Security & Crisis Management International Conference
“ATHENA14”
“Issues of Crisis Management in
Organizations”
Vassilis N. Kefis, Associate Professor
Panteion University of Social and Political Sciences
Dept. of Public Administration
bkefis@panteion.gr
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Crisis Management
in practice
Defining Crisis


By the term "crisis" we mean a situation that has reached a
dangerous (critical) phase, which requires significant, unusual
and extraordinary intervention to prevent or correct a great
damage (Harvard Business Review).
In the case of a company (or organization), crisis is a radical
change to the unfavorable, an extraordinary event that
adversely affects the reputation (fame) and the financial
capacity of the organization, exacerbating the problems of
anxiety in people.
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Elements of Crisis
Four elements are common to most definitions of
crisis:
(a)
(b)
(c)
(d)
a threat to the organization
the element of surprise
a short decision time
a need for change
Types of Crises
•
•
•
•
•
•
•
•
•
Natural disasters
Malevolence
Technical breakdowns
Human breakdowns
Challenges
Mega-damage
Organizational misdeeds
Workplace violence
Rumors
Life cycle of Crisis
Every type of crisis includes three main stages:
1)
The pre-crisis phase
2)
The crisis event
3)
The post-crisis phase
Indications
Prevention /
Preparation
Social types of pressure
Direct influence of public opinion
Peak /
Prevention
Elimination of
Impacts
Problem Solving /
Recovery
Difficult influence of public opinion
Assessment
Crisis Event
Post-crisis phase
↑ social interest
Media
Prevention
Pre-crisis phase
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Crisis Event

Stages of strategic decisions

Recognition

Decision making

Media

Measurement of effectiveness (reputation, impacts etc)
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Crisis Management 1/4

Definition


Crisis Management is a thorough study and prediction of risks that may
threaten a company or an organization in order to reduce uncertainty
and to take all necessary measures - actions and procedures - before,
during and after the crisis to avoid or to address the crisis in a manner
that ensures the health and safety of citizens / customers, the
environment, human resources and the financial position of the
organization.
The main objectives of Crisis Management



Immediating or even short ending the crisis
Limiting the damage
Restoring credibility
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Crisis Management 2/4
Crisis management is the process by which an
organization deals with a major unpredictable
event that threatens to harm the organization,
its stakeholders, or the general public
Crisis Management 3/4
Crisis management consists of:
• Methods used to respond to both the reality and
perception of crises
• Establishing metrics to define what scenarios
constitute a crisis and should consequently trigger
the necessary response mechanisms.
• Communication that occurs within the response
phase of emergency management scenarios
Crisis Management 4/4
The credibility and reputation of
organizations is heavily influenced by
the perception of their responses during
crisis situations
Crisis Management Basics

“No comment” fuels hostility

Always try to be helpful

Be aware of deadlines

Befriend journalists before the crisis hits
CASE STUDIES
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Case Study- ODWALLA



One child died and more than 60 people in the
Western United States and Canada became sick after
drinking the juice.
Sales plummeted by 90%, Odwalla's stock price fell
34%.
Customers filed more than 20 personal-injury
lawsuits and the company looked as though it could
well be destroyed.
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What did the company do?


Odwalla acted immediately.
Although at the point where they were first notified
the link was uncertain, Odwalla's CEO Stephen
Williamson ordered a complete recall of all products
containing apple or carrot juice.


This recall covered around 4,600 retail outlets in 7 states.
Internal task teams were formed and mobilized, and
the recall - costing around $6.5m was completed
within 48 hours.
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Taking Responsibility


On all media interviews, the CEO expressed
sympathy and regret for all those affected and
immediately promised that the company would pay
all medical costs.
This, allied to the prompt and comprehensive recall,
went a long way towards satisfying customers that the
company was doing all it could.
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Internal communications


The CEO conducted regular company-wide
conference calls on a daily basis, giving employees
the chance to ask questions and get the latest
information.
This approach proved so popular that the practice of
quarterly calls survived the crisis.
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External communications



Within 24 hours, the company had an explanatory
Web site (its first) that received 20,000 hits in 48
hours.
The company spoke to the press, appeared on TV and
carried out direct advertising with the Web site
address.
All possible attempts were made to provide up to the
minute, accurate information.
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Fixing the Problem





The next step was to tackle the problem of contamination.
The company switched from unpasteurised juice to a process
called "flash pasteurization" which would guarantee that E-coli
had been destroyed without compromising flavor.
Within months of the outbreak, the company had in place what
some experts described as "the most comprehensive quality
control and safety system in the fresh juice industry."
On December 5, the company brought back its apple juice.
The new process was communicated in all advertising and
public outreach campaigns
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Cost and benefit




Odwalla made a rapid recovery.
Much of the good will and trust it had built up over
the years remained.
Sales picked up again quite quickly.
The company did pay a large cost. Odwalla pleaded
guilty to criminal charges of selling tainted apple
juice and was fined $1.5m - the largest ever assessed
in a food industry case by the US Food and Drug
Administration.
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Case Study - EXXON




In 1989, the Exxon Valdez oil tanker, entered the Prince
William Sound, on its way towards California.
The ship ran aground and began spilling oil. Within a very
short period of time, significant quantities of its 1,260,000
barrels had entered the environment.
What did the company do?
The action to contain the spill was slow to get going.
The company refused to communicate openly and effectively
to the public about the incident.

The Exxon Chairman, Lawrence Rawl, was immensely suspicious of
the media, and reacted accordingly.
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Poor Crisis Management


Media coverage escalated while
Exxon dodged the media
 The Chairman refused to be
interviewed on TV and said
that he had no time for “that
kind of thing.”
A company spokesman
misrepresented the extent of the
spill and clean-up efforts
 This was in contrast to the
footage of the ecological
disaster shown on TV
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Failure to Fix the Problem




While Exxon stalled and attempted to cover up the problem,
the clean-up operation was slow to begin
Around 240,000 barrels had been spilled, with another million
still on the ship.
During the first two days, when calm weather would have
allowed it, little was done to contain the spillage.
This spillage spread out into a 12 square mile slick.
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The Problem Compounds




Then the bad weather struck, making further containment almost
impossible.
After more than a week, the company was still giving no ground on the
request for better communication.
The media clamor became so hostile that eventually Frank Larossi, the
Director of Exxon Shipping, flew to Valdez to hold a press conference.
It was not a success. Small pieces of good news claimed by the
company were immediately contradicted by the eyewitness accounts of
the present journalists and fishermen.
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Outrage Builds

John Devens, the Mayor of Valdez, commented that the
community felt betrayed by Exxon's inadequate response to
the crisis, in contrast to the promises they had been quick to
give of how they would react in exactly this eventuality.
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Poor Communication

Eventually, Chairman Rawl was interviewed live.

He was asked about the latest plans for the clean-up.

It turned out he had neglected to read these, and cited the fact
that it was not the job of the chairman to read such reports.

He placed the blame for the crisis at the feet of the world's
media.
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The Aftermath




The spill cost around $7 billion, including the clean up costs.
$5 billion of this was made up of the largest punitive fines ever
handed out to a company for corporate irresponsibility.
Exxon lost market share and slipped from being the largest oil
company in the world to the third largest.
The "Exxon Valdez" entered the language as a shortcut for
corporate arrogance and damage.
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What went wrong?

The company failed to show that they had effective systems in
place to deal with the crisis - and in particular their ability to
move quickly once the problem had occurred was not in
evidence

They showed little leadership after the event in showing their
commitment to ensuring such problems would never happen
again

They quite simply gave no evidence that they cared about what
had happened. They appeared indifferent to the environmental
destruction.
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