Crisis Management - Principles of Management - ثالث ثانوي

Und to qualit www.len.cdd.co 4.3 Crisis Management KLEY TERMS Organizational Crisis Crisis Management Contingency Plan LEARNING OBJECTIVES Once you have completed this lesson, you should be able to 4.3.1 Define crises in organizations. 4.3.2 Discuss strategies for crisis management. التعليم 200 REALITY CHECK A Data Disaster Farah is the regional operavons manager of large business with several locauons, across Saudi Arabia She is in charge of the local office headquarters based in Jeddah The company has millions of customers across the Gulf countries, thousands of employees, and hundreds of suppliers that provide materials and services to support the business. All their information is kept on record, on an electron- Ic system that is now increasingly out-of-date About a year ago, the IT manager recommended that it should be upgraded as soon as possible. However, for budgeting reasons, the company decided to wait until the next finandal year before upgrading. This morning, Farah received a call from the IT manager to inform her that the system had experienced a technical malfunction. All customers and suppliers data had been lost and orders could not be fulfilled Faran began to panic She did not know what to do in such a situation and has hesitated to call the head office. Although it wasn't her decision to delay the system upgrade, she doesn't want her senior managers to think she can't handle the situation Offering some good news, the IT manager explains that his team carry out a weekly back-up of the system in anticipation of failure, and should hopefully be able to restore the records. However, the Chapter 4 Challenges of Contemporary Management

موارد الصليم process will take at least 48 hours to complete and, as the last back- up was three days ago, any new information since then (including new orders) will be lost permanently What's Your Reaction? Do you think that this crisis could have been avoided? Was Farah right to avoid contacting senior manage- meni and try to resolve the issue herself? LO 4.3.1 Crises in Organizations An organizational crisis is an event or occurrence that has a dra- matic and potentially disastrous impact on an organization's financial standing, reputation, survival, or welfare of its stakeholders, Crises can originate from within or outside of the organization.. A crisis can be localized within a specific department of a business, or it can be an international event that affects many nations across the world. An example of the latter could be a global recession that affects all aspects of life and business around the world. Of course, businesses face operational challenges, set-backs and isolated incidents on a daily basis. This is an expectation of running an organization. Not every one of these challenges can be considered a crisis, particularly it it is limited to a short-term issue. To be considered a crisis, the situation must reach a level that endangers the ongoing stability and longevity of the business and its environment. This is important, as crises typically start with a single 'catalyst incident, so how management deals with an mitial isolated incident can be critical in preventing it from escalating into a crisis.. Lesson 4.3 Crisis Management 201

الصليم Types of Crisis Crises in an organization can fall into several different types of catego- ries, as illustrated in Figure 4-9. Financial/ Technological Economic Recession Inflatic Systems failure Data loss Natural/ Environmental Medical/Health Sandstorm Earthquakes Pandemic Local outbreaks 202 Figure 4-9 Types of Organizational Crisis Some of the types of crises that can affect an organization. Financial economic: Financial crises can be the most damaging, particularly when on a global level, often taking many years for full recovery of the world economy. A classic example in recent years is the global economic downturn, following the financial crisis of 2008, which began as a regional issue, before quickly spreading across the world. Technological: While technology is one of the key aspects of innovation, it is not completely infallible. The near total depend- ence upon electronic systems in all aspects of life and business can lead to greater crises when these systems fail. When one busy international airport introduced a new automated security and baggage check-in system in its new terminal, it was pro- moted as a world-class, state-of-the-art innovation. However, the system experienced some technological challenges during its initial launch, causing havoc, huge delays, and embarrass- Chapter Challenges of Contemporary Management

درارت التعليم 2012-1464 ment for the airport. Technological cnses can also occur when an organization that relies on an outmoded technology is dis- placed by a new market entry, such as the growth of the gig economy and digital distribution services. ■ Natural or environmental: A range of environmental crisis can arise, including floods from heavy rainfall, earthquakes, volca- nnies, huncanes, and tsunamis. Also, adverse weather might affect businesses, such as sandstorms, an extreme heatwave, or crop damage from insect infestation Some environmental crises can be manmade, such as climate change. Medical: The recent global Coronavirus pandemic affected peo- ple and businesses all around the world on an unprecedented scale. However, on a smaller scale, a local outbreak of a particu- lar virus or disease can have a major adverse effect on a specific industry, particularly agriculture and counsm Coles can be lised by al of environmental factors such as a Sandstorm What other exule of environmental crises can you think of?

ارت التعليم 4 204 Crises can happen for a wide range of reasons, within and outside the organization. While some crises are caused by negligence of the man- agement or failure to pre-empt a brewing issue, many come from exter nal influences outside of a company's control. It can also be seen that a crisis may fall into several categories A natural disaster, for example, may have environmental origins, however, this will likely lead to financial challenges that could quickly escalate into a monetary or social crisis for the organizations affected by the disaster. If, for example, a warehouse burns down as a result of an extreme heatwave, the short-term loss of revenue on the affected business could have greater consequences for its survival in the longer term. ? CHECKPOINT What types of crises can effect an organization? LO 4.3.2 Strategies for Crisis Management Whether or not a specific crisis can be foreseen and pre-empted or even avoided, all managers should recognize that crises can and occa sionally will happen. By accepting this reality, managers can prepare themselves effectively and minimize the potential impact. It is there- fore critical that every organization develops a strategy for manag- ing crises, before, during and after the event. This is known as crisis management Managers' Responsibilities Before a Crisis By their very nature, not every crisis can be predicted. Indeed, many crises are so impactful and damaging for the precise reason that they happen without apparent warning. Even if an impending crisis is antic- ipated, its precise nature and full implications may not be understood. Although not every disaster can be averted, planning can be done in advance by creating contingency plans. A contingency plan is a set Chapter & Challenges of Contemporary Management

