"It'll take time to restore chaos."
- George W. Bush, 43rd President of the USA (2001 - 2009)

Crisis management is about how a business organization responds in the event of a rea crisis faced by the organization. It is about the way in which the business reacts during a real crisis. This is particularly important if the crisis is major enough to threaten the survival of the organization.

The purpose of crisis management is to return to normal business operations as quickly possible. To achieve this aim, businesses usually rely on their contingency plans that were prepared just in case the crisis actually occurred. The four key and interrelated factors affecting the effectiveness of crisis management are:

1.  Transparency

Transparency is about being open and honest with all stakeholders during a crisis. It is about disclosing the truth, such as the scale or severity of the crisis situation. People are far more receptive to bad news and are more forgiving during a time of crisis, especially if the crisis was beyond the organization’s control. However, people do not like to be lied to. They are far less sympathetic if important information is discovered at a later time; hiding the truth from the media is particularly not well received!

Stakeholders want the business to act responsibly before, during and after a crisis. As part of its corporate social responsibilities (CSR), the business will need to remain transparent, not just in communicating about the crisis, but keeping stakeholders informed about its recovery plan. Workers, for example, will want to know that they still have their jobs or that it is safe for them to return to work.

In the case of the Volkswagen diesel scandal (see case study below), the carmaker initially tried to hide their unethical business practices, resulting in an unfavourable court hearing in the USA. Had the company communicated in a transparent way, the severity of the crisis would not have been prolonged, nor would it have cost the company so much money. Essentially, transparency can help an organization to maintain its integrity and uphold its corporate image.

2.  Communication

"The single biggest problem in communication is the illusion that it has taken place"
- George Bernard Shaw (1856 - 1950), Irish playwright

Effective communication is vital during a time of crisis. Internal communication with employees will help them to know and understand the issue, and the course of action for business continuity and the role that workers play in this. External communication is equally important as customers, suppliers and the general public are more likely to be understanding, sympathetic and supportive if they know what is going on. Insurance companies will also need to be clearly communicated with if they are to compensate the insured business for damages incurred.

Clear and open communication can therefore help a business to earn support and goodwill from internal and external stakeholders at a time when it is needed the most. A business that chooses not to communicate with its stakeholders risks a public relations disaster (see above case study about VW’s car emissions scandal). In the worst case scenario, a lack of open communication, in an attempt to hide the scale of a crisis, risks damaging the reputation of the business beyond repair. By contrast, effective and honest communication can win the support of the mass media and general public.

Of course, it is not always necessary to communicate with the general public about a crisis. The business needs to consider which stakeholders are the most important ones that need to know, although all responses and reaction to the crisis must be done so in a socially responsible manner.

Effective communication is vital during a crisis

3.  Speed

The purpose of crisis management is to return to the business to its normal operations as soon as possible. Hence, a speedy response is needed during a crisis in order to contain the situation and to keep people safe. Decisive actions are easier to take if the business has an effective contingency plan that can be implemented. Prompt action includes communications with all stakeholders (see above), perhaps through a staff meeting or press conference.

Business continuity becomes far less of an issue if the organization has an effective contingency plan to act in a swift way. Speed can also prevent a heavily biased or false version of the crisis being reported on social media or through other means, which could potentially worsen the problems.

By contrast, a slow response can easily prolong or even worsen the crisis. However, a rushed decision will not always be the best one, which is why contingency plans are important.

4.  Control

Some crises can be preventable, such as improved health and safety practices in the workplace to prevent major accidents and fires. Improved security measures can prevent loss of stock and other valuable assets. Many businesses use a crisis management team to handle a crisis situation and ensure there is effective control. Taking control of a crisis situation is essential to prevent the matter worsening or damaging news being spread beyond control via social media and other channels of communication.

Fire drills allow firms to take control in a real emergency

A crisis will typically require clear leadership, so senior executives will adopt an autocratic leadership to take effective control of the situation. Autocratic leaders are decisive decision makers, which can also help to reassure and motivate employees. Taking control prevents further damage being done, so helps to keep the situation under control as far as possible.

In summary, a transparent and speedy response, backed by honest communications, allows a business to take better control of a crisis situation. The combination of these four factors enables a business to stand a greater chance of returning to normality.