In today’s unpredictable business landscape, having a solid crisis management plan is essential to protecting your business when trouble strikes. Whether it’s a natural disaster, a data breach, a product recall, or even a public relations nightmare, being prepared can mean the difference between survival and disaster. But where do you begin?
In this comprehensive guide, we will walk you through the steps needed to create an effective crisis management plan that will safeguard your brand reputation, minimize financial losses, and ensure business continuity. From conducting a risk assessment to establishing a crisis response team, from developing communication protocols to coordinating with stakeholders, you will learn all the crucial elements needed to navigate through any crisis successfully. This guide will empower you to tackle any crisis head-on and emerge stronger than ever. Don’t wait for a crisis to strike. Start preparing your business today with our essential guide to developing a crisis management plan.
What is crisis management?
Crisis management refers to the identification of a threat to a company and its stakeholders and the subsequent development of a successful response.
Since global events are unpredictable, many organizations today attempt to identify potential crises before they occur to develop plans to deal with them. To survive a crisis, the organization must be able to act quickly and alter its course drastically.
Any organization, large or small, may encounter issues that disrupt its normal operations. A crisis can take many forms: a workplace fire, the death of a CEO, a social media hack, a data breach, or a natural disaster can all result in tangible and intangible costs for a company in the form of lost sales, reputational damage, and income loss.
Implementing a continuity plan in the event of an unforeseen contingency can reduce the impact of an adverse event. Good crisis management requires the business to implement this continuity plan swiftly during a crisis.
Types of crises for a business
1) Financial crisis
A financial crisis occurs when a company suddenly loses a large sum of money, making it challenging to meet its financial obligations or service its debts. An example is when a company suddenly and without warning loses three major clients who account for 45% of its revenue. Some of the factors that can contribute to a financial crisis are as follows: loss of revenue, bankruptcy, loss of market, inflation, or sudden change in market trends.
A financial crisis can impair an organization’s ability to serve customers effectively. This kind of event also increases the risk of talent loss. This makes it critical to be proactive in crisis management to avoid business destabilization.
Examples of financial crises
Delta Airlines:
Delta Airlines declared bankruptcy in 2005. The September 11 attacks reduced customer demand, and this trend continued into the mid-2000s. In 2007, the company emerged from bankruptcy and invested in its workforce to improve the customer experience. It established a profit-sharing program in 2020 and distributed nearly $1.6 billion in profit shares to its employees.
Gold’s Gym:
Following all of the closures and movement restrictions in 2020, fitness behemoth Gold’s Gym declared bankruptcy and permanently closed around 30 gyms. The company only recovered from this crisis after being acquired by RSG Group in July 2020.
2) Personnel crisis
Personnel crises occur when an employee or someone associated with the company engages in unethical or illegal behavior.
These situations, whether in the workplace or in an employee’s personal life, can result in a severe backlash against the company. Since the organization employed or supported this individual, the organization’s lack of judgment reflects on the company’s reputation.
Companies must identify the scope of the situation, determine appropriate disciplinary action, and, if necessary, provide a written or verbal statement in these cases. It is critical to thoroughly assess the situation and determine how severely the individual violated the company’s values.
This will assist them in determining the appropriate retaliatory action to take against the convicted individual. Finally, if the situation has garnered media attention, businesses will want to be transparent with these outlets and inform them of the steps they are taking.
Examples of personnel crises
Tyson Foods:
The pandemic affected almost everything, including our food supply chain. Workers at a Tyson Foods pork plant in Iowa were forced to work longer hours in cramped quarters to meet demand. As a result, COVID-19 spread quickly, and several workers died from contracting the virus. To make matters worse, supervisors at the Waterloo, Iowa, plant allegedly participated in a pool betting on how many workers would become ill from the virus. This not only came across as cruel, but the company is now facing legal ramifications as families of the deceased have filed lawsuits.
WeWork:
The 2019 WeWork scandal is one of the most compelling examples of a personnel crisis. WeWork’s former CEO, Adam Neumann, resigned after overvaluing the company (lying about how much the company was worth) when the company attempted to go public.
CrossFit:
CrossFit’s former CEO, Greg Glassman, stated in a meeting during the height of the 2020 Black Lives Matter movement that “he didn’t mourn George Floyd’s death.” He also claimed that racism and police brutality were not widespread issues. He resigned after issuing an apology.
3) Organizational crisis
Organizational crises occur when a company has significantly harmed its customers or employees. Rather than developing mutually beneficial relationships, these companies exploit their customers or abuse their employees to “save face.”
There are three types of organizational crises:
- Crisis of deception occurs when a company intentionally lies about publicly accessible product information or tampers with publicly accessible data.
- Crisis of management misconduct is the result of management’s willing and knowing participation in illegal activities.
