Crisis Management- a Strategic Leadership Approach

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Crisis management - a strategic leadership approach

Introduction

The past decade has been wrought with crises on both a domestic and international scale. It has been marked by a glut of organizational crises including natural disasters, technology disruption, and acts of terrorism, scandals, and financial mismanagement. Yet, many leaders are ill-prepared for the important role they may need to play in leading an organization through a crisis. At the beginning of the decade people all over the world scrambled to tackle the potential technological disruption of the Y2K bug which was one of the utmost crises. Then in 2001 the US was thrown off balance by the terrorist attack on September 11, which led to a world wide upshot. A few years later the Hurricane Katrina disaster that hit the gulf coast region which led to an ineradicable images of a community and the government struggling to respond and also the Tsunami in 2004. The close of the decade was through the collapse of financial markets 2008 and the H1N1 virulent disease in 2009. A glimpse of the events of the last decade suggests that crises are inevitable. In most instances the leadership team is not prepared to manage a crisis, and the mishandling of an organizational crisis can have negative, long-term consequences for an organization’s profitability, reputation, market position, and human resource management systems. It is very much necessary for the leaders and the organizations to manifest positivity in crisis. Although executives are aware of the negative consequences associated with organizational crises, their formal training and on-the-job learning experiences do not prepare them for leading a crisis situation. When leadership training addresses crisis situations, the focus is on communications to stakeholders and public relations. However, leading a crisis situation is more than communication and public relations since public speaking and positive spin alone will not solve the majority of crises that leaders deal with. So there is a need for management to develop the competencies to lead in a crisis situation. Anticipating crisis is a matter of strategic planning and risk management, but each crisis that manifests itself, must be dealt with adeptly by leaders, who also must consolidate the lessons learnt and communicate the same to the people as organizational learning and thus drive sense for initiating change in the organization. A leader must institutionalize the process of crisis management to anticipate, prepare and mitigate an impending crisis. To ensure an effective crisis management mechanism leadership support and involvement is absolutely essential. Defining Crisis:

Dutton described a business crisis as a type of strategic issue that, in the absence of corrective action, can lead to a negative outcome. Pearson and Clair defined a crisis as a low-probability, high-impact event that threatens the security and well being of the public, and is characterized by ambiguity of cause, effect, and means of resolution, and consequently requires decisions to be taken swiftly. Thus a business crisis can be defined as a rare and significant situation that has the potential to become public and bring about highly undesirable outcomes for the firm and its stakeholders, therefore requiring immediate corrective action by firm leaders. Crises are clearly complicated events. Although many crises seem to happen instantaneously, in truth they generally unfold over a period of time. There are primarily two types of crises situations- Sudden crisis and smoldering crises. Sudden crises are significant and unexpected events that disrupt the daily operations of business for some period of time. Natural disasters and other potentially calamitous events represent typical examples of sudden crises in that they occur suddenly and with limited warning. Smoldering crises are business problems that start out as small, internal problems within a firm, which when they become...
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