Crisis management involves dealing with unpredictable threats to an organization. It consists of methods to respond to crises, metrics to define crisis scenarios, and communication during emergencies. A crisis threatens an organization and requires a timely response and open communication. Different types of crises include natural disasters, malevolence, and organizational misdeeds. Successful crisis management requires planning beforehand and understanding how to handle each phase of a crisis. Toyota violated basic crisis management rules in its response to accelerators getting stuck, trying to downplay the problem rather than finding solutions and communicating fully.

1. CRISIS MANAGEMENTCRISIS MANAGEMENT
Key issuesKey issues

2. Crisis ManagementCrisis Management
Crisis managementCrisis management is the process by which anis the process by which an
organization deals with a major unpredictable eventorganization deals with a major unpredictable event
that threatens to harm the organization, itsthat threatens to harm the organization, its
stakeholders, or the general publicstakeholders, or the general public

3. Elements of a CrisisElements of a Crisis
Three elements are common to most definitions of crisis:Three elements are common to most definitions of crisis:
(a)(a)a threat to the organization,a threat to the organization,
(b)(b) the element of surprise,the element of surprise,
(c)(c)a short decision timea short decision time
(d)(d)a need for changea need for change

4. Crisis management - 1Crisis management - 1
Crisis management consists of:Crisis management consists of:
• Methods used to respond to both the reality andMethods used to respond to both the reality and
perception of crisesperception of crises
• EstablishingEstablishing metricsmetrics to define what scenariosto define what scenarios
constitute a crisis and should consequently trigger theconstitute a crisis and should consequently trigger the
necessary response mechanisms.necessary response mechanisms.
• CommunicationCommunication that occurs within the response phasethat occurs within the response phase
of emergency management scenariosof emergency management scenarios

5. Crisis Management - 2Crisis Management - 2
The credibility and reputation of organizations is heavilyThe credibility and reputation of organizations is heavily
influenced by the perception of their responses duringinfluenced by the perception of their responses during
crisis situationscrisis situations

6. Crisis Management - 3Crisis Management - 3
* respond to a crisis in a timely fashion makes for a* respond to a crisis in a timely fashion makes for a
challenge in businesses.challenge in businesses.
* must be open and consistent communication* must be open and consistent communication
throughout the hierarchy to contribute to a successfulthroughout the hierarchy to contribute to a successful
crisis communication process.crisis communication process.

7. Types of CrisesTypes of Crises
• Natural disastersNatural disasters
• MalevolenceMalevolence
• Technical breakdownsTechnical breakdowns
• Human breakdownsHuman breakdowns
• ChallengesChallenges
• Mega-damageMega-damage
• Organizational misdeedsOrganizational misdeeds
• Workplace violenceWorkplace violence
• RumorsRumors

8. Crisis ManagementCrisis Management
Technological crisesTechnological crises
- caused by human application of science andcaused by human application of science and
technologytechnology
- when technology becomes complex and coupled andwhen technology becomes complex and coupled and
something goes wrong in the system as a wholesomething goes wrong in the system as a whole
(Technological breakdowns)(Technological breakdowns)

9. Crisis ManagementCrisis Management
Crises of organizational misdeedsCrises of organizational misdeeds
- when management takes actions it knows will harm or- when management takes actions it knows will harm or
place stakeholders at risk for harm without adequateplace stakeholders at risk for harm without adequate
precautionsprecautions

10. Crisis ManagementCrisis Management
Types of crises of organizational misdeeds:Types of crises of organizational misdeeds:
- crises of skewed management valuescrises of skewed management values
- crises of deceptioncrises of deception
- crises of management misconduct.crises of management misconduct.

11. Crisis ManagementCrisis Management
Crisis management modelCrisis management model -- Gonzalez-Herrero and Pratt 95Gonzalez-Herrero and Pratt 95
• Successfully diffusing a crisis requires anSuccessfully diffusing a crisis requires an
understanding of how to handle a crisis – before itunderstanding of how to handle a crisis – before it
occursoccurs
- issues managementissues management
- planning-preventionplanning-prevention
- the crisisthe crisis
- post-crisispost-crisis

12. ContingencyContingency
PlanningPlanning
• Plan in advancePlan in advance
• Rehearse via simulationRehearse via simulation
• Stipulate who the spokesperson isStipulate who the spokesperson is
• Speed and efficiency in response to crisisSpeed and efficiency in response to crisis
• Offer accurate information or it will backfireOffer accurate information or it will backfire
• Plan offers info and guidance to help decision makers dealPlan offers info and guidance to help decision makers deal
with long-term effects of decisionswith long-term effects of decisions

13. Role of apologies inRole of apologies in
crisis managementcrisis management
• Controversial - for fear of legal outcomesControversial - for fear of legal outcomes
• Evidence says that a compensation and sympathy areEvidence says that a compensation and sympathy are
effectiveeffective
• True contrition includes sympathy for victims and offers ofTrue contrition includes sympathy for victims and offers of
compensation to offset losses or sufferingcompensation to offset losses or suffering

14. TOYOTA –TOYOTA –
CRISIS MANAGEMENT FAILURECRISIS MANAGEMENT FAILURE
Toyota’s communication strategy:Toyota’s communication strategy:
““Too little, too late”Too little, too late”
Beyond the quality problemBeyond the quality problem
Toyota mismanaged the crisisToyota mismanaged the crisis

15. TOYOTATOYOTA
Basic Rules ViolatedBasic Rules Violated
• For senior mgmt:For senior mgmt: crises must become their #1 prioritycrises must become their #1 priority
immediately.immediately.
• Integrity of firm threatened - immediate hands-onIntegrity of firm threatened - immediate hands-on
control of CEO/teamcontrol of CEO/team
• Sticking accelerators in 2008 - not treated as a seriousSticking accelerators in 2008 - not treated as a serious
mattermatter

16. TOYOTATOYOTA
Basic Rules violatedBasic Rules violated
Find facts & solutions fast:Find facts & solutions fast:
- Toyota managers at first in denialToyota managers at first in denial
- accepted a ‘patch’ (remove floor mats), not solutionaccepted a ‘patch’ (remove floor mats), not solution
- when crisis exploded -- engineering solution/stoppedwhen crisis exploded -- engineering solution/stopped
productionproduction
- Even today no one outside of Toyota knows what theEven today no one outside of Toyota knows what the
real problems are – open to speculation and rumorsreal problems are – open to speculation and rumors

17. TOYOTATOYOTA
Basic rules violatedBasic rules violated
Communicate fully and accurately:Communicate fully and accurately:
- to all constituents to sustain trustto all constituents to sustain trust
- err on side of protecting consumers & maintain trusterr on side of protecting consumers & maintain trust
with a recallwith a recall
What Toyota did:What Toyota did:
hushed problem and hoped it go awayhushed problem and hoped it go away