The Role of Perception in Crisis Planning
Public Relations Review, 26(2):155–171 ISSN: 0363-8111
Copyright © 2000 by Elsevier Science Inc. All rights of reproduction in any form reserved.
John M. Penrose
The Role of Perception in Crisis Planning
ABSTRACT: This article reveals that a company’s perceptions of crises have a profound effect on primary crisis management activities. Although briefly reviewing the technical aspects of crisis management, the research examines the effects that threat and opportunity constructs have on crisis planning. The article concludes with some recommendations concerning the communication of a crisis’s dual nature before, during, and after a crisis situation. John M. Penrose is professor of business communication and chair of the Information and Decision Systems Department in the College of Business Administration at San Diego State University.
Much of the traditional crisis management literature stresses the fundamental importance of implementing an enterprise-wide crisis plan. In most cases, successful crisis resolutions stem from an organization’s instilled crisis plan, whereas most instances of mishandled crisis situations result from a company’s lack of such a plan.1 Researchers tend to agree that organizations that practice proactive crisis management will lessen the damage of a crisis. Conversely, when organizations only respond to crises, the resulting damage seems to overshadow potential opportunities.2 Why is it then, that about 40% of Fortune 1000 industrial companies still do not have an operational crisis plan?3 Indeed, many of these companies believe that their company’s prestige and goodwill will carry them through any unforeseen misfortune. This may be true for huge companies, such as Exxon, that also have the financial resources to weather even the most disastrous crisis. But, smaller, lesser-known companies must heed the fact that 80% of companies without a comprehensive crisis plan vanish within 2 years of suffering a major disaster.4 Thus, it seems that a crisis plan is indeed an invaluable precaution that any company must take.
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THE ROLE OF PERCEPTION The perception of crises may ultimately affect crisis outcomes. Furthermore, the perception of a crisis as an opportunity or a threat may also have significant implications. Crises are not inherently good or bad; they are merely perceived by most as bad. Many examples reveal the severe penalties attached to the unpreparedness of an organization, such as the Union Carbide disaster or the Exxon Valdez oil spill.5 Crises can destroy a company’s reputation in a concentrated time frame. When reviewing the results of the Union Carbide disaster or the Exxon Valdez oil spill, one may view crises exclusively as threats. But would the perceptions of the organizations have been different if senior management had perceived these threats differently, prepared accordingly, and executed differently? Opportunities exist within any crisis situation. New leaders may emerge from a crisis, and in most cases, a crisis leads to accelerated change in business processes that may prove advantageous in the long run.6 Often companies that do survive disasters are more prepared for the next one. This thought does depend, however, on the extent of learning that the company in question absorbs from the event. Finally, companies that do handle a crisis effectively are generally perceived in a more positive way.7 Many companies simply fail to identify these potential positive outcomes. The perception of a crisis as an opportunity should lead to an increased ability to consider various alternatives and thus a greater extent of proactive planning. Managers generally view opportunistic situations to be more controllable, thus including more members into the resolution process and thereby increasing the flow of alternatives.8 On the other hand, the perceiving of a crisis as a threat will cause managers to limit the amount of information they consider. Thus, perception has the potential to influence the extent to which an organization is willing to engage in crisis management activities.
NEED FOR STUDY
Much of the crisis management research today focuses on the technical aspects of dealing with crises. The majority of this literature explains the importance of implementing a crisis plan and the strategies involved in that planning.9 Other research deals with the formation of crisis management teams and their relevance.10 Finally, many case studies detail preventive measures taken and lessons learned.11 Such valuable case studies are too few to provide researchers with an all-encompassing model of crisis management. The purpose of this article is to insert a new perspective into the crisis management literature. Rather than focusing on how perceptions affect the outcome of a crisis situation, what is needed is a measure of whether the perception of a crisis as an opportunity or as a threat affects an organization’s willingness to engage in crisis management activities that then affect the outcome of a crisis.
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AN OVERVIEW OF THE CRISIS COMPONENTS
A crisis occurs when an event increases in intensity, falls under close scrutiny of the news media or government, interferes with normal business operations, devalues a positive public image, and has an adverse effect on a business’s bottom line.12 According to Shrivastava et al., crises are caused by an interacting set of human, organizational, and technological failures that combine with regulatory, infrastructure, and preparedness shortcomings in the organizations’ environments.13 Pearson and Clair build on the crisis definition by noting that organizational crises are highly ambiguous events that necessitate a decision or judgment that will result in change for better or for worse.14 This implies that crises have dual meanings as well as dual outcomes. Reviews of crises and crisis plans typically include four common elements: the plan, the management team, communication, and post-crisis evaluation. These four components together form the basis of crisis management activities and should figure into any comprehensive crisis plan. Therefore, it is imperative to discuss each of these basic elements before introducing the possible effects of perception on crisis management. The Crisis Management Plan The ambiguous nature of crises makes planning for a crisis difficult. Further, the infinite number of possible crisis scenarios has prevented the adoption or implementation of a universally accepted planning strategy.15 Indeed, there are times when a plan may not be as relevant to a crisis as planners might have envisioned. The penalties, however, for complete unpreparedness can be catastrophic to any company, regardless of size or prestige. A certain amount of proactive planning is necessary to counter a potentially disastrous crisis situation. Proactive planning may include mechanisms for determining possible crises, identification of affected audiences, procedures to follow during a crisis, appointment and training of a crisis management team, development of a communication plan, and policies for evaluating and revising the plan.16 Such a comprehensive plan should include input from all levels and all functional areas of the organization. The Crisis Management Team Pearson and Clair argued that there are key aspects of planned responses that will influence the degree of crisis management success. Most important of these planned responses is a team response, as opposed to an individual response.17 Researchers agree that organizations with a team-oriented approach to crisis preparation will be better able to successfully manage a crisis than will those organizations that entrust a single individual such as a chief executive officer (CEO). Mitroff concluded that most crisis management teams are composed of six to 10 senior executives that may include the CEO, chief financial
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officer, top public relations or communications executive, legal counsel, and health/safety advisor.18 All members should be empowered and respected by peers so that the recognition and preassignment of responsibilities at policy, strategy, and execution levels will not be constrained by political or hierarchical relationships within the company. Finally, the team must be trained by way of drills and simulations to teach the team how to identify potential crises and brainstorm possible solutions. Crisis Communication Alliance and coordination with stakeholders as well as the dissemination of information are two more aspects of Pearson and Clair’s planned crisis responses.19 Effective communication during a crisis should be a company’s top priority. Thus, a communication strategy should strive to achieve the fastest delivery of the most accurate information available. This can be achieved by establishing a communication protocol, selecting and training a company spokesperson, identifying key audiences and key messages, and deciding on the most appropriate method of communication before a crisis occurs.20 Crisis preparations should also include identifying specific information that must be kept confidential, as well as the specification of media access to management, employees, facilities, and the actual crisis site.21 Evaluation and Revision of Management Plans The end of every crisis is the beginning of the preparation step for the next one. Debriefing the crisis team and evaluating the crisis plan immediately after a crisis can be the most important part of crisis management. When evaluating the handling of a crisis, a company should accomplish three goals. First, the organization should evaluate team performance to recognize and correct any errors. Second, the crisis team and other related personnel should be given the opportunity to express feelings to be able deal with the stress brought on by the crisis situation. Finally, the plan itself should be evaluated and revised, if necessary.22 Throughout this process, sufficient resources should be made available to keep a history of the crisis along with any revisions made.
THE VOID IN CRISIS MANAGEMENT STRATEGIES AND MODELS
In the last 15 years or so, crisis management has emerged as a substantive focus area and a number of strategic approaches and models have appeared. By looking at the major ones, we’ll see a void in the research and thus the need for the present study. These strategies and models are summarized below starting with the oldest.
