Manage A Crisis: Types of Crisis Management
No matter how immaculately you plan everything and feel confident of things going your way, there is one thing that…
September 9, 2020 | 5 mins read
No matter how immaculately you plan everything and feel confident of things going your way, there is one thing that you can’t be prepared enough for: crisis. You never know when a problem will come knocking. It can either creep up on you or fall on you like a ton of bricks—in most cases, it has a tendency to emerge when you are at your most vulnerable.
We don’t go out looking for a problem. But when it does arrive, we can do our best to change course or control the damage.
So while it is not possible to eliminate them completely, we should pay attention to ways in which we can manage crisis situations.
In the world of businesses and companies, a crisis can often transform into an existential challenge. There are different reasons for and types of crisis situations. Sometimes, a crisis is brought about by the company’s internal ecosystem. Let’s understand this with some crisis management examples.
Rajat was the CEO of a high-profile software solutions company with a number of marquee clients. One day, an employee disappeared with confidential data belonging to a multi-billion dollar enterprise. He had to deal with the crisis and find the culprit before the issue snowballed and impacted the client’s business or reputation. Crisis management in the business environment starts with the process of assessment.
You need to assess whether the situation can create a threat to the company’s very existence. Another common characteristic of crisis situations is their unpredictability. Last but not least, crisis situations typically require the business to make corrective decisions within a certain timeframe.
By understanding the cause, type, and urgency of the crisis, we can create systems for better crisis handling.
Let’s now take a look at five types of crisis management for professionals:
A business faces a financial crisis when, due to any reason, its financial condition becomes unstable. There may be a situation when it is running out of funds to sustain its operations.
Ajay owned a factory producing electrical goods. He used to import raw materials from overseas and sell the finished goods in the domestic market. However, his suppliers suddenly increased raw material prices which, in turn, caused him to increase the price of goods manufactured in his factory. Consequently, his sales dropped and he went into debt.
The financial crisis can be overcome by arranging short-term funds to sustain business operations for up to a year. This can be done by selling some assets or mortgaging them with a financial institution. Subsequently, the entrepreneur needs to look for alternatives that can sustain the business in the longer run.
There can be situations where an employee or person involved with the company might indulge in illegal or unethical activities. Even if the employee commits such acts in a personal capacity, their association with the business is bound to impact the company’s reputation.
To manage crisis situations, you need to assess the circumstances, analyze possible fallouts and then determine steps that will need to be taken to control the damage. At times, an official statement is also needed to dissociate the business from individual actions.
An organizational crisis can occur when it is revealed that the company has acted unfairly against its customers with an intention to misguide or deceive them. This is one of the most difficult types of crisis management as customers lose their faith in the brand.
Activities such as hiding information, furnishing wrong information, or exploiting customers by selling them goods and services they don’t need can create an uproar among the customer or user base.
Changing a company’s internal environment, work culture or leadership are some of the ways to manage an organizational crisis.
The world is having to rapidly adapt to doing business online. Particularly in the wake of the coronavirus pandemic, most companies are relying heavily on technology to carry out their day-to-day operations. But sometimes technological errors or failures can cause significant disruptions to business operations. Such a situation is called a technology crisis.
Recently Google Drive and GMail faced several outages and even WhatsApp had similar problems. When it comes to these widely-used platforms and software, even a short duration of downtime can cause global chaos. Round-the-clock IT monitoring and deployment of quick response teams are necessary to resolve such disruptions After resuming services, a deeper analysis is necessary to find out what went wrong and take preventive steps to avoid its recurrence.
Events such as hurricanes, earthquakes, floods, or a pandemic are some of the natural crises that governments and policy-makers across the world have been struggling to manage.
The COVID-19 pandemic has been foremost on everyone’s minds for a while now. The steps that companies are taking to adapt to the “new normal” is a classic example of natural crisis handling.
To manage crisis situations created by nature, you need to understand the risks posed by natural causes and how they can impact us. Building strong structures that can withstand tremors or cyclonic winds etc. is recommended. You must also prepare backup plans to manage crisis situations that result in the unavailability of your regular office space and systems.
A crisis can strike without warning. Until the start of this year, there was a fair bit of optimism about economic opportunities and growth. However, the pandemic spread across the world like wildfire, and in a matter of weeks, millions of people were in lockdown.
Such unprecedented situations drive home the point that you have to be good at crisis handling. Harappa Education’s Managing Teamwork course has a section on four styles of traits, interaction, and decision-making at workplaces. By understanding these four styles, the course aims to familiarize you with various types of crisis management. It will also make you more resilient and confident of being able to manage a crisis.
Explore topics such as Managing Conflict, Types of Conflict, Thomas Kilmann Model, Functional and Dysfunctional Conflict & Characteristics of an Effective Team in our Harappa Diaries section in order to build trust-rich relationships at work.