CRISIS

MANAGEMENT
THEORY
PREPARED BY:
AZUCENA R. MATEO
 RATIONALE
Effective crisis management handles the
threats sequentially. The primary concern in
crisis has to be public safety. A failure to
address public safety intensifies the damage
from a crisis. Reputation and financial
concerns are considered after public safety
has been remedied. Ultimately, crisis
management theories are designed to
protect an organization and its stakeholders
from threats and/or reduce the impact felt by
threats.
RELATED LITERATURE
(1)Dealing with Past Corporate Crises Johnson &
Johnson Tylenol Crisis In September of 1982, seven
deaths occurred due to capsules of Extra-Strength
Tylenol that were laced with cyanide being consumed
in the Chicago area. These deaths were a crisis that
burst quickly and ferociously upon Johnson &
Johnson, and its subsidiary McNeil Consumer
Products Company, the maker of Tylenol. Although
the Tylenol crisis struck without warning, Johnson &
Johnson is lauded for their exemplary crisis
management performance. First, Johnson & Johnson
began open and honest communication with the
public and the media immediately.
 RELATED LITERATURE
Second, Johnson & Johnson’s CEO James E. Burke
made sure to create a seven member crisis
management team that was in charge of handling all
decisions about the “ever-changing developments”
and “coordinated all organizational efforts and
communications”. Johnson & Johnson crisis
management team and CEO looked to the Credo to
guide them in decisions, like whether or not they
should have withdrawn the Tylenol product from
stores, which made that decision the third great crisis
management choice made by Johnson & Johnson .
 RELATED LITERATURE
Fourth, Johnson & Johnson not only fully admitted to
the Tylenol problem when it first surfaced, but also
“accepted fault and didn’t hide behind the problem or
try to affix the blame on someone or something else”.
Besides financially reimbursing their consumers,
Johnson & Johnson opened up their ears to listen to
their customers concerns in order to gain back public
trust in the Tylenol product. Thus, the fifth great crisis
management decision made by Johnson & Johnson,
was to have McNeil, Johnson & Johnson’s
subsidiary, create “toll-free consumer hot lines to
respond to inquiries concerning the safety of Tylenol”.
 RELATED LITERATURE
Finally, the last great crisis management choice that
Johnson & Johnson made was to come out publicly
with information about what they did to make to make
things right and to what they were doing to prevent a
similar crisis from happening, including introducing a
safer and improved product. “The key to the
remarkable comeback of Tylenol can be attributed to
swift action by the company combined with a clearly
defined action plan. Following a strategy and
developing the correct message for the appropriate
public is clearly illuminated” in the handling of the
Tylenol crisis.
 RELATED LITERATURE
(2) Social Network Theory: An Application in crisis management
The geographical location of the Philippines makes it prone to
natural disasters. It lies at the western side of the Pacific Ocean
where most typhoons are formed. It sits “astride typhoon belt,
usually affected by 15 and struck by five to six cyclonic storms
per year” (Geography of the Philippines, 2013). It also
experiences landslides, volcanic eruptions, destructive
earthquakes and tsunamis. A report from the Citizen’s Disaster
Response Center (CDRC) showed that the Philippines is the
most disaster-affected country in 2012 with 471 natural and
human-induced disasters, that killed 1,615 people from 2.8
million families or 12 million people and costing over P39.9 billion
(Research and Public Information Department, 2012). Coastal
cities such as Manila, are most likely to suffer from coastal
flooding and other effects of the global climate change that
resulted to sea-level rise and increased storminess.
 RELATED LITERATURE
A World Bank report published in 2013 reported,
though, that the Philippines is one of the most
prepared countries that could manage the effects of
natural disasters . In spite of this, the