Monday, February 22, 2010

Crisis Management In Small Businesses

Crisis Management is how a company deals with a major unpredictable event that threatens to harm its reputation, public image or business operations. When Crisis Management procedures are being implemented the unfavorable event has already occurred, which underscores the importance of creating a risk management plan to assess potential crisis and the best ways to avoid them.
  • Before planning for a crisis, management should be clear about what constitutes a crisis. A crisis must be a threat to the business, it must possess the element of surprise, the time needed to decide on what to do will be short, and it must necessitate changes to prevent the same crisis occurring again.
  • The types of crisis likely to be dealt with in a small business include, the ‘acts of God’, also known as Natural Crisis. They include earthquakes, flood, hurricanes, etc. A Technological Crisis is caused by human application of science and technology. For instance, when a company’s computers crashes or its machines break down.
  • A Confrontation Crisis will occur in a small business when discontented individuals or groups seek to pressure the company to accept their demands by using boycotts or picketing. Crisis of Malevolence is another unfavorable event a small business may encounter when individuals or groups use criminal or other extreme tactics to express hostility or anger toward a company by tampering, malicious rumors or espionage.
  • Crisis of Deception occurs when management conceals or misrepresents information about itself, or its products when dealing with customers or other stakeholders in the company. A small business may also have to deal with workplace violence when an employee or former employee commits violence against other employees over business related disputes.
  • The aforementioned crisis’ are few examples of the types of crisis management may have to deal with, however, depending on the size and nature of the business others may be added. But, regardless of the type of crisis, all crisis’ go through four phases. According to the crisis management model created by Gonzelez-Herrero and Pratt in 1995 the phases are: issue management, planning and prevention, the crisis, and post-crisis.
  • When creating a crisis management plan, under which falls risk management, the issues involved in each crisis should be identified, and strategies designed specifically for those alone, since crisis’ are different and will require different crisis management strategies to prevent or manage each.
  • Planning and Prevention involve preparing contingency plans in advance to best respond to each crisis. The crisis management team needs to periodically rehearse the crisis plan by developing simulated scenario to use as a drill to ensure that team members are adequately informed about the possibility of crisis and how best to prevent or manage them.
  • Despite the efforts to prevent a crisis from occurring, if it does occur, the crisis management team will provide the skills and techniques required to identify, assess, understand and contain the crisis, from the moment it occurs to when recovery procedures start. Crucial to this phase is for the company to designate an employee as spokesperson, and every effort made to truthfully inform customers and other stakeholders about the issues involved in the crisis and what is been done to correct them. Putting out untrue statements will harm the company, because the truth will eventually come out.
  • The debate is still unsettled on whether a company should apologize for the effects of a crisis on its customers, employees and shareholders, for fear it may open the floodgate of legal actions against the company. Still the value of an apology cannot be overstated. When a company apologizes for a crisis, it is telling its customers that it identifies with their pain and suffering, and is ready to make good what has been damaged, and where necessary to pay compensation for harm suffered.
All the planning and rehearsal of the crisis management plan will achieve very little if the company does not have adequate internal and external resources to call up when a crisis occurs. Also crucial is the free flow of timely information to responsible individuals within the company, to enable them inform the public truthfully about the crisis, what is being done to solve it, and steps taken to continue providing quality services to customers.

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