education.
Advances in competitive position will have their
roots in knowledge.
44

14.Top Management Commitment and Action
Clearly define top management's permanent
commitment to ever improving quality and
productivity, and their obligation to implement all of
these principles. Indeed, it is not enough that top
management commit themselves for life to quality
and productivity.
They must know what it is that they are committed to -
that is, what they must do. Create a structure in top
management that will push every day on the preceding
13 Points, and take action in order to accomplish the
transformation. Support is not enough - action is
45

Deming Chain Reaction
46

Deming Chain Reaction
Producing high quality products and services is key for
any organization that wishes to stay in business. Recent
facts regarding the corporate crisis shows that not
enough priority, as well as poor innovation is given to
quality.
An important goal for any organization is to produce
trouble-free products and services and delightful
products and services.
By doing so, loyalty is created, reduces costs, and allows
the firm to further delight the customer through other
offerings.
Deming’s point with the Deming Chain Reaction is to show
47

Conclusion
In today’s business, many organizations are put too much
focus on cost saving and productivity. Where in the long
term, the consequences might end up with business
bankruptcy.
Because, the objective for productivity or cost saving are
to achieve short term period target. So that you could keep
the good news for the closing year management reports
and rise your investment in the stock market.
Relying heavily on the cost saving (without improving
quality of the products) will jeopardize your customer’s
satisfaction and make your employees unmotivated. This
is why, companies which too much rely on cost saving will
make their ongoing crisis getting worst than before.
48

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