The Role of Perception in Crisis Planning.

ABSTRACT: This article reveals that a company's perceptions of crises have a profound effect on primary crisis management activities. Although briefly reviewing the technical aspects of crisis management, the research examines the effects that threat and opportunity constructs have on crisis planning. The article concludes with some recommendations concerning the communication of a crisis's dual nature before, during, and after a crisis situation.

John M. Penrose is professor of business communication and chair of the Information and Decision Systems Department in the College of Business Administration at San Diego State University.

Much of the traditional crisis management literature stresses the fundamental importance of implementing an enterprise-wide crisis plan. In most cases, successful crisis resolutions stem from an organization's instilled crisis plan, whereas most instances of mishandled crisis situations result from a company's lack of such a plan. [1] Researchers tend to agree that organizations that practice proactive crisis management will lessen the damage of a crisis. Conversely, when organizations only respond to crises, the resulting damage seems to overshadow potential [2] Why is it then, that about 40% of Fortune 1000 industrial companies still do not have an operational crisis plan? [3]

Indeed, many of these companies believe that their company's prestige and goodwill will carry them through any unforeseen misfortune. This may be true for huge companies, such as Exxon, that also have the financial resources to weather even the most disastrous crisis. But, smaller, lesser-known companies must heed the fact that 80% of companies without a comprehensive crisis plan vanish within 2 years of suffering a major disaster. [4] Thus, it seems that a crisis plan is indeed an invaluable precaution that any company must take.

THE ROLE OF PERCEPTION

The perception of crises may ultimately affect crisis outcomes. Furthermore, the perception of a crisis as an opportunity or a threat may also have significant implications. Crises are not inherently good or bad; they are merely perceived by most as bad. Many examples reveal the severe penalties attached to the unpreparedness of an organization, such as the Union Carbide disaster or the Exxon Valdez oil spill. [5] Crises can destroy a company's reputation in a concentrated time frame. When reviewing the results of the Union Carbide disaster or the Exxon Valdez oil spill, one may view crises exclusively as threats. But would the perceptions of the organizations have been different if senior management had perceived these threats differently, prepared accordingly, and executed differently?

Opportunities exist within any crisis situation. New leaders may emerge from a crisis, and in most cases, a crisis leads to accelerated change in business processes that may prove advantageous in the long run. [6] Often companies that do survive disasters are more prepared for the next one. This thought does depend, however, on the extent of learning that the company in question absorbs from the event. Finally, companies that do handle a crisis effectively are generally perceived in a more positive way. [7] Many companies simply fall to identify these potential positive outcomes.

The perception of a crisis as an opportunity should lead to an increased ability to consider various alternatives and thus a greater extent of proactive planning. Managers generally view opportunistic situations to be more controllable, thus including more members into the resolution process and thereby increasing the flow of alternatives. [8] On the other hand, the perceiving of a crisis as a threat will cause managers to limit the amount of information they consider. Thus, perception has the potential to influence the extent to which an organization is willing to engage in crisis management activities.

NEED FOR STUDY

Much of the crisis management research today focuses on the technical aspects of dealing with crises. The majority of this literature explains the importance of implementing a crisis plan and the strategies involved in that planning. [9] Other research deals with the formation of crisis management teams and their relevance. [10] Finally, many case studies detail preventive measures taken and lessons learned. [11] Such valuable case studies are too few to provide researchers with an all-encompassing model of crisis management.

The purpose of this article is to insert a new perspective into the crisis management literature. Rather than focusing on how perceptions affect the outcome of a crisis situation, what is needed is a measure of whether the perception of a crisis as an opportunity or as a threat affects an organization's willingness to engage in crisis management activities that then affect the outcome of a crisis.

AN OVERVIEW OF THE CRISIS COMPONENTS

A crisis occurs when an event increases in intensity, falls under close scrutiny of the news media or government, interferes with normal business operations, devalues a positive public image, and has an adverse effect on a business's bottom line.[12] According to Shrivastava et al., crises are caused by an interacting set of human, organizational, and technological failures that combine with regulatory, infrastructure, and preparedness shortcomings in the organizations' environments. [13] Pearson and Clair build on the crisis definition by noting that organizational crises are highly ambiguous events that necessitate a decision or judgment that will result in change for better or for worse. [14] This implies that crises have dual meanings as well as dual outcomes.

Reviews of crises and crisis plans typically include four common elements: the plan, the management team, communication, and post-crisis evaluation. These four components together form the basis of crisis management activities and should figure into any comprehensive crisis plan. Therefore, it is imperative to discuss each of these basic elements before introducing the possible effects of perception on crisis management.

The Crisis Management Plan

The ambiguous nature of crises makes planning for a crisis difficult. Further, the infinite number of possible crisis scenarios has prevented the adoption or implementation of a universally accepted planning strategy. [15] Indeed, there are times when a plan may not be as relevant to a crisis as …