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Littlejohn’s Six-Step Crisis Model Models can help simplify complex processes and thereby provide a better understanding of the problem domain. Littlejohn’s six-step crisis model is a framework that provides a guideline of basic crisis management development. According to Littlejohn, the first step for any organization is to design the crisis management organizational structure.23 This process would then be followed by the selection of a crisis team. Once the team has been chosen, team development should occur by means of training and simulations. The next step is to design and conduct a crisis situation audit. After conducting a thorough review of potential scenarios, a contingency plan should then be drafted. The final step of Littlejohn’s model is to actually manage the crisis.24 Fink’s Comprehensive Audit Fink suggested a comprehensive situation audit. Such a preparedness audit would propel an organization to determine what events could cause a crisis in each functional area.25 Once scenarios are developed, action plans should be prepared. The plan should include the crisis situation description and a statement of desired outcomes or a range of acceptable outcomes. Consequently, crisis team members should ask “what if” or “if then” questions to develop strategic or tactical options. Mitroff’s Portfolio Planning Approach Although no company can prepare for every fathomable crisis scenario, a company may be able to group crises according to their underlying structural similarities. Once clusters of crises are recognized, the organization should then prepare for the worst scenario in each cluster by considering the best preventive actions. Thus, preparation for one crisis scenario, in turn, provides exposure to several other similar or related scenarios.26 Crisis/Strategic Management Integration Crisis management is just now being recognized as strategically significant to organizations. Mitroff et al. argued that crisis management perspectives should, therefore, be integrated into the strategic management process.27 Whereas strategic management focuses on the offensive aspects of competing in the marketplace, crisis management deals more with the defensive capabilities of the company.28 Whereas strategic management promotes the welfare of an organization, crisis management works to protect it. Thus, according to Preble and Mitroff et al., both perspectives require the attention and involvement of top management and should, therefore, be integrated into the strategic management perspective. Burnett’s Crisis Classification Matrix Crisis situations can be classified into a 16-cell matrix based on threat-level, response-options, time pressure, and degree of control.29 The
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matrix can be viewed as a sort of crisis continuum. Thus, for example, a major crisis would be a situation where the time pressure is intense, the degree of control is low, the threat-level is high, and response-options are limited in number. Such a crisis would be classified as a Level 4 situation, whereas a Level 3 crisis would exhibit three of the characteristics inhibiting strategic management, and so on. There are several benefits of the classification matrix. For one, the preparation and analysis of the matrix by the crisis management team is an invaluable exercise in problem awareness. The matrix also improves decision making by revealing and prioritizing a list of all potential crisis situations that a company may need to confront at one time or another, allowing for the proper allocation of resources for each potential crisis.30
INTANGIBLE FACTORS OF CRISIS MANAGEMENT
Recent literature shows a trend from technical details of crisis management to the more intangible aspects. The current research consistently includes communication/corporate culture, public relations autonomy, and top management attitudes as significant factors in predicting the outcome of a crisis situation. This article will later extend these intangibles to include the perception of crises as opportunities/threats and their impact on crisis planning. As can be seen by the previously summarized strategies and models, such an examination has been absent from the literature. Crisis researchers have changed their perspective because of the analysis of several historical case studies. It was once believed that having a solid crisis plan in place was the single, most important variable as to whether the organization would be successful in dealing with a crisis situation. A simple example will bring to light researchers’ reasoning behind devaluing this once-accepted theory. Before the onset of the now infamous disasters, Union Carbide and NASA had extensive crisis management plans in place. In hindsight, however, the organizations’ mishandling of Bhopal and the Challenger situations have been primary examples of crisis management failure. Conversely, some companies that lacked a plan during a crisis are now deemed crisis management success stories (e.g., McDonald’s and Johnson & Johnson).31 These inconsistencies have led researchers to believe that there must be other factors to consider in determining the successful outcome of a crisis situation. In addition to the creation of crisis plans, crisis teams, and communication guidelines, other factors substantially affect the outcome of a crisis. Throughout the prevailing contemporary literature, attitudes place corporate culture as the main factor in affecting crisis outcomes. In the case of the Challenger explosion, NASA’s closed communication culture contributed to the failure of properly executing its comprehensive crisis plan.32 A crisis management plan is, therefore, of limited use if it does not coincide with an organization’s philosophies, values, attitudes, assumptions, and norms. Thus, a policy of open communication within
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a company may be a more reliable predictor of crisis management success than the mere formulation of a crisis plan.33 A high degree of autonomy is another important factor in predicting crisis outcomes. Corporate culture usually dictates the amount of autonomy given to crisis team members. A greater amount of autonomy allows teams to act quickly once a crisis occurs because messages are filtered through fewer levels of the organizational hierarchy. The quicker an organization can initiate with the media, the more likely a successful outcome will occur because the team has more of a chance to control the message, thereby lessening the chance of misinformation.34 Thus, a major communication strategy is to limit the number of filters a message must pass through in the organizational hierarchy. Including more employees in the decision activities during a crisis also enables the organization to draw from more available responses from varying points of view.35 During a crisis, a company tends to use fewer sources of information and thus limits its management abilities.36 A conscious effort must be made to include more autonomous sources in the crisis action plan. The base of the crisis management pyramid is senior management’s willingness to initiate proactive planning.37 Senior executives’ attitudes and beliefs impress greatly on the corporate culture.38 The corporate culture in turn affects autonomy, which then affects crisis management activities. If top management ignores or denies its vulnerability, it will naturally allocate fewer resources to crisis management. Finally, Pearson and Clair asserted that executive perceptions are the fundamental and initiating variable in determining potential outcomes from a crisis.39 Having discovered the key role that senior executives’ perceptions play, our research takes these theories a step further. As asked earlier, does perception of a crisis as an opportunity or a threat affect an organization’s willingness to engage in crisis management activities?
THE STUDY
This section details the study’s design, the demographics of the respondents, and the results. Research Design Primary research was conducted to discover the opinions of respondents concerning crises as threats or opportunities. An analysis of crisis management literature as well as a series of personal interviews with crisis management practitioners resulted in an initial questionnaire. Two pilot tests of the questionnaire led to 34 randomly ordered statements in the agree-disagree rating system (Likert scale). Appendix A lists the 34 statements. The statements covered five stages of crisis management constructs and activities: mitigation, planning, response, recovery, and renewal. Mitigation contained all internal and external activities that had preplanning implications. PlanSummer 2000 161
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ning encompassed internal procedures dealing with contingency planning, communication guidelines, and crisis plan content and scope. Response included activities that deal with timely assessment of a crisis as it occurs. Recovery was composed of post-crisis activities dealing with evaluation and documentation. Renewal was the post-crisis period when an organization experiences a change of perspective about crises and crisis management. Distribution and Demographic Results Because a mail questionnaire is able to reach a wider geographical base than would be possible with personal interviews, mail was chosen as the research medium. The surveys were sent to Fortune 500 industrial companies because these companies are large enough to support comprehensive crisis management plans and have common functional areas. Of the 500 questionnaires mailed, 115 completed questionnaires were returned (23%). Included in the survey were demographic questions related to the existence of a crisis plan (see Appendix A). Seventy-eight percent of the respondents reported having a crisis management plan in place, and of these respondents, 63% had crisis plans in place for 5 years or less. These findings suggest that crisis management planning has only recently become an organizational concern. Comparing this data to that of similar surveys conducted in the mid-1980s, it is worth noting that the number of companies with a crisis plan is increasing. For example, a Fortune 500 survey by Fink in 1986 showed that only 50% of the companies that responded had a crisis plan in place.40 Measures Three statistical procedures were applied to 34 Likert-style statements: factor analysis, factor scores, and correlations. The factor analysis procedure reduces the data and provides the basis for generating factor scores for each respondent. The factor scores are used to transform each factor into a factor variable that is then correlated with three criterion variables: the existence of a crisis plan, top management typically perceiving a crisis as a threat to the organization, and a crisis perceived as an opportunity for an organization to assess itself. A factor analysis was applied to the data to determine underlying relationships among 34 survey responses. A varimax rotation scheme was used to maximally differentiate among the factors. An examination of the rotated factor matrix shows more clearly which variables go together and thus facilitates interpretation and labeling of factors. From this analysis, five factors account for 56% of the cumulated variance and include 26 of the 34 variables. The next step was to label each of the factors by using my judgment and interpretation to identify underlying constructs. The five factors, labeled subjectively, appear in Table 1. To draw relationships between each respondent and a criterion variable,
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TABLE 1
Five Interpreted Factors
Factor Variables Planning Number of statements 11 Description Determines the extent of agreement with statements about planning activities and the existence of a crisis management plan. Measures the extent of agreement regarding being proactive and assessing vulnerability to a crisis as well as evaluating the effectiveness of the crisis plan. Measures the extent of agreement with statements about the willingness to integrate crisis management activities into the organization. Evaluates a respondent’s opinion regarding the involvement of crisis management in strategic planning. Measures the extent of agreement with statements regarding the importance of communicating with the media and external publics.