عبارت التعليم " of procedures to follow in the event of an emergency. Using the crisis categones outlined in Figure 4-9, managers can con- sider the kinds of issues that might occur and take steps to avoid them or minimize their impact. Chapter 2 introduced the idea of planning tools and the setting of standards of control, policies and procedures that set boundaries and rules that govern how the organization operates and reacts to certain situations. Crisis management strategies should be built into these frameworks so that warning signs trigger appropriate responses. There is often a particular event or 'chain reaction' that leads to a crisis; this situation should be addressed before it escalates into a full crisis For instance, sales forecasters can look at wider market trends to pre-empt an economic downturn and adjust the company's strategies accordingly, such as the pricing of goods, or by developing new prod ucts or services that might be better suited to the change in climate. Equally, supply chain managers can insulate the company from the potential impact of a failed supplier by sourcing from multiple suppli- ers, or by developing other ways to deliver the products or services. IT managers can identify and set warning signals that trigger alarms if certain systems criteria reach a predetermined threshold. Systems and processes can be routinely checked for potential faults. Staff can be regularly consulted and provided with an outlet for sharing concerns they have encountered that may lead to a crisis. Whatever the business scenario, managers can create specific procedures and protocols to fol- low in order to deal with the situation, should it occur, in a methodical and rational way. Taking steps to avert or limit a crisis before it happens is known as taking a proactive approach to crisis management. Conversely, taking action only in response to a situation is known as a reactive approach. While all managers must be able to react quickly and efficiently to a sit- uation, it is better to take a proactive approach as it gives the manager a greater degree of control in shaping the outcome. This pre-emptive approach can be applied to any type of known disaster that might possibly occur. Managers can simulate scenarios and use these to create procedures and ensure the organization is resourced, and staff are well-trained. One of the most obvious exam- Lesson 4.3 Crisis Management 205

Why is it in tunt to liave a crisis intangxinen jardoy in plecs

عبارة التعليم ples of this is regular fire drills at an office or factory. New employees should be briefed on what to do in the case of a fire. Designated fire wardens direct workers and customers to the predetermined assembly areas outside the building. Other forms of emergency of cnsis should have a similar protocol. Managers' Responsibilities During a Crisis If the crisis cannot be avoided completely- and many, indeed, cannot - then it will have to be managed carefully, so that the organization can survive and rebuild its reputation once the crisis has subsided. During the onset of a crisis, an organization must implement the initial processes that have already been established in the crisis man- agement strategy, rather than having to suddenly create processes after the crisis has happened. All employees should be clear of the procedure and how they are expected to respond to the crisis situa- tion. All members of the organization should follow the designated chain of command to ensure that the issue is reported promptly. Swift action could prevent a localized issue from becoming a compa- ny-wide crisis. In the Reality Check scenario at the beginning of this lesson, Farah did not know what to do in the crisis situation and was reluctant to report the issue to her seniors. What is clear here is that there was no formal process in place for managing a crisis situation of this nature. While Farah demonstrated initiative in wishing to take ownership of solving the issue, she should have alerted superiors immediately. The IT manager, however, had shown some foresight in coordinating regular back-ups to protect the company in the event of data loss. Managers' Responsibilities After a Crisis Responsibilities do not end once a crisis has drawn to a close. It is critical that leaders learn from the fall-out of a crisis through a formal review process, adapting their crisis management strategies accord- ingly, in light of what has been discovered. Many crises often appear to have been avoidable after the event, yet leaders must use this hind- Lesson 4.3 Crisis Management 207

ارت التعليم 4 sight to their advantage. One positive benefit of a crisis is that often it will improve standards to help prevent or limit similar damage being inflicted in future. Managers also have a duty of care to ensure that those affected by the crisis are looked after and compensated appropriately. The organ- ization must also take ownership for any responsibility it had in either the initial cause or the handling of it. Leaders should reward those who have shown courage or strong leadership and teamwork during the crisis. ? CHECKPOINT What strategies are there for crisis management, before, during and after the event? 208 Chapter 4 Challenges of Contemporary Mimagument

عبارت التعليم 43 Assessment UNDERSTAND MANAGEMENT CONCEPTS Determine the best answer for each of the following questions. 1. An earthquake is an example of ain #inclinological crisis. b invirinmernal C financial 2. 4. mextical Which of the following is not an aspect of crisis management? b. Dealing barungency plans Kwangway happe briefing employeon clse procmires d. Warming of people for the palem Think Critically Answer the following questions as completely as possible 3. Giving examples, describe the difference between taking a proactive and a reactive approach to crisis management. 4. "Some crises such as natural disasters are completely unavoidable, so there is no point preparing for them. Do you agree with this state- ment? Give reasons for your answer. Lesson 4.3 Crisis Management 209