The term "crisis management" can be used in business to describe the style of management that is used in dealing with unknown or precipitous events that have the potential of impacting in a major way on the success of a business. It can be used in a positive way to describe the style of management that is needed to deal with either chronic or critical crises; it can also be used to describe a style of management to deal with every event, even everyday events, as crises.
A chronic crisis is one that is ongoing but one that the company believes is survivable. An example of a chronic crisis would be one that occurs because of a slowdown in the economy, or because of a shortage of a needed resource, or because of a hike in interest rates. Chronic crises require strong management. There are usually three general principles that must be observed during a chronic crisis, and these principles differ from what takes place during a normal business cycle in most part only by degree. During a chronic crisis, management must, of course, be concerned with cost, with finding ways to cut costs effectively and quickly to a degree that is not necessary during a normal business cycle. Management must also be concerned about production, with finding ways to enhance its current products rather than developing new ones and to make customers more receptive to the existing products. [A] In addition to reliance on the principles of cost reduction and production enhancement, management must also pay attention to the morale of current employees of the company during a chronic crisis. [B] A pervasive feeling among employees that a company is in trouble can have a negative effect on the performance of the company and can cause key employees to desert what they believe is a sinking ship. [C] Thus, during a chronic crisis, it is important for management to focus on costs and production to an even stronger degree than is needed during normal times and also to be aware of the need to take steps to maintain a high level of morale while the company is dealing with the chronic crisis. [D]
A critical crisis is one that takes a company by surprise, a crisis that might, for example, result from a natural disaster such as an earthquake or a tornado, or from an unexpected outbreak of war or widespread disease, or from a major accident such as an airline disaster or a sinking ship. Even though a critical crisis is one that would not have been predicted by a company, a company must nonetheless be prepared for it. When critical crises occur, the companies that generally survive them are those that have mechanisms in place prior to a particular crisis to deal with the crisis immediately, definitively, and compassionately. Companies that are unprepared when an unexpected catastrophe occurs generally have difficulty responding to the crisis appropriately, perhaps by failing to react immediately, by having inadequate resources set aside to deal with the crisis, or by lacking clearly established procedures to resolve the crisis. In situations where a company is unprepared to deal with a severe crisis, it can suffer the dual blow of not being able to resolve the crisis and at the same time giving the perception that it lacks concern for those who are suffering because of the crisis.
The term "crisis management" is sometimes used in a different way, not as the type of management that is needed to respond to a chronic or critical crisis, but as a style of management that deals with everyday occurrences as crises. This style of management is a reactive style in which there is a lack of planning and preparation for everyday situations, and these everyday situations regularly fester to the point of crisis. This style of management leads to regular and ongoing crises even during periods of economic strength.
