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Business Strategy Best Practice

Crisis Management and Strategies for Dealing with Crisis

by Jon White

Executive Summary

  • Crises and their characteristics—what distinguishes crises from disasters, emergencies, and other exceptional situations.

  • Crisis management—phases in crisis management, and the requirements in each phase for effective management.

  • Techniques for anticipating crises, and preparations for dealing with them.

  • The benefits to be gained by routine management from paying attention to crisis management.

  • The demands made on management at times of crisis and the importance of psychological preparation.

  • Practical conclusions.

Introduction: Crises and Their Characteristics

The term “crisis” is much used in the media coverage of events, in public discussion, and by organization leaders describing the situations that they face and try to manage. The consequences of failure to manage these situations may prove more or less damaging to their organizations. However, not all situations that are described as crises should be labeled as such, and it is important to distinguish real crises from other situations as a first step toward managing them as effectively as possible.

Before looking at the characteristics of crisis situations, we will examine a situation—the Deepwater Horizon oil spill in the Gulf of Mexico—that was recognized at the time as a crisis for the organization involved to draw out the features that define it as a crisis.

Case Study

BP in the Gulf of Mexico, 2010

On April 20, 2010, an oil rig—the Deepwater Horizon, which was operated for BP in the Gulf of Mexico by Transocean—was rocked by an explosion which killed 11 workers and allowed oil to escape from the wellhead, 40 miles off the coast of Louisiana and 5,000 feet below the surface of the sea. Oil flowed into the water for 87 days before the well was finally capped.

After the event, BP recognized that it was being subjected to unprecedented media and political scrutiny. For President Barack Obama the stakes were high—his predecessor, President George W. Bush, had been heavily criticized for his perceived slowness of response to the impact of Hurricane Katrina on the same US state in 2005.

In addition to the deaths of employees, the accident caused damage to the environment and economic damage to the affected states. For BP, the accident was a corporate crisis that threatened the existence of the company, wiping 50% off its market value and forcing it to set aside funds to meet potential claims against the company.

The management response to the accident and its aftermath was a reaction to a complex interplay of issues:

  • the technical problems associated with attempts to cap a well in a deepwater operation;

  • the organizational requirements of dealing with several partner and supplier organizations that were not part of BP, but were providing services, such as the operation of the rig, to BP;

  • the number of involved stakeholders, from the US federal government, to local governments and the communities affected.

BP’s CEO, Tony Hayward, became personally involved in the company’s response to the accident, suggesting that he would not leave the site until the problem had been solved. He was, however, to be heavily criticized in his role and for a number of statements that he made to the media during the course of managing the company’s response to the accident and its aftermath. His credibility was damaged, and he was replaced as CEO of the company as it sought to retrieve its reputation after the well was finally capped.

Media scrutiny of the company was intense, with attempts to deal with the problem of the oil leaking into the sea and to explain the company’s actions under constant surveillance by the press and broadcast media, and in discussions that took place on the social media.

BP’s experience in dealing with the Gulf of Mexico incident and its aftermath is already a classic case study, taking its place alongside other oil industry case studies dealing with Shell’s experience with the Brent Spar in the mid-1990s and Exxon’s disastrous Alaskan oil spill from the company’s vessel, the Exxon Valdez, in 1989.

But what made the accident a crisis for the company? We will consider this question in the next part of the chapter.

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Further reading

Books:

  • Griffin, Andrew. New Strategies for Reputation Management: Gaining Control of Issues, Crises & Corporate Social Responsibility. London: Kogan Page, 2008.
  • Regester, Michael, and Judy Larkin. Risk Issues and Crisis Management in Public Relations: A Casebook of Best Practice. 4th ed. London: Kogan Page, 2008.
  • Janis, Irving L. Group Think. 2nd ed. Boston, MA: Houghton Mifflin, 1982.
  • Larkin, Judy. Strategic Reputation Risk Management. Basingstoke, UK: Palgrave Macmillan, 2002.
  • Lerbinger, Otto. The Crisis Manager: Facing Disasters, Conflicts, and Failures. 2nd ed. New York: Routledge, 2012.

Movie:

  • Petersen, Wolfgang (dir). The Perfect Storm. Warner Bros, 2000.

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