A SEMINAR REPORT ON

CRISIS MANAGEMENT

Submitted By:

ADITHA PRAKASH 1BM09IM002

Submitted To: Professor and Head of the Department Department of IEM, BMSCE, Bangalore

Department of INDUSTRIAL ENGINEERING AND MANAGEMENT BMS COLLEGE OF ENGINEERING Autonomous College under VTU Accredited by NBA, Approved by AICTE Bangalore-560019 MAY 2013

Certificate
Department of INDUSTRIAL ENGINEERING AND MANAGEMENT BMS COLLEGE OF ENGINEERING Bangalore-560019

This is to certify that the Seminar (11IE8DCSEM) Entitled CRISIS MANAGEMENT

Has been successfully completed by ADITHA PRAKASH 1BM09IM002 As a part of 8th Semester curriculum in Bachelor of Engineering in Industrial Engineering and Management, BMS College of Engineering an Autonomous College under VTU During the Academic Year 2012-2013

Signature Guide and HOD Dr. B Ravishankar Prof and HOD, IEM, BMSCE Semester End Examinations: Name Examiner 1 Examiner 2

Signature

DECLARATION
I ADITHA PRAKASH bearing USN: 1BM09IM002, of VIII semester B.E, Department of Industrial Engineering and Management do hereby declare that seminar report entitled "CRISIS MANAGEMENT" has been compiled by me. This work and any part of this work have not been submitted anywhere for the award of any degree.

Place: Bangalore Date: 04/05/2013

Signature: Name: ADITHA PRAKASH

CRISIS MANAGEMENT

ACKNOWLEDGEMENT
Words are often too less to reveal ones deep regards. An understanding of the work like this is never the outcome of the efforts of a single person. The euphoria and satisfaction of the completion of any work will be incomplete without thanking the people responsible for its venture. I take this opportunity to express my profound sense of gratitude and respect to all those who helped me through the duration of this seminar. I would like to thank Dr B RAVISHANKAR, Professor, Head of the Department, Department of Industrial Engineering and Management, B M S College of Engineering, Bangalore, for his constant encouragement for this Seminar. I would also like to thank Dr K MALLIKHARJUNA BABU, Principal, B M S College of Engineering, Bangalore, for giving us an opportunity to carry out the seminar in this college. I am also thankful to all the Faculty Members and Non-teaching staff in the Department of Industrial Engineering and Management, B M S College of Engineering, Bangalore, for their constant support. I would like to thank my Parents for their moral support and Friends for their suggestions. Last but not least, I would like to thank those, whose name may not have been appeared here but their efforts have not gone unnoticed.

ABSTRACT
Industry is an integral part of civilisation. .From time immemorial man has been able to develop industries mostly by trial and error method. But with the advancement in science and technology man has become more reasonable and hence successful. The success of an industry lies in the well balanced organisational skills of the management. It is not enough to have a thorough know how of the infrastructure or the tips to increase production. It is absolutely necessary for a management to anticipate crisis in the system and to successfully be well prepared to overcome it, so that the industry may scale great height. Hence the need of the hour is to know the in and out of crisis management to maintain the reputation and well-being of the Industry.

CONTENTS

Sl No. 1 2 3 4 5 6 7

TOPIC INTRODUCTION WHAT IS CRISIS? WHAT IS CRISIS MANAGEMENT? PHASES OF CRISIS MANAGEMENT CASE STUDIES CONCLUSION REFERENCES

PAGE No. 6 8 10 12 14 18 19

INTRODUCTION
The business world is becoming more and more complex, and results need to be obtained more rapidly. Many organizations have taken a methodical response to business disruptions- primarily a combination of planning and insurance. They no longer have that luxury. Incidents are becoming more common and less predictable, inside and outside the enterprise. Whats needed is a way of managing any crisis regardless of its source.

People, processes and platforms are vital to managing a crisis successfully. Underpinning these is the need to communicate effectively between all participants and stake holders. Miss any of these and the crisis can rapidly escalate out of control, increasing the damage to assets, including people and brand.

A study conducted by the Oxford University and the Sedgwick Group to analyse the long term effects of a crisis on an organization analysed the impact of catastrophes on shareholder value, evaluating companies that responded well to a crisis, as well as those that responded poorly. Not surprisingly, companies that responded poorly suffered a decline in shareholder confidence. However, the companies that responded well saw a 22% positive difference in stock price.

Need for the study:

Crisis Management prepares the individuals to face unexpected developments and adverse conditions in the organization with courage and determination. Employees adjust well to the sudden changes in the organization. Employees can understand and analyse the causes of crisis and cope with it in the best possible way. Crisis Management helps the managers to devise strategies to come out of uncertain conditions and also decide on the future course of action. Crisis Management helps the managers to feel the early signs of crisis, warn the employees against the aftermaths and take necessary precautions for the same.

Ultimately crisis management plays an important role in maintaining the stability and well-being of an organization.

