3 Stages of an Organisational Crisis

In our recent blog Risk Management, Business Continuity and Disaster Recovery, we looked at the relationship between the disciplines and highlighted both the similarities and the differences.

Another related concept that we now need to look into, however, is that of Crisis Management (CM).

In this blog we will look at how CM relates to Business Continuity Management (BCM), what actually defines a crisis, and the three stages that are experienced from an incident of this kind – crisis of management, operational, and crisis of legitimation.

Crisis management looks at how to best prepare an organisation to react in the case of a sudden or unexpected event which has the potential to negatively affect the business.

The key word here is REACT.

This helps us to explain the differences between Crisis Management (CM) and Risk Management (RM) - which is also focused on preparing a company to deal with an incident, however is more proactive in its approach.

RM aims to identify and analyse any risks which may occur in a business and putting steps in place to minimise the likelihood of those risks taking place.

So, what exactly can determine whether an incident should be treated as a crisis?

The main criteria is that the event is entirely unexpected, there is little time to act or respond to the danger identified, and only limited or unreliable information is available.

With an organisational crisis, this means that the company affected is under great pressure – their challenge will be to prevent damages occurring from the crisis to the best of their ability, and in the case that damages are experiences, being able to respond to these consequences and recover in the best way possible.

There are three main reasons that crises in nature are particularly unpredictable:

• Cognitive limits – our brains experience certain barriers, such as limited memory capacity and concentration levels, meaning that we are subconsciously selective in the way that we perceive and absorb information and preventing us from being able to consider each and every possibility.
• Those incidents which are predicted and prepared for can be mitigated before reaching crisis point.
• Our natural instinct moves toward denial, which therefore creates an inability to recognise a danger before it becomes a crisis.

Three key stages have been identified within organisational crises:

1. 1. A crisis of management
2. 2. An operational stage
3. 3. The crisis of legitimation

Stage 1: A crisis of management

During the crisis of management stage, conditions are developed. This is usually down to the inabilities of an organisation to respond to any problems or issues which in turn determine whether a snowball effect will occur, turning the situation into a crisis which could have been avoided.

This could occur if, for example, some staff members break protocol and stray from the correct operating processes and procedures. This is sometimes known as the РІР‚пїЅincubationРІР‚в„ў phase.

Stage 2: Operational

The operational stage is characterised by the actual crisis event itself, and then covers the stage in which the crisis has been acknowledged by the firm and they are attempting to respond and diffuse the situation.

The snowball is well and truly rolling by this point, causing an increase of the problemРІР‚в„ўs severity over time. One well known example of a crisis that escalated wildly during its operational phase is in the case of Operation Yewtree.

In this instance, the initial incident became more deeper rooted, far-reaching and impactful from initial onset and throughout the event, throughout the enquiry period and beyond, to the extent that this incident is globally notorious.

Stage 3: The crisis of legitimation

The РІР‚пїЅcrisis of legitimationРІР‚в„ў is the stage which comes after the event itself and is focused around business recovery.

The failures which have culminated in the crisis occurring are pinpointed and analysed by several stakeholder groups during this phase, and there is a sense that blame must be placed.

During this stage, the organization also needs to address any reputational damage that has been experienced – which can be far harder than it might sound.

The negative feeling and publicity brought on from a crisis can have a monumental impact on a business for years or even decades, as can be explained in the example of the Hillsborough disaster.

Unfortunately, one common error made during organisational crises is when firms fail to see the importance of planning for such an occasion or learning from their mistakes in the aftermath of the incident.

Instead, they focus simply on actions during the operational phase of the crisis only - in direct response to the events which are occurring. It is imperative that organisations ensure crisis management is a part of their Business Continuity Management System (BCMS).

In the case that a crisis is still experienced, the lessons learnt from dealing with the incident should be utilized to update and improve BC plans.

Our BCM software is designed to alleviate and assist with the day to day management of an organisation's BCMS by automating key functions and ensuring that all information, documentation and contacts are stored in one place. Plans are managed in one integrated, dynamic template system, which allows consistency across the board for the creation, updating and maintenance of each plan.

To find out more about the features and benefits of our leading software, contact us to arrange a product demonstration today!