- Crisis of skewed management values occurs when senior management prioritizes short-term financial gains over long-term social responsibility and disregards the interests of stakeholders such as customers and employees.
Misconduct examples include withholding information, exploiting customers, and abusing managerial authority.
Given that organizational crises are typically caused by employees who ignore customer needs, changing company culture is the best way to address them. Embracing a corporate culture dedicated to customer success can reduce the likelihood of an internal crisis. Additionally, businesses should hire employees who share the same values as their organization.
Examples of organizational crises
Google was accused of spying on employees and discouraging unionized organizations in late 2020. When employees voiced workplace complaints, the company “illegally surveilled” their conversations.
“We’re proud of [our] culture and are committed to defending it against attempts by individuals to undermine it deliberately,” Google said in a public statement to The Verge. […] We will defend our position because such actions are a severe violation of our policies and an unacceptable breach of a trusted responsibility.”
Wells Fargo:
Wells Fargo employees illegally opened millions of fake customer accounts without the customer’s consent to meet sales quotas. Employees forged signatures and created fictitious records, resulting in billions of dollars in revenue. Wells Fargo paid a $3 billion settlement to cover corporate penalties in 2020.
4) Technological crisis
Businesses rely heavily on technology to perform day-to-day functions in today’s tech-driven age. When that technology fails, they have far more to be concerned about than a few missing emails. If eCommerce sites or software companies’ servers fail unexpectedly, they could lose millions of potential customers. This is not only leads to a significant loss of potential revenue but also a significant blow to the product or service’s reputation.
The first step in managing these crises is for businesses to collaborate with their IT or technology providers to resolve the issue as soon as possible. Their top priority should be to keep the problem from affecting any more customers. Once their software is operational, the next step is to collaborate with internal resources to determine what went wrong with their system and implement safeguards to prevent it from happening again. They should also ramp up their customer service and support teams to ensure they are prepared to handle a surge in calls from angry or confused customers.
Google:
A major product outage in December 2020 affected the majority of Google’s offerings and services, including Gmail, YouTube, and other Google Workspace products. Google provides an up-to-date public dashboard with system status information, and it uses this tool to keep users informed during the outage.
A Google spokeswoman wrote in an email to customers, “Today, at 3:47 AM PT, Google experienced an authentication system outage for approximately 45 minutes due to an internal storage quota issue. All services are now operational. We apologize to everyone affected and will conduct a thorough follow-up review to ensure this problem does not occur again.”
Instagram:
Instagram, WhatsApp, and Facebook Messenger all went down for at least an hour for thousands of users in March 2021. While this affected ordinary consumers, international businesses that use WhatsApp and Messenger to communicate with clients were impacted even more.
According to Facebook’s response to The Verge, “Earlier today, a technical issue caused people to have difficulty accessing some Facebook services. We resolved the issue for everyone and apologized for any inconvenience.” On the same day, the services were restored.”
5) Natural crisis
Natural disasters such as hurricanes, earthquakes, and tornadoes, while rare, can have a significant impact on a business. People may refer to an earthquake as a crisis if it destroys an office. If a company is located in an area prone to extreme weather, it must plan an emergency response in the event of a natural disaster.
Being proactive is the best way to deal with natural disasters. Companies should ideally construct their offices in a structure that is resistant to local weather and prepare an evacuation plan in an emergency. It will also aid in preparing a business continuity plan if their offices become unavailable.
Examples of natural crises
COVID-19:
COVID-19 pandemic affected businesses, organizations, and families and the effects of the pandemic are still an ongoing challenge in many places. While it caught everyone off guard, many companies incorporated remote work and health protocols into their business models to keep employees and customers as safe as possible. With the worst of the pandemic seemingly over, many companies around the world have actually retained this remote/hybrid work style.
The stages of a crisis
While there are numerous crisis management models available, the four stages of a crisis listed below are among the most widely used:
1) Pre-crisis stage
This first stage occurs before the onset of the crisis. In many cases, this pre-crisis stage will be unremarkable. Some situations, such as active shooter incidents, cyberattacks, or natural disasters, can occur anytime and without warning. Your crisis management team may be able to detect warning signs for other events. Extreme weather events and transportation disruptions may bring some forewarning, such as weather warnings or press and social media coverage.
Companies should view this as a preparatory stage in which they look for potential crises that may affect their business. If warning signs are detected, action should be taken to mitigate or prevent the impact of the crisis.
2) Crisis stage
This is when a company notices the first signs of a crisis developing. Also known as the acute phase, this is the point at which businesses can no longer prevent the crisis from occurring. Their attention must now shift to risk assessment in order to respond quickly and mitigate the impact of theevent. While the acute stage is frequently the most intense, it is also the shortest of the four stages.
3) Response stage
When a company’s response plan is activated, the crisis enters the response stage, during which resources are deployed to address the emergency. Their crisis team members are now in action.
The length of this stage will depend on the type of crisis. Some events, such as a snowstorm, could take several days. A company’s response time may be much longer in other cases, such as a public health emergency. Few companies could have predicted that their crisis management teams would still be dealing with the COVID-19 pandemic more than two years after it first hit.
4) Post-crisis stage
At this point, the crisis can be considered resolved, as the company transitions from crisis management to business as usual. Employees are returning to work, and normal business operations can resume. This final crisis resolution stage can take days, weeks, or even months, depending on the type of crisis.
Tips for creating a crisis management plan in 2023
1) Form a crisis management team
The first step in developing a crisis management plan is to form a crisis management team. You need to take time to put together an effective team of people who think on their feet and don’t crumble under pressure. These individuals will need to be ready to act as soon as the crisis is identified. The responsibilities of a crisis management team include:
- Tracking and analyzing signs of crisis,
- Developing plans of action for various situations,
- Leading internal and external communications,
- Leading management and supporting employees, and
- Guiding a company through an uncertain time.
2) Conduct risk assessment
To comply with health standards and regulations, every company is required by law to conduct risk assessments. However, separate risk assessments must identify potential crises. Businesses can locate potential incidents or scenarios where situations could occur by conducting a risk analysis. They can then devise a crisis management strategy in case it happens.
3) Understand how crises can affect business
After identifying potential risk areas, businesses should consider how these risks may impact their operations. For example, if the risk is a poorly judged social media post, it could harm sales, damaged reputation, and alienate customers. If the risk is an economic downturn, this could result in falling stocks, layoffs, and office closures.
4) Implement monitoring systems
Monitoring systems enable businesses to detect potential crises before they turn into crises. Such systems can include social media alerts to detect trends or online discourse, feedback from customers or stakeholders, and reports on broader industry trends. Monitoring will allow a company to stay on top of potential issues and, if necessary, adjust its crisis management plan strategy.
5) Define crisis criteria
Crises can be identified before they occur, in real-time, or after the worst has happened. While businesses can do their best to prepare for potential situations, a crisis can occur completely unexpectedly, such as through social media. As a result, companies should develop distinct criteria for defining a crisis in order to prepare accordingly and implement the crisis plan effectively.
6) Identify the chain of command
A chain of command is essential in a crisis management plan to ensure a cohesive and organized response. Ideally, companies want to inform all employees about the crisis and the planned response before they address the general public. It stands to reason that top-level executives will be informed first, followed by management, employees, and then external affected parties such as shareholders. This chain of command is necessary to ensure that communication is consistent and that the entire company receives the most recent information.
7) Establish an internal & external communications plan
Internal and external reactions to a company’s crisis will differ. The public will expect a quick response after a crisis has occurred. The company should prioritize the public, but not so quickly that it fails to acknowledge critical information or further antagonizes affected parties. Furthermore, as a crisis worsens, it is easy to lose sight of employees who are probably concerned. A crisis management plan should also prioritize coordinated internal communications to employees so that every management level receives the most up-to-date information.
8) Develop a social media strategy
As a crisis unfolds, social media platforms provide an instant way to broadcast an apology, update, or acknowledgment. This part of the crisis management plan may play an important role in shaping the company’s response to a crisis. At the very least, people anticipate a response on social media. Keep in mind that because news spreads quickly on social media, an emergency can unfold much faster. Since online conversation can shift rapidly, companies must not overlook social media while implementing a crisis management plan.
9) Training
The best way to ensure that everyone is prepared is to familiarize the company with various crisis management plans and implement practical training. This training will be invaluable if and when the crisis is resolved.
10) Regularly review plans
Plans for crisis management can quickly become out of date. It is critical that the delegated crisis management team reviews and adapts the techniques as needed and retrains employees as required.
It can take years to build a solid reputation, but it only takes one crisis to destroy it. The key to minimizing damage during a company crisis is practical planning. Any crisis can be handled effectively by following a well-thought-out plan, training employees, and monitoring key risk areas regularly.
Conclusion
Every brand, personal or corporate, may face a crisis. Being aware of potential crises and having a plan in place can make the difference between successfully managing a crisis and experiencing a full-fledged brand meltdown. There is a widespread belief that businesses cannot see a crisis coming until it is well underway. Likewise, people falsely assume that until the crisis has arrived, they cannot plan for it. In reality, with the right crisis management team and the right crisis management plan, a company can anticipate and plan its response to different types of crises. In fact, they must prepare for crises if they want to protect their brand reputation in the wake of a crisis. Crisis management planning is actually now necessary in our increasingly online world.
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