WHAT IS CRISIS?
What is Crisis?
A sudden and unexpected event leading to major unrest amongst the individuals at the workplace is called as organization crisis. In other words, crisis is defined as any emergency situation which disturbs the employees as well as leads to instability in the organization. Crisis affects an individual, group, organization or society on the whole.

Characteristics of Crisis
Some of the characteristics of crises are: Crisis is a sequence of sudden disturbing events harming the organization. Crisis generally arises on a short notice. Crisis triggers a feeling of fear and threat amongst the individuals

Why Crisis?
Crisis can arise in an organization due to any of the following reasons: Technological failure and Breakdown of machines lead to crisis. Problems in internet, corruption in the software, errors in passwords all result in crisis. Crisis arises when employees do not agree to each other and fight amongst themselves. Crisis arises as a result of boycott, strikes for indefinite periods, disputes and so on. Violence, thefts and terrorism at the workplace result in organization crisis.

 Neglecting minor issues in the beginning can lead to major crisis and a situation of uncertainty at the work place. The management must have complete control on its employees and should not adopt a casual attitude at work. Illegal behaviours such as accepting bribes, frauds, data or information tampering all lead to organization crisis. Crisis arises when organization fails to pay its creditors and declares itself a bankrupt organization.

Types of crises
Crises can be categorized as follows: 1) 2) 3) 4) 5) 6) 7) 8) Natural crises Technological crises Confrontation Malevolence Organizational misdeeds Workplace violence Rumours Terrorist attacks/man-made disasters

WHAT IS CRISIS MANAGEMENT?

Crisis management can be defined as a, "Holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience, with the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand, and value-creating activities- as well as effectively restoring operational capabilities."

Essentially, it is the process by which an organization deals with a major event that threatens to harm the organization, its stakeholders, or the general public. Three elements are common to most definitions of crisis: (a) A threat to the organization, (b) The element of surprise, and (c) A short decision time

Crisis management can also be expressed as crisis is a process of transformation where the old system can no longer be maintained. Therefore the fourth defining quality is the need for change. If change is not needed, the event could more accurately be described as a failure or incident.

In contrast to risk management, which involves assessing potential threats and finding the best ways to avoid those threats, crisis management involves dealing with threats before, during, and after they have occurred. It is a discipline within the broader context of management consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start.

10

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 methods of a business or an organization are called Crisis Management Plan. A crisis mind set requires the ability to think of the worst-case scenario while simultaneously suggesting numerous solutions. Trial and error is an accepted discipline, as the first line of defence might not work. It is necessary to maintain a list of contingency plans and to be always on alert. Organizations and individuals should always be prepared with a rapid response plan to emergencies which would require analysis, drills and exercises. The credibility and reputation of organizations is heavily influenced by the perception of their responses during crisis situations. The organization and communication involved in responding to a crisis in a timely fashion makes for a challenge in businesses. There must be open and consistent communication throughout the hierarchy to contribute to a successful crisis communication process. The related terms emergency management and business continuity management focus respectively on the prompt but short lived "first aid" type of response (e.g. putting the fire out) and the longer term recovery and restoration phases (e.g. moving operations to another site). Crisis is also a facet of risk management, although it is probably untrue to say that Crisis Management represents a failure of Risk Management since it will never be possible to totally mitigate the chances of catastrophes occurring.

11

PHASES OF CRISIS MANAGEMENT

PRECRISIS

PHASES OF CRISIS MANAGEMENT

CRISIS RESPONSE

POST CRISIS

PRECRISIS PHASE:
The pre-crisis phase is concerned with prevention and preparation. Prevention involves seeking to reduce known risks that could lead to a crisis. This is part of an organizations risk management program. Preparation involves creating the crisis management plan. Selecting and training the crisis management team, and conducting exercises to test the Crisis management plan and crisis management team.

CRISIS RESPONSE PHASE: The crisis response is what management does and says after the crisis hits. Public relations play a critical role in the crisis response by helping to develop the messages that are sent to various people.
12

 A great deal of research has examined the crisis response. That research has been divided into two sections: the initial crisis response and Reputation repair and behavioural intentions

POST CRISIS PHASE:

In the post-crisis phase, the organization is returning to business as usual. The crisis is no longer the focal point of managements attention but still requires some attention.

13

CASE STUDIES
Examples of successful crisis management
1) Tylenol (Johnson and Johnson)
In the fall of 1982, a murderer added 65 milligrams of cyanide to some Tylenol capsules on store shelves, killing seven people, including three in one family. Johnson & Johnson recalled and destroyed 31 million capsules at a cost of $100 million. The affable CEO, James Burke, appeared in television ads and at news conferences informing consumers of the company's actions. Tamper-resistant packaging was rapidly introduced, and Tylenol sales swiftly bounced back to near pre-crisis levels. When another bottle of tainted Tylenol was discovered in a store, it took only a matter of minutes for the manufacturer to issue a nationwide warning that people should not use the medication in its capsule form.