Pre/Post crisis
6
Commitment
5
Strategic orientation
2
External communication
2
factor scores or variables were then determined. Each respondent was evaluated to high or low scores for each factor. Thus, a respondent with a high Factor 1 score (Planning), had a high propensity to engage in crisis planning activities. A respondent with a low Factor 2 score (Pre-/Post-Crisis activities), however, exhibited a low inclination toward engaging in pre- and post-crisis actions. The correlation procedure reveals the existence of a relationship between variables by indicating that two or more variables vary together either positively or negatively. To provide the best measure of the effects of perception of a crisis on an organization’s willingness to engage in crisis management activities, three relative criterion variables were established to correlate with each factor variable mentioned above. The three criterion variables included the existence of a crisis management plan, top management typically perceiving a crisis as a threat to the organization, and a crisis being an opportunity for an organization to assess itself (see Table 2). The resulting correlation coefficients measure the degree to which the factor variables and criterion variables vary together and the direction of this relationship, either positive or negative.
ANALYSIS
After intercorrelating the factor variables with the criterion variables, insightful conclusions regarding the link between perceptions and crisis
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TABLE 2
Criterion Variables
Variable 1 Variable 2 Variable 3 The existence of a crisis management plan Top management perceives a crisis as a threat Top management perceives a crisis as an opportunity
management activities can be drawn (see Table 3). Indeed, there are obvious links that this study verifies. For example, the fact that the planning factor correlates positively with a company possessing a crisis plan is not surprising. However, there were some unexpected results that show perceptions to be a significant factor to consider when implementing crisis management activities. Planning Factor Variable 1 dealt with the planning aspects of crisis management, including the formation of a comprehensive crisis plan. Not surprisingly, a high degree of correlation (r 0.4369) existed between planning and the existence of a crisis management plan (Criterion Variable 1). This makes sense because respondents with a high propensity for planning are more likely to have a crisis management plan in place. There was also a sizable correlation (r 0.2438) between planning and the perception of a crisis as a threat to the organization. Because respondents perceived crises as threats to the organization, they engaged in crisis planning activities in an attempt to lessen the damage caused by a crisis. Consequently, the perception of a crisis as a threat increased an organization’s planning activities. Finally, there was a low correlation (r 0.0241) between the planning factor variable and the perception of a crisis as an opportunity to the organization. No worthwhile conclusions were drawn from this last correlation. Pre-/Post-Crisis Activities Factor Variable 2 dealt primarily with the degree of proactive planning before a crisis as well as the ability to assess the situation after a crisis.
TABLE 3
Results
Criterion Variables Factor Variables Planning Pre/Post crisis Commitment Strategic orientation External communication Plan 0.4369 0.0143 0.2013 0.0409 0.0088 Threat 0.2438 0.2974 0.0683 0.0278 0.3274 Opportunity 0.0241 0.3622 0.0161 0.0278 0.3230
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Both sets of actions have serious implications for a business’s ability to manage a crisis, as well as to effectively recover from such an event. A high variable score in this category was translated into a high intention to engage in pre- and post-crisis activities. The findings reveal no significant relationship between these activities and the existence of a crisis plan. However, both the opportunity and threat variables achieved significant correlation with this factor. A correlation of r 0.2974 existed between pre- and post-crisis activities and the perception of a crisis as a threat. An even stronger relationship (r 0.3622) existed between respondents with high Factor Variable 2 scores and the likelihood of perceiving a crisis as an opportunity. Thus, the findings here support the perception of a crisis as both a threat and an opportunity. Commitment Commitment items gauge a respondent’s degree of agreement with statements that assess management issues, such as training and responsibility for crisis management, and whether crisis management requires a long-term commitment. Those who strongly agree that crisis management requires a longterm commitment were more likely to have a crisis plan in place. The correlation between commitment and the existence of a plan (r 0.2013) is not surprising. Clearly, an organization dedicated to crisis management would implement a crisis plan. Perception does not appear to affect an organization’s commitment to crisis management, as revealed by low correlation scores (Threat: r 0.0683, Opportunity: r 0.0161). This may be attributed to a perception becoming a central issue as a crisis develops, and the decision to make an organization-wide commitment to crisis management typically precedes a period of a crisis or occurs after an organization experiences a crisis. Strategic Orientation Two of the statements in the survey loaded on Factor 4. These statements concerned respondents’ degree of agreement with the necessity to include crisis reserve funds in the budget and the importance of incorporating crisis planning into overall strategic planning. An organization’s strategic orientation, or the degree to which it is willing to incorporate crisis management into long-range planning, may have implications for that company’s ultimate success or failure in managing a crisis. With that said, however, no significant correlations between strategic orientation and the three criterion variables (Plan: r 0.0409, Threat: r 0.0278, Opportunity: r 0.0278) were found. Thus, no conclusions can be drawn about respondents with a high strategic orientation. It may be assumed by the lack of relationships that an organization’s willingness to engage in strategic planning and crisis budgeting is not affected by perception. External Communication Respondents with a high factor score on the external communication factor variable strongly agreed that developing a solid working relaSummer 2000 165
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tionship with the media before a crisis and sharing information with external publics are critical crisis management activities. There was no significant correlation between external communication and the existence of a plan; however, the correlations between external communication and the other two variables (Threat: r 0.3274, Opportunity: r 0.3230) suggest the importance of incorporating both opinions in creating a complex communication strategy. Moreover, the perception of a crisis as both a threat and an opportunity will increase a business’s propensity to communicate with external audiences.
CONCLUSIONS
A company’s perception of a crisis as a threat or an opportunity does appear to influence a company’s willingness to engage in primary crisis management activities. Results of this study reveal that organizations are especially affected by perception in the areas of planning, pre- and post-crisis activities, and external communication. Perceptions, however, did not seem to influence a company’s level of commitment and strategic orientation. One of the primary inputs of comprehensive crisis management is the planning factor. Planning is at the root of all crisis management activities. Some logical deductions can be made concerning the correlation results of the planning factor. The results showed a high correlation between the existence of a crisis plan and planning. Furthermore, the perception of a crisis as a threat increased an organization’s willingness to engage in planning activities. An organization that is able to identify a set of possible crises is more likely to initiate planning activities in preparation for the worst. The magnitude of such preparations seems to be a direct link between an organization’s vulnerability to certain crisis situations and its level of perception toward each potential contingency. The more threatening a potential crisis is to a company’s core competencies, the more it should partake in primary crisis planning activities. Thus, when evaluating, in early planning stages, the multiple components of a crisis, a company should assess the threatening aspects of a situation before considering crisis opportunity components. It is important to recognize and plan for contingencies that may directly threaten the company as a whole before anything else. Nevertheless, such a perspective should not be without the acknowledgment of possible opportunity outcomes. Such a dual perspective will diminish the inclination to panic, while focusing on threats that are most menacing to the company. In the past, pre- and post-crisis actions have not been consolidated as one, integrated unit. However, the results of this study suggest that these activities do cluster together and should be considered in aggregate rather than as separate sets of activities. Proactive crisis management naturally affects the recovery measures a company must use and is a vital strategy in mitigating the negative effects of crises. Proactive planning is also critical in capitalizing on opportunities provided by a crisis before one occurs. However, the relationship between pre- and post-crisis activities places equal importance on recovery as on proactive action. An organi166 Vol. 26, No. 2
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zation that does not evaluate its crisis management strategy after a crisis will be little better prepared to manage the next crisis. Thus, it is not surprising that preand post-crisis activities correlate significantly with both perception criteria. Again, the company that recognizes the dual nature of a crisis will have a greater propensity for proactive planning and recovery, which leads to more effective crisis management. The results of this study reveal that there is a link between external communication and the perception of a crisis as a threat and an opportunity. Although realizing the threat of a crisis, an organization will carefully select the message content and address each specific public affected. An organization will also benefit if it perceives the positive outcomes of a crisis, which stem from effective crisis communication. Good external communication in a crisis can result in favorable public perception, leading to an improved corporate image. But this, of course, depends on the nature of the crisis. In some cases, effective external communication will merely maintain a company’s image. In any case, a company will not benefit by perceiving a crisis entirely as a threat to the exclusion of even considering potential opportunities. Organizations that feel threatened tend to limit the amount of information they process and communicate.41 This typically leads to negative public perception and the belief that the company is untrustworthy. Recognizing that crises can provide opportunities is crucial to balancing an organization’s external communication practices. Furthermore, by communicating a balanced perception of a crisis, the organization is more likely to sway public opinion and dispel false rumors about the severity and ultimate consequences of the crisis.
