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What will cause your next organizational crisis?

01 Jun, 2020 Issues and crises

This article was originally published in 2015 and has been completely updated in 2020.

Crises are rare events. They are unexpected, unwanted and unpleasant. However, experience shows if you don’t plan for crises, the consequences are much worse when a crisis is triggered. Find out how your organization’s next crisis could be caused.

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%
Destabilisation of entire company 16% 21%

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

Sudden versus smouldering crises

Around 70% of crises have been smoldering. They are predictable. Only about 30% are sudden and totally unexpected. Analysis conducted by crisis experts of thousands of US cases over 10 years to 2010 found managers knew about smoldering concerns, or should have known about them before they turn into major issues and crises. Planning would minimize most of these.

This analysis of the origins of crises found:

  • 50% managers were responsible
  • 32% employees were responsible
  • 18% other reasons

Year after year, most business and organizational crises are caused internally by people in a leadership or management position or other employees.

If managers are responsible for 50% of crises through inaction etc and other employees a further 30%, then 80% of crises can be anticipated and responses planned – because people know about them early. Result: better reduction of impact or prevention. Therefore sensible planning is vital to avoid or minimize crises.

Photo by Obi Onyeador on Unsplash.

About the author Kim Harrison

Kim Harrison 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 the eBooks available from cuttingedgepr.com.

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