2) Odwalla Foods
When Odwalla's apple juice was thought to be the cause of an outbreak of E. coli infection, the company lost a third of its market value. In October 1996, an outbreak of E. coli bacteria in Washington State, California, Colorado and British Columbia was traced to unpasteurized apple juice manufactured by natural juice maker Odwalla Inc. Forty-nine cases were reported, including the death of a small child. Within 24 hours, Odwalla conferred with the FDA and Washington state health officials; established a schedule of daily press briefings; sent out press releases which announced the recall; expressed remorse, concern and apology, and took responsibility for anyone harmed by their products; detailed symptoms of E. coli poisoning; and explained what consumers should do with any affected products. Odwalla then developed through the help of consultants - effective thermal processes that would not harm the products' flavours when production resumed. All of these steps were

14

communicated through close relations with the media and through full-page newspaper.

3) Pepsi
The Pepsi Corporation faced a crisis in 1993 which started with claims of syringes being found in cans of diet Pepsi. Pepsi urged stores not to remove the product from shelves while it had the cans and the situation investigated. This led to an arrest, which Pepsi made public and then followed with their first video news release, showing the production process to demonstrate that such tampering was impossible within their factories. A second video news release displayed the man arrested. A third video news release showed surveillance from a convenience store where a woman was caught replicating the tampering incident. The company simultaneously publicly worked with the FDA during the crisis. The corporation was completely open with the public throughout, and every employee of Pepsi was kept aware of the details. This made public communications effective throughout the crisis. After the crisis had been resolved, the corporation ran a series of special campaigns designed to thank the public for standing by the corporation, along with coupons for further compensation. This case served as a design for how to handle other crisis situations.

15

Examples of unsuccessful crisis management

1) Bhopal gas tragedy
The Bhopal disaster in which poor communication before, during, and after the crisis cost thousands of lives, illustrates the importance of incorporating crosscultural communication in crisis management plans. According to American Universitys Trade Environmental Database Case Studies (1997), local residents were not sure how to react to warnings of potential threats from the Union Carbide plant. Operating manuals printed only in English is an extreme example of mismanagement but indicative of systemic barriers to information diffusion. According to Union Carbides own chronology of the incident (2006), a day after the crisis Union Carbides upper management arrived in India but was unable to assist in the relief efforts because they were placed under house arrest by the Indian government. Symbolic intervention can be counterproductive; a crisis management strategy can help upper management make more calculated decisions in how they should respond to disaster scenarios. The Bhopal incident illustrates the difficulty in consistently applying management standards to multi-national operations and the blame shifting that often results from the lack of a clear management plan.

2) Ford and Firestone Tire and Rubber Company

The Ford-Firestone Tire and Rubber Company dispute transpired in August 2000. In response to claims that their 15-inch Wilderness AT, radial ATX and ATX II tire treads were separating from the tire coreleading to grisly, spectacular crashesBridgestone/Firestone recalled 6.5 million tires. These tires were mostly used on the Ford Explorer, the world's top-selling sport utility vehicle (SUV). The two companies committed three major blunders early on, say crisis experts. First, they blamed consumers for not inflating their tires properly. Then they blamed each other for faulty tires and faulty vehicle design. Then they said very little about what they were doing to solve a problem that had caused more than 100 deathsuntil they got called to Washington to testify before Congress.

16

3) Exxon
On March 24, 1989, a tanker belonging to the Exxon Corporation ran aground in the Prince William Sound in Alaska. The Exxon Valdez spilled millions of gallons of crude oil into the waters off Valdez, killing thousands of fish, fowl, and sea otters. Hundreds of miles of coastline were polluted and salmon spawning runs disrupted; numerous fishermen, especially Native Americans, lost their livelihoods. Exxon, by contrast, did not react quickly in terms of dealing with the media and the public; the CEO, Lawrence Rawl, did not become an active part of the public relations effort and actually shunned public involvement; the company had neither a communication plan nor a communication team in place to handle the eventin fact, the company did not appoint a public relations manager to its management team until 1993, 4 years after the incident; Exxon established its media centre in Valdez, a location too small and too remote to handle the onslaught of media attention; and the company acted defensively in its response to its publics, even laying blame, at times, on other groups such as the Coast Guard. These responses also happened within days of the incident.

17

CONCLUSION
To conclude, here are some tips to overcome crises through effective communication in an organization: Have a crisis plan ready to go. Build the crisis support infrastructure Speak with one voice Be prepared before you talk Remembers social media Be there Protect the record Keep reading the situation Dont go quiet Learn and tweak

A crisis management plan generates order out of chaos. It needs strong leadership by well-trained and rehearsed individuals. Everyone within an organisation should know what his or her role is in a crisis and should be prepared to deal with one.

18

REFERENCES
o Corporate crisis management: how to minimize the chaos by Elizabeth Stevens o http://archive.adl.org/security/crisis%20management.p df o http://www.managementstudyguide.com/crisismanagement.htm o http://www.bernsteincrisismanagement.com/ o Wikipedia.org

19