RECOMMENDATIONS AND APPLICATIONS
This study reveals the key role that perceptions play in determining the magnitude of primary crisis management activities. First, an organization must perceive contingencies that threaten the company most. Once those threats have been identified, the organization should take steps to define these situations according to possible positive and negative outcomes. Managers must realize the profound effect that framed perceptions have on a crisis situation. As a situation is viewed in more negative terms, a natural tendency is to panic and reduce the number of information channels the company will consider. Perception can be used to redefine the crisis in more positive terms. Communicating the effects of a crisis in a more positive manner works to align internal thinking about the event and encourage employees to support the company’s evaluation of the situation. As noted by Ashmos’ research, company-wide participation is deterred when issues are labeled negatively as a crisis situation.42 On the contrary, a situation framed as opportunistic will enhance internal participation, thus increasing the number of options the company is able to consider. Additionally, maintaining a balanced perspective will suggest that the crisis is more controllable than was first thought. When only considering threat compoSummer 2000 167
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nents, the crisis manager may perceive a distorted view of the situation as the level of stress restricts the amount of information he or she processes. By considering opportunity components as well as threat components, stress is effectively reduced, thus increasing the crisis manager’s likelihood of considering and evaluating more information. This will allow the crisis manager to achieve a more accurate view of the situation. Managing crises is an exercise in managing meaning. The crisis practitioner must realize the importance of a balanced perception throughout the crisis lifecycle. Such a balanced perception, if communicated effectively to employees, will lessen fear and lead to a quicker and more effective response. The balancing of perception, however, requires a strong, conscious effort on the part of the organization. It is more natural for a company to recognize and emphasize a threat as opposed to an opportunity during a crisis. Perceiving the crisis in only a negative way, however, may serve to exacerbate a situation that was not disastrous to begin with. Conversely, an organization that communicates only the opportunities gained from the crisis may be perceived as side stepping the consequences of the event. Thus, striking that delicate balance is crucial in dealing effectively with a crisis. Both the threat and opportunity components of a crisis are major, highpriority issues that are difficult to resolve and involve the integration of many areas and individuals with diverse skills and knowledge. In this way, the multiple dimensions of a crisis are treated from multiple disciplinary and functional perspectives. However, to optimize crisis management effectiveness, a cross-functional approach must be combined with a multiple perception of the crisis itself. Such a dual perception seems equally as important as the implementation of a crisis plan or the development of a crisis management team. Perception is just one of the intangible elements that affects crisis management. Thus, to propel crisis management into a new stage, studies that assess and evaluate the more abstract facets of the field must be undertaken to complement the existing research that still focuses on the more fundamental crisis management activities.
Acknowledgment: I extend my appreciation to Ernie T. Climenson and Julie A. Miller for their assistance in the research and preparation of this manuscript.
APPENDIX A
Survey—34 Statements 1. 2. 3. 4. 5. 6.
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Employees have authority to make decisions in a crisis CEO visible at crisis site CEO as company spokesperson in a crisis Multifunctional crisis management team Established communication protocol Audiences identified prior to crisis
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7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.
Crisis scenario planning sessions Preventive action planning sessions Timely assessment of crisis Identification of key messages Corporate crisis plan Divisional crisis plan Crisis response training Top management commitment to crisis management Funds budgeted for a crisis Existence of crisis control center Formation of crisis portfolio Mechanisms in place to detect early warning signals Crisis management included in corporate strategic planning Annual disaster drills Continuous monitoring and revision of crisis plan Long-term commitment to crisis management Build relationship with media prior to crisis Evaluate organization’s vulnerability to crisis Internal/external situation audit Identify external resources in event of a crisis Proactive approach to crisis management Document organization’s response to crisis Contingency plans in place to ensure daily operations Evaluate effectiveness of crisis plan Debrief crisis team after crisis Document crisis as initially reported Crises as opportunities for change/growth Executive level manager responsible for crisis management Demographic Questions Included in the Survey
35. 36. 37.
Does the company have a crisis management plan? How long has this plan been in place? What is the respondent’s job title?
NOTES
1. Francis J. Marra, “Crisis Communication Plans: Poor Predictors of Excellent Crisis Public Relations,” Public Relations Review 24 (1998), pp. 461– 474. 2. Mayer Nudell and Norman Antokol, The Handbook for Effective Emergency and Crisis Management (Toronto: Lexington Books, 1988), p. 2. 3. Michael J. Tiller, “Is Your Disaster Plan Effective?” Management Review 83 (1994), p. 57.
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4. 5. 6. 7. 8.
9. 10. 11. 12. 13. 14. 15. 16.
17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.
28. 29. 30. 31. 32.
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Malcolm Brown, “The Disaster Business,” Management Today (October 1993), pp. 42– 44. Paul Shrivastava, Ian I. Mitroff, Danny Miller, and Anil Miglani, “Understanding Industrial Crises,” Journal of Management Studies 25 (1998), pp. 285–297. John J. Burnett, “A Strategic Approach to Managing Crises,” Public Relations Review 24 (1998), pp. 475– 488. Otto Lerbinger, Managing Corporate Crises: Strategies for Executives (Boston: Barrington Press, 1986), pp. 88 –90. Susan E. Jackson and Jane E. Dutton, “Discerning Threats and Opportunities,” Administrative Science Quarterly 33 (1988.), pp. 370 –387; Donde P. Ashmos, Dennis Duchon, and Wayne D. Bodensteiner, “Linking Issue Labels and Managerial Actions: A Study of Participation in Crisis vs. Opportunity Issues,” Journal of Applied Business Research 13 (1997), pp. 31– 45. Marra, op. cit., pp. 462– 463. Christine M. Pearson and Judith A. Clair, “Reframing Crisis Management,” The Academy of Management Review 23 (1998), pp. 59 –76. Burnett, op. cit., p. 477. Steven Fink, Crisis Management: Planning for the Inevitable (New York: American Management Association, 1986), pp. 15–16. Shrivastava, Mitroff, Miller, and Miglani, op. cit., p. 290. Pearson and Clair, op. cit., p. 60. Burnett, op. cit., p. 478. John M. Penrose, Robert W. Rasberry, and Robert J. Myers, Advanced Business Communication, 3rd ed. (Cincinnati, OH: South-Western College Publishing, 1997), pp. 277–287. Pearson and Clair, op. cit., p. 71. Ian I. Mitroff, Christine M. Pearson, Judith A. Clair, and Sarah Kovoor Misra, “Managing the Unthinkable,” Organizational Dynamics 26 (1997), pp. 51– 64. Pearson and Clair, op. cit., p. 71. Jonathan Bernstein, “The 10 Steps of Crisis Management,” Security Management 34 (1990), pp. 75–76. Carole Gorney, “Crisis Management: How to Plan Ahead for Potential Crises,” American School & University 62 (1990), pp. 20a–22a. Nudell and Antokol, op. cit., p. 131. Robert F. Littlejohn, Crisis Management: A Team Approach (New York: AMA Management Briefing, 1983), p. 13. Ibid, pp. 14 –17. Fink, op. cit., pp. 36 – 46. Ian I. Mitroff, “Crisis Management: Cutting Through the Confusion,” Sloan Management Review 29 (1988), pp. 15–20. Ian Mitroff, Christine Pearson, and Thierry C. Pauchant, “Crisis Management and Strategic Management: Similarities. Differences, and Challenges,” Advances in Strategic Management 8 (1992), pp. 235–260. John F. Preble, “Integrating the Crisis Management Perspective into the Strategic Management Process,” Journal of Management Studies 34 (1997), pp. 769 –791. Burnett, op. cit., p. 482. Burnett, op. cit., p. 482. Marra, op. cit., p. 463. Marra, op. cit., p. 468.
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33. 34. 35. 36.
37. 38. 39. 40. 41. 42.
Marra, op. cit., p. 466. Fink, op. cit., p. 109. Ashmos, Duchon, and Bodensteiner, op. cit., pp. 33–34. Ian Mitroff, Paul Shrivastava, and Firdaus Udwadia, “Effective Crisis Management,” Academy of Management Executive 1 (1987), pp. 283–292; Ashmos, Duchon, and Bodensteiner, op. cit., p. 34. Nudell and Antokol, op. cit., pp. 18 –21. Pearson and Clair, op. cit., p. 68. Pearson and Clair, op. cit., p. 66. Fink, op. cit., p. 67. Jackson and Dutton, op. cit., p. 370. Ashmos, Duchon, and Bodensteiner, op. cit., p. 35.
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Copyright © 2000 by Elsevier Science Inc. All rights of reproduction in any form reserved.
John M. Penrose
The Role of Perception in Crisis Planning
ABSTRACT: This article reveals that a company’s perceptions of crises have a profound effect on primary crisis management activities. Although briefly reviewing the technical aspects of crisis management, the research examines the effects that threat and opportunity constructs have on crisis planning. The article concludes with some recommendations concerning the communication of a crisis’s dual nature before, during, and after a crisis situation. John M. Penrose is professor of business communication and chair of the Information and Decision Systems Department in the College of Business Administration at San Diego State University.
Much of the traditional crisis management literature stresses the fundamental importance of implementing an enterprise-wide crisis plan. In most cases, successful crisis resolutions stem from an organization’s instilled crisis plan, whereas most instances of mishandled crisis situations result from a company’s lack of such a plan.1 Researchers tend to agree that organizations that practice proactive crisis management will lessen the damage of a crisis. Conversely, when organizations only respond to crises, the resulting damage seems to overshadow potential opportunities.2 Why is it then, that about 40% of Fortune 1000 industrial companies still do not have an operational crisis plan?3 Indeed, many of these companies believe that their company’s prestige and goodwill will carry them through any unforeseen misfortune. This may be true for huge companies, such as Exxon, that also have the financial resources to weather even the most disastrous crisis. But, smaller, lesser-known companies must heed the fact that 80% of companies without a comprehensive crisis plan vanish within 2 years of suffering a major disaster.4 Thus, it seems that a crisis plan is indeed an invaluable precaution that any company must take.
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THE ROLE OF PERCEPTION The perception of crises may ultimately affect crisis outcomes. Furthermore, the perception of a crisis as an opportunity or a threat may also have significant implications. Crises are not inherently good or bad; they are merely perceived by most as bad. Many examples reveal the severe penalties attached to the unpreparedness of an organization, such as the Union Carbide disaster or the Exxon Valdez oil spill.5 Crises can destroy a company’s reputation in a concentrated time frame. When reviewing the results of the Union Carbide disaster or the Exxon Valdez oil spill, one may view crises exclusively as threats. But would the perceptions of the organizations have been different if senior management had perceived these threats differently, prepared accordingly, and executed differently? Opportunities exist within any crisis situation. New leaders may emerge from a crisis, and in most cases, a crisis leads to accelerated change in business processes that may prove advantageous in the long run.6 Often companies that do survive disasters are more prepared for the next one. This thought does depend, however, on the extent of learning that the company in question absorbs from the event. Finally, companies that do handle a crisis effectively are generally perceived in a more positive way.7 Many companies simply fail to identify these potential positive outcomes. The perception of a crisis as an opportunity should lead to an increased ability to consider various alternatives and thus a greater extent of proactive planning. Managers generally view opportunistic situations to be more controllable, thus including more members into the resolution process and thereby increasing the flow of alternatives.8 On the other hand, the perceiving of a crisis as a threat will cause managers to limit the amount of information they consider. Thus, perception has the potential to influence the extent to which an organization is willing to engage in crisis management activities.
NEED FOR STUDY
Much of the crisis management research today focuses on the technical aspects of dealing with crises. The majority of this literature explains the importance of implementing a crisis plan and the strategies involved in that planning.9 Other research deals with the formation of crisis management teams and their relevance.10 Finally, many case studies detail preventive measures taken and lessons learned.11 Such valuable case studies are too few to provide researchers with an all-encompassing model of crisis management. The purpose of this article is to insert a new perspective into the crisis management literature. Rather than focusing on how perceptions affect the outcome of a crisis situation, what is needed is a measure of whether the perception of a crisis as an opportunity or as a threat affects an organization’s willingness to engage in crisis management activities that then affect the outcome of a crisis.
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AN OVERVIEW OF THE CRISIS COMPONENTS
A crisis occurs when an event increases in intensity, falls under close scrutiny of the news media or government, interferes with normal business operations, devalues a positive public image, and has an adverse effect on a business’s bottom line.12 According to Shrivastava et al., crises are caused by an interacting set of human, organizational, and technological failures that combine with regulatory, infrastructure, and preparedness shortcomings in the organizations’ environments.13 Pearson and Clair build on the crisis definition by noting that organizational crises are highly ambiguous events that necessitate a decision or judgment that will result in change for better or for worse.14 This implies that crises have dual meanings as well as dual outcomes. Reviews of crises and crisis plans typically include four common elements: the plan, the management team, communication, and post-crisis evaluation. These four components together form the basis of crisis management activities and should figure into any comprehensive crisis plan. Therefore, it is imperative to discuss each of these basic elements before introducing the possible effects of perception on crisis management. The Crisis Management Plan The ambiguous nature of crises makes planning for a crisis difficult. Further, the infinite number of possible crisis scenarios has prevented the adoption or implementation of a universally accepted planning strategy.15 Indeed, there are times when a plan may not be as relevant to a crisis as planners might have envisioned. The penalties, however, for complete unpreparedness can be catastrophic to any company, regardless of size or prestige. A certain amount of proactive planning is necessary to counter a potentially disastrous crisis situation. Proactive planning may include mechanisms for determining possible crises, identification of affected audiences, procedures to follow during a crisis, appointment and training of a crisis management team, development of a communication plan, and policies for evaluating and revising the plan.16 Such a comprehensive plan should include input from all levels and all functional areas of the organization. The Crisis Management Team Pearson and Clair argued that there are key aspects of planned responses that will influence the degree of crisis management success. Most important of these planned responses is a team response, as opposed to an individual response.17 Researchers agree that organizations with a team-oriented approach to crisis preparation will be better able to successfully manage a crisis than will those organizations that entrust a single individual such as a chief executive officer (CEO). Mitroff concluded that most crisis management teams are composed of six to 10 senior executives that may include the CEO, chief financial
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officer, top public relations or communications executive, legal counsel, and health/safety advisor.18 All members should be empowered and respected by peers so that the recognition and preassignment of responsibilities at policy, strategy, and execution levels will not be constrained by political or hierarchical relationships within the company. Finally, the team must be trained by way of drills and simulations to teach the team how to identify potential crises and brainstorm possible solutions. Crisis Communication Alliance and coordination with stakeholders as well as the dissemination of information are two more aspects of Pearson and Clair’s planned crisis responses.19 Effective communication during a crisis should be a company’s top priority. Thus, a communication strategy should strive to achieve the fastest delivery of the most accurate information available. This can be achieved by establishing a communication protocol, selecting and training a company spokesperson, identifying key audiences and key messages, and deciding on the most appropriate method of communication before a crisis occurs.20 Crisis preparations should also include identifying specific information that must be kept confidential, as well as the specification of media access to management, employees, facilities, and the actual crisis site.21 Evaluation and Revision of Management Plans The end of every crisis is the beginning of the preparation step for the next one. Debriefing the crisis team and evaluating the crisis plan immediately after a crisis can be the most important part of crisis management. When evaluating the handling of a crisis, a company should accomplish three goals. First, the organization should evaluate team performance to recognize and correct any errors. Second, the crisis team and other related personnel should be given the opportunity to express feelings to be able deal with the stress brought on by the crisis situation. Finally, the plan itself should be evaluated and revised, if necessary.22 Throughout this process, sufficient resources should be made available to keep a history of the crisis along with any revisions made.
THE VOID IN CRISIS MANAGEMENT STRATEGIES AND MODELS
In the last 15 years or so, crisis management has emerged as a substantive focus area and a number of strategic approaches and models have appeared. By looking at the major ones, we’ll see a void in the research and thus the need for the present study. These strategies and models are summarized below starting with the oldest.
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Littlejohn’s Six-Step Crisis Model Models can help simplify complex processes and thereby provide a better understanding of the problem domain. Littlejohn’s six-step crisis model is a framework that provides a guideline of basic crisis management development. According to Littlejohn, the first step for any organization is to design the crisis management organizational structure.23 This process would then be followed by the selection of a crisis team. Once the team has been chosen, team development should occur by means of training and simulations. The next step is to design and conduct a crisis situation audit. After conducting a thorough review of potential scenarios, a contingency plan should then be drafted. The final step of Littlejohn’s model is to actually manage the crisis.24 Fink’s Comprehensive Audit Fink suggested a comprehensive situation audit. Such a preparedness audit would propel an organization to determine what events could cause a crisis in each functional area.25 Once scenarios are developed, action plans should be prepared. The plan should include the crisis situation description and a statement of desired outcomes or a range of acceptable outcomes. Consequently, crisis team members should ask “what if” or “if then” questions to develop strategic or tactical options. Mitroff’s Portfolio Planning Approach Although no company can prepare for every fathomable crisis scenario, a company may be able to group crises according to their underlying structural similarities. Once clusters of crises are recognized, the organization should then prepare for the worst scenario in each cluster by considering the best preventive actions. Thus, preparation for one crisis scenario, in turn, provides exposure to several other similar or related scenarios.26 Crisis/Strategic Management Integration Crisis management is just now being recognized as strategically significant to organizations. Mitroff et al. argued that crisis management perspectives should, therefore, be integrated into the strategic management process.27 Whereas strategic management focuses on the offensive aspects of competing in the marketplace, crisis management deals more with the defensive capabilities of the company.28 Whereas strategic management promotes the welfare of an organization, crisis management works to protect it. Thus, according to Preble and Mitroff et al., both perspectives require the attention and involvement of top management and should, therefore, be integrated into the strategic management perspective. Burnett’s Crisis Classification Matrix Crisis situations can be classified into a 16-cell matrix based on threat-level, response-options, time pressure, and degree of control.29 The
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matrix can be viewed as a sort of crisis continuum. Thus, for example, a major crisis would be a situation where the time pressure is intense, the degree of control is low, the threat-level is high, and response-options are limited in number. Such a crisis would be classified as a Level 4 situation, whereas a Level 3 crisis would exhibit three of the characteristics inhibiting strategic management, and so on. There are several benefits of the classification matrix. For one, the preparation and analysis of the matrix by the crisis management team is an invaluable exercise in problem awareness. The matrix also improves decision making by revealing and prioritizing a list of all potential crisis situations that a company may need to confront at one time or another, allowing for the proper allocation of resources for each potential crisis.30
INTANGIBLE FACTORS OF CRISIS MANAGEMENT
Recent literature shows a trend from technical details of crisis management to the more intangible aspects. The current research consistently includes communication/corporate culture, public relations autonomy, and top management attitudes as significant factors in predicting the outcome of a crisis situation. This article will later extend these intangibles to include the perception of crises as opportunities/threats and their impact on crisis planning. As can be seen by the previously summarized strategies and models, such an examination has been absent from the literature. Crisis researchers have changed their perspective because of the analysis of several historical case studies. It was once believed that having a solid crisis plan in place was the single, most important variable as to whether the organization would be successful in dealing with a crisis situation. A simple example will bring to light researchers’ reasoning behind devaluing this once-accepted theory. Before the onset of the now infamous disasters, Union Carbide and NASA had extensive crisis management plans in place. In hindsight, however, the organizations’ mishandling of Bhopal and the Challenger situations have been primary examples of crisis management failure. Conversely, some companies that lacked a plan during a crisis are now deemed crisis management success stories (e.g., McDonald’s and Johnson & Johnson).31 These inconsistencies have led researchers to believe that there must be other factors to consider in determining the successful outcome of a crisis situation. In addition to the creation of crisis plans, crisis teams, and communication guidelines, other factors substantially affect the outcome of a crisis. Throughout the prevailing contemporary literature, attitudes place corporate culture as the main factor in affecting crisis outcomes. In the case of the Challenger explosion, NASA’s closed communication culture contributed to the failure of properly executing its comprehensive crisis plan.32 A crisis management plan is, therefore, of limited use if it does not coincide with an organization’s philosophies, values, attitudes, assumptions, and norms. Thus, a policy of open communication within
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a company may be a more reliable predictor of crisis management success than the mere formulation of a crisis plan.33 A high degree of autonomy is another important factor in predicting crisis outcomes. Corporate culture usually dictates the amount of autonomy given to crisis team members. A greater amount of autonomy allows teams to act quickly once a crisis occurs because messages are filtered through fewer levels of the organizational hierarchy. The quicker an organization can initiate with the media, the more likely a successful outcome will occur because the team has more of a chance to control the message, thereby lessening the chance of misinformation.34 Thus, a major communication strategy is to limit the number of filters a message must pass through in the organizational hierarchy. Including more employees in the decision activities during a crisis also enables the organization to draw from more available responses from varying points of view.35 During a crisis, a company tends to use fewer sources of information and thus limits its management abilities.36 A conscious effort must be made to include more autonomous sources in the crisis action plan. The base of the crisis management pyramid is senior management’s willingness to initiate proactive planning.37 Senior executives’ attitudes and beliefs impress greatly on the corporate culture.38 The corporate culture in turn affects autonomy, which then affects crisis management activities. If top management ignores or denies its vulnerability, it will naturally allocate fewer resources to crisis management. Finally, Pearson and Clair asserted that executive perceptions are the fundamental and initiating variable in determining potential outcomes from a crisis.39 Having discovered the key role that senior executives’ perceptions play, our research takes these theories a step further. As asked earlier, does perception of a crisis as an opportunity or a threat affect an organization’s willingness to engage in crisis management activities?
THE STUDY
This section details the study’s design, the demographics of the respondents, and the results. Research Design Primary research was conducted to discover the opinions of respondents concerning crises as threats or opportunities. An analysis of crisis management literature as well as a series of personal interviews with crisis management practitioners resulted in an initial questionnaire. Two pilot tests of the questionnaire led to 34 randomly ordered statements in the agree-disagree rating system (Likert scale). Appendix A lists the 34 statements. The statements covered five stages of crisis management constructs and activities: mitigation, planning, response, recovery, and renewal. Mitigation contained all internal and external activities that had preplanning implications. PlanSummer 2000 161
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ning encompassed internal procedures dealing with contingency planning, communication guidelines, and crisis plan content and scope. Response included activities that deal with timely assessment of a crisis as it occurs. Recovery was composed of post-crisis activities dealing with evaluation and documentation. Renewal was the post-crisis period when an organization experiences a change of perspective about crises and crisis management. Distribution and Demographic Results Because a mail questionnaire is able to reach a wider geographical base than would be possible with personal interviews, mail was chosen as the research medium. The surveys were sent to Fortune 500 industrial companies because these companies are large enough to support comprehensive crisis management plans and have common functional areas. Of the 500 questionnaires mailed, 115 completed questionnaires were returned (23%). Included in the survey were demographic questions related to the existence of a crisis plan (see Appendix A). Seventy-eight percent of the respondents reported having a crisis management plan in place, and of these respondents, 63% had crisis plans in place for 5 years or less. These findings suggest that crisis management planning has only recently become an organizational concern. Comparing this data to that of similar surveys conducted in the mid-1980s, it is worth noting that the number of companies with a crisis plan is increasing. For example, a Fortune 500 survey by Fink in 1986 showed that only 50% of the companies that responded had a crisis plan in place.40 Measures Three statistical procedures were applied to 34 Likert-style statements: factor analysis, factor scores, and correlations. The factor analysis procedure reduces the data and provides the basis for generating factor scores for each respondent. The factor scores are used to transform each factor into a factor variable that is then correlated with three criterion variables: the existence of a crisis plan, top management typically perceiving a crisis as a threat to the organization, and a crisis perceived as an opportunity for an organization to assess itself. A factor analysis was applied to the data to determine underlying relationships among 34 survey responses. A varimax rotation scheme was used to maximally differentiate among the factors. An examination of the rotated factor matrix shows more clearly which variables go together and thus facilitates interpretation and labeling of factors. From this analysis, five factors account for 56% of the cumulated variance and include 26 of the 34 variables. The next step was to label each of the factors by using my judgment and interpretation to identify underlying constructs. The five factors, labeled subjectively, appear in Table 1. To draw relationships between each respondent and a criterion variable,
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TABLE 1
Five Interpreted Factors
Factor Variables Planning Number of statements 11 Description Determines the extent of agreement with statements about planning activities and the existence of a crisis management plan. Measures the extent of agreement regarding being proactive and assessing vulnerability to a crisis as well as evaluating the effectiveness of the crisis plan. Measures the extent of agreement with statements about the willingness to integrate crisis management activities into the organization. Evaluates a respondent’s opinion regarding the involvement of crisis management in strategic planning. Measures the extent of agreement with statements regarding the importance of communicating with the media and external publics.
Pre/Post crisis
6
Commitment
5
Strategic orientation
2
External communication
2
factor scores or variables were then determined. Each respondent was evaluated to high or low scores for each factor. Thus, a respondent with a high Factor 1 score (Planning), had a high propensity to engage in crisis planning activities. A respondent with a low Factor 2 score (Pre-/Post-Crisis activities), however, exhibited a low inclination toward engaging in pre- and post-crisis actions. The correlation procedure reveals the existence of a relationship between variables by indicating that two or more variables vary together either positively or negatively. To provide the best measure of the effects of perception of a crisis on an organization’s willingness to engage in crisis management activities, three relative criterion variables were established to correlate with each factor variable mentioned above. The three criterion variables included the existence of a crisis management plan, top management typically perceiving a crisis as a threat to the organization, and a crisis being an opportunity for an organization to assess itself (see Table 2). The resulting correlation coefficients measure the degree to which the factor variables and criterion variables vary together and the direction of this relationship, either positive or negative.
ANALYSIS
After intercorrelating the factor variables with the criterion variables, insightful conclusions regarding the link between perceptions and crisis
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TABLE 2
Criterion Variables
Variable 1 Variable 2 Variable 3 The existence of a crisis management plan Top management perceives a crisis as a threat Top management perceives a crisis as an opportunity
management activities can be drawn (see Table 3). Indeed, there are obvious links that this study verifies. For example, the fact that the planning factor correlates positively with a company possessing a crisis plan is not surprising. However, there were some unexpected results that show perceptions to be a significant factor to consider when implementing crisis management activities. Planning Factor Variable 1 dealt with the planning aspects of crisis management, including the formation of a comprehensive crisis plan. Not surprisingly, a high degree of correlation (r 0.4369) existed between planning and the existence of a crisis management plan (Criterion Variable 1). This makes sense because respondents with a high propensity for planning are more likely to have a crisis management plan in place. There was also a sizable correlation (r 0.2438) between planning and the perception of a crisis as a threat to the organization. Because respondents perceived crises as threats to the organization, they engaged in crisis planning activities in an attempt to lessen the damage caused by a crisis. Consequently, the perception of a crisis as a threat increased an organization’s planning activities. Finally, there was a low correlation (r 0.0241) between the planning factor variable and the perception of a crisis as an opportunity to the organization. No worthwhile conclusions were drawn from this last correlation. Pre-/Post-Crisis Activities Factor Variable 2 dealt primarily with the degree of proactive planning before a crisis as well as the ability to assess the situation after a crisis.
TABLE 3
Results
Criterion Variables Factor Variables Planning Pre/Post crisis Commitment Strategic orientation External communication Plan 0.4369 0.0143 0.2013 0.0409 0.0088 Threat 0.2438 0.2974 0.0683 0.0278 0.3274 Opportunity 0.0241 0.3622 0.0161 0.0278 0.3230
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Both sets of actions have serious implications for a business’s ability to manage a crisis, as well as to effectively recover from such an event. A high variable score in this category was translated into a high intention to engage in pre- and post-crisis activities. The findings reveal no significant relationship between these activities and the existence of a crisis plan. However, both the opportunity and threat variables achieved significant correlation with this factor. A correlation of r 0.2974 existed between pre- and post-crisis activities and the perception of a crisis as a threat. An even stronger relationship (r 0.3622) existed between respondents with high Factor Variable 2 scores and the likelihood of perceiving a crisis as an opportunity. Thus, the findings here support the perception of a crisis as both a threat and an opportunity. Commitment Commitment items gauge a respondent’s degree of agreement with statements that assess management issues, such as training and responsibility for crisis management, and whether crisis management requires a long-term commitment. Those who strongly agree that crisis management requires a longterm commitment were more likely to have a crisis plan in place. The correlation between commitment and the existence of a plan (r 0.2013) is not surprising. Clearly, an organization dedicated to crisis management would implement a crisis plan. Perception does not appear to affect an organization’s commitment to crisis management, as revealed by low correlation scores (Threat: r 0.0683, Opportunity: r 0.0161). This may be attributed to a perception becoming a central issue as a crisis develops, and the decision to make an organization-wide commitment to crisis management typically precedes a period of a crisis or occurs after an organization experiences a crisis. Strategic Orientation Two of the statements in the survey loaded on Factor 4. These statements concerned respondents’ degree of agreement with the necessity to include crisis reserve funds in the budget and the importance of incorporating crisis planning into overall strategic planning. An organization’s strategic orientation, or the degree to which it is willing to incorporate crisis management into long-range planning, may have implications for that company’s ultimate success or failure in managing a crisis. With that said, however, no significant correlations between strategic orientation and the three criterion variables (Plan: r 0.0409, Threat: r 0.0278, Opportunity: r 0.0278) were found. Thus, no conclusions can be drawn about respondents with a high strategic orientation. It may be assumed by the lack of relationships that an organization’s willingness to engage in strategic planning and crisis budgeting is not affected by perception. External Communication Respondents with a high factor score on the external communication factor variable strongly agreed that developing a solid working relaSummer 2000 165
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tionship with the media before a crisis and sharing information with external publics are critical crisis management activities. There was no significant correlation between external communication and the existence of a plan; however, the correlations between external communication and the other two variables (Threat: r 0.3274, Opportunity: r 0.3230) suggest the importance of incorporating both opinions in creating a complex communication strategy. Moreover, the perception of a crisis as both a threat and an opportunity will increase a business’s propensity to communicate with external audiences.
CONCLUSIONS
A company’s perception of a crisis as a threat or an opportunity does appear to influence a company’s willingness to engage in primary crisis management activities. Results of this study reveal that organizations are especially affected by perception in the areas of planning, pre- and post-crisis activities, and external communication. Perceptions, however, did not seem to influence a company’s level of commitment and strategic orientation. One of the primary inputs of comprehensive crisis management is the planning factor. Planning is at the root of all crisis management activities. Some logical deductions can be made concerning the correlation results of the planning factor. The results showed a high correlation between the existence of a crisis plan and planning. Furthermore, the perception of a crisis as a threat increased an organization’s willingness to engage in planning activities. An organization that is able to identify a set of possible crises is more likely to initiate planning activities in preparation for the worst. The magnitude of such preparations seems to be a direct link between an organization’s vulnerability to certain crisis situations and its level of perception toward each potential contingency. The more threatening a potential crisis is to a company’s core competencies, the more it should partake in primary crisis planning activities. Thus, when evaluating, in early planning stages, the multiple components of a crisis, a company should assess the threatening aspects of a situation before considering crisis opportunity components. It is important to recognize and plan for contingencies that may directly threaten the company as a whole before anything else. Nevertheless, such a perspective should not be without the acknowledgment of possible opportunity outcomes. Such a dual perspective will diminish the inclination to panic, while focusing on threats that are most menacing to the company. In the past, pre- and post-crisis actions have not been consolidated as one, integrated unit. However, the results of this study suggest that these activities do cluster together and should be considered in aggregate rather than as separate sets of activities. Proactive crisis management naturally affects the recovery measures a company must use and is a vital strategy in mitigating the negative effects of crises. Proactive planning is also critical in capitalizing on opportunities provided by a crisis before one occurs. However, the relationship between pre- and post-crisis activities places equal importance on recovery as on proactive action. An organi166 Vol. 26, No. 2
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zation that does not evaluate its crisis management strategy after a crisis will be little better prepared to manage the next crisis. Thus, it is not surprising that preand post-crisis activities correlate significantly with both perception criteria. Again, the company that recognizes the dual nature of a crisis will have a greater propensity for proactive planning and recovery, which leads to more effective crisis management. The results of this study reveal that there is a link between external communication and the perception of a crisis as a threat and an opportunity. Although realizing the threat of a crisis, an organization will carefully select the message content and address each specific public affected. An organization will also benefit if it perceives the positive outcomes of a crisis, which stem from effective crisis communication. Good external communication in a crisis can result in favorable public perception, leading to an improved corporate image. But this, of course, depends on the nature of the crisis. In some cases, effective external communication will merely maintain a company’s image. In any case, a company will not benefit by perceiving a crisis entirely as a threat to the exclusion of even considering potential opportunities. Organizations that feel threatened tend to limit the amount of information they process and communicate.41 This typically leads to negative public perception and the belief that the company is untrustworthy. Recognizing that crises can provide opportunities is crucial to balancing an organization’s external communication practices. Furthermore, by communicating a balanced perception of a crisis, the organization is more likely to sway public opinion and dispel false rumors about the severity and ultimate consequences of the crisis.
RECOMMENDATIONS AND APPLICATIONS
This study reveals the key role that perceptions play in determining the magnitude of primary crisis management activities. First, an organization must perceive contingencies that threaten the company most. Once those threats have been identified, the organization should take steps to define these situations according to possible positive and negative outcomes. Managers must realize the profound effect that framed perceptions have on a crisis situation. As a situation is viewed in more negative terms, a natural tendency is to panic and reduce the number of information channels the company will consider. Perception can be used to redefine the crisis in more positive terms. Communicating the effects of a crisis in a more positive manner works to align internal thinking about the event and encourage employees to support the company’s evaluation of the situation. As noted by Ashmos’ research, company-wide participation is deterred when issues are labeled negatively as a crisis situation.42 On the contrary, a situation framed as opportunistic will enhance internal participation, thus increasing the number of options the company is able to consider. Additionally, maintaining a balanced perspective will suggest that the crisis is more controllable than was first thought. When only considering threat compoSummer 2000 167
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nents, the crisis manager may perceive a distorted view of the situation as the level of stress restricts the amount of information he or she processes. By considering opportunity components as well as threat components, stress is effectively reduced, thus increasing the crisis manager’s likelihood of considering and evaluating more information. This will allow the crisis manager to achieve a more accurate view of the situation. Managing crises is an exercise in managing meaning. The crisis practitioner must realize the importance of a balanced perception throughout the crisis lifecycle. Such a balanced perception, if communicated effectively to employees, will lessen fear and lead to a quicker and more effective response. The balancing of perception, however, requires a strong, conscious effort on the part of the organization. It is more natural for a company to recognize and emphasize a threat as opposed to an opportunity during a crisis. Perceiving the crisis in only a negative way, however, may serve to exacerbate a situation that was not disastrous to begin with. Conversely, an organization that communicates only the opportunities gained from the crisis may be perceived as side stepping the consequences of the event. Thus, striking that delicate balance is crucial in dealing effectively with a crisis. Both the threat and opportunity components of a crisis are major, highpriority issues that are difficult to resolve and involve the integration of many areas and individuals with diverse skills and knowledge. In this way, the multiple dimensions of a crisis are treated from multiple disciplinary and functional perspectives. However, to optimize crisis management effectiveness, a cross-functional approach must be combined with a multiple perception of the crisis itself. Such a dual perception seems equally as important as the implementation of a crisis plan or the development of a crisis management team. Perception is just one of the intangible elements that affects crisis management. Thus, to propel crisis management into a new stage, studies that assess and evaluate the more abstract facets of the field must be undertaken to complement the existing research that still focuses on the more fundamental crisis management activities.
Acknowledgment: I extend my appreciation to Ernie T. Climenson and Julie A. Miller for their assistance in the research and preparation of this manuscript.
APPENDIX A
Survey—34 Statements 1. 2. 3. 4. 5. 6.
168
Employees have authority to make decisions in a crisis CEO visible at crisis site CEO as company spokesperson in a crisis Multifunctional crisis management team Established communication protocol Audiences identified prior to crisis
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7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.
Crisis scenario planning sessions Preventive action planning sessions Timely assessment of crisis Identification of key messages Corporate crisis plan Divisional crisis plan Crisis response training Top management commitment to crisis management Funds budgeted for a crisis Existence of crisis control center Formation of crisis portfolio Mechanisms in place to detect early warning signals Crisis management included in corporate strategic planning Annual disaster drills Continuous monitoring and revision of crisis plan Long-term commitment to crisis management Build relationship with media prior to crisis Evaluate organization’s vulnerability to crisis Internal/external situation audit Identify external resources in event of a crisis Proactive approach to crisis management Document organization’s response to crisis Contingency plans in place to ensure daily operations Evaluate effectiveness of crisis plan Debrief crisis team after crisis Document crisis as initially reported Crises as opportunities for change/growth Executive level manager responsible for crisis management Demographic Questions Included in the Survey
35. 36. 37.
Does the company have a crisis management plan? How long has this plan been in place? What is the respondent’s job title?
NOTES
1. Francis J. Marra, “Crisis Communication Plans: Poor Predictors of Excellent Crisis Public Relations,” Public Relations Review 24 (1998), pp. 461– 474. 2. Mayer Nudell and Norman Antokol, The Handbook for Effective Emergency and Crisis Management (Toronto: Lexington Books, 1988), p. 2. 3. Michael J. Tiller, “Is Your Disaster Plan Effective?” Management Review 83 (1994), p. 57.
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4. 5. 6. 7. 8.
9. 10. 11. 12. 13. 14. 15. 16.
17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.
28. 29. 30. 31. 32.
170
Malcolm Brown, “The Disaster Business,” Management Today (October 1993), pp. 42– 44. Paul Shrivastava, Ian I. Mitroff, Danny Miller, and Anil Miglani, “Understanding Industrial Crises,” Journal of Management Studies 25 (1998), pp. 285–297. John J. Burnett, “A Strategic Approach to Managing Crises,” Public Relations Review 24 (1998), pp. 475– 488. Otto Lerbinger, Managing Corporate Crises: Strategies for Executives (Boston: Barrington Press, 1986), pp. 88 –90. Susan E. Jackson and Jane E. Dutton, “Discerning Threats and Opportunities,” Administrative Science Quarterly 33 (1988.), pp. 370 –387; Donde P. Ashmos, Dennis Duchon, and Wayne D. Bodensteiner, “Linking Issue Labels and Managerial Actions: A Study of Participation in Crisis vs. Opportunity Issues,” Journal of Applied Business Research 13 (1997), pp. 31– 45. Marra, op. cit., pp. 462– 463. Christine M. Pearson and Judith A. Clair, “Reframing Crisis Management,” The Academy of Management Review 23 (1998), pp. 59 –76. Burnett, op. cit., p. 477. Steven Fink, Crisis Management: Planning for the Inevitable (New York: American Management Association, 1986), pp. 15–16. Shrivastava, Mitroff, Miller, and Miglani, op. cit., p. 290. Pearson and Clair, op. cit., p. 60. Burnett, op. cit., p. 478. John M. Penrose, Robert W. Rasberry, and Robert J. Myers, Advanced Business Communication, 3rd ed. (Cincinnati, OH: South-Western College Publishing, 1997), pp. 277–287. Pearson and Clair, op. cit., p. 71. Ian I. Mitroff, Christine M. Pearson, Judith A. Clair, and Sarah Kovoor Misra, “Managing the Unthinkable,” Organizational Dynamics 26 (1997), pp. 51– 64. Pearson and Clair, op. cit., p. 71. Jonathan Bernstein, “The 10 Steps of Crisis Management,” Security Management 34 (1990), pp. 75–76. Carole Gorney, “Crisis Management: How to Plan Ahead for Potential Crises,” American School & University 62 (1990), pp. 20a–22a. Nudell and Antokol, op. cit., p. 131. Robert F. Littlejohn, Crisis Management: A Team Approach (New York: AMA Management Briefing, 1983), p. 13. Ibid, pp. 14 –17. Fink, op. cit., pp. 36 – 46. Ian I. Mitroff, “Crisis Management: Cutting Through the Confusion,” Sloan Management Review 29 (1988), pp. 15–20. Ian Mitroff, Christine Pearson, and Thierry C. Pauchant, “Crisis Management and Strategic Management: Similarities. Differences, and Challenges,” Advances in Strategic Management 8 (1992), pp. 235–260. John F. Preble, “Integrating the Crisis Management Perspective into the Strategic Management Process,” Journal of Management Studies 34 (1997), pp. 769 –791. Burnett, op. cit., p. 482. Burnett, op. cit., p. 482. Marra, op. cit., p. 463. Marra, op. cit., p. 468.
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The Role of Perception in Crisis Planning
33. 34. 35. 36.
37. 38. 39. 40. 41. 42.
Marra, op. cit., p. 466. Fink, op. cit., p. 109. Ashmos, Duchon, and Bodensteiner, op. cit., pp. 33–34. Ian Mitroff, Paul Shrivastava, and Firdaus Udwadia, “Effective Crisis Management,” Academy of Management Executive 1 (1987), pp. 283–292; Ashmos, Duchon, and Bodensteiner, op. cit., p. 34. Nudell and Antokol, op. cit., pp. 18 –21. Pearson and Clair, op. cit., p. 68. Pearson and Clair, op. cit., p. 66. Fink, op. cit., p. 67. Jackson and Dutton, op. cit., p. 370. Ashmos, Duchon, and Bodensteiner, op. cit., p. 35.
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