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What will cause your next organizational crisis?

01 Jun, 2020 Issues and crises

Crises are comparatively rare events. They are unexpected, unwanted and unpleasant, but are more common since COVID-19 has caused complete upheavals of so many business and government sectors around the world. Experience shows if you don’t plan for crises, the unexpected consequences will ber much worse when a crisis is triggered. Also, for the first time, a bigger proportion of crises have sudden causes (51%) versus smoldering causes (49%), according to the 2021 annual report of the US Institute for Crisis Management (ICM) analysis of global news coverage of business crises in 2020. It is now even more important to consider what will cause your next organizational crisis.

International surveys show organizations are generally not prepared to deal with crises.

But first we need to know what we are talking about: A crisis is any issue, problem or disruption triggering negative stakeholder reactions that can threaten the organization’s viability. Notice that a crisis is about communicating with stakeholders, and is not about dealing with an operational emergency.

Around 80% of businesses around the world believe they are only 12 months from a potential crisis. Yet only 54% have a crisis plan in place. Why this poor situation???

In a crisis preparedness study conducted by Burson-Marsteller/Penn Schoen Berland, 826 decision makers interviewed globally gave general reasons for lack of crisis preparedness. These reasons amounted to indifference and cost. Expressed attitudes were:

  • 33% thought a crisis plan would be rarely needed
  • 18% thought it would be too difficult to set up or manage
  • 14% thought it would be too expensive
  • 13% thought other matters were a higher priority

Most common reasons nominated as crisis causes:

  • 31% Controversial company development (eg retrenchments)
  • 20% Logistic difficulties (eg transport, delivery problems)
  • 19% Danger to product safety (defective or contaminated parts)
  • 18% Technical accidents (eg natural disaster or explosion)
  • 16% Online or digital security failure

HOWEVER

Analysis by issue and crisis expert Tony Jaques* found the real causes of crises are more likely to be:

  • Poor maintenance practices
  • Human error
  • Bad planning
  • Material failure
  • Unethical or dishonest behavior
  • Unresponsive culture
  • Leadership failure
  • Poor judgment
  • Insufficient training, eg maintenance workers, designers or accountants

*Jaques, T. (2007). ‘Issue management and crisis management: an integrated, non-linear, relational construct’. Public Relations Review, 33(2), pp. 147-157.

Benefits of crisis planning

Companies with a plan recover faster, especially in short-term crises. Those with a plan are more likely to handle the crisis effectively:

Type of impact Plan in place No plan
Drop in revenue 30% 41%
Cutbacks and retrenchments 22% 33%
Loss of corporate reputation 15% 22%
Destabilization of entire company 16% 21%

(Burson-Marsteller / Penn Schoen Berland 2011 Crisis Preparedness Study.
Interviews of 826 decision makers globally in May-June 2011.)

In the light of these problems caused by crises, you need to convince senior management of the importance of crisis communication planning.

Sudden versus smouldering crises

A few years ago, 70% of crises were found to have been smoldering. They were predictable. Only about 30% were sudden and totally unexpected. But this has changed dramatically. Analysis conducted by the Institute for Crisis Management (ICM) found that 49% of the time in 2020, managers knew about smoldering concerns, or should have known about them before they turn into major issues and crises. And conversely, the proportion of sudden crises jumped dramatically to almost 51% in the same year – largely caused by the COVID pandemic.

Lessons learned

ICM found that many organizations stopped their planning and preparedness efforts while dealing the pandemic. Some of those believed the virus would be short-lived, but have had to continue responding to its impacts ever since then. The ICM research found that initial crisis news about the pandemic frequently showed that people thought it would be a single, rare event. But COVID variants have put paid to that expectation. Unfortunately, many executives continue to believe they don’t need a comprehensive crisis management and communications plan, refusing to recognize that a minimal investment in planning and preparedness can save them from the overwhelming costs of a crisis or disaster.

Photo by Obi Onyeador on Unsplash.

About Kim Harrison – author, editor and content curator

Kim Harrison, Founder and Principal of Cutting Edge PR, loves sharing actionable ideas and information about professional communication and business management. He has wide experience as a corporate affairs manager, consultant, author, lecturer, and CEO of a non-profit organization. Kim is a Fellow and former national board member of the Public Relations Institute of Australia, and he ran his State’s professional development program for 7 years, helping many practitioners to strengthen their communication skills. People from 115 countries benefit from the practical knowledge shared in his monthly newsletter and in his books available from cuttingedgepr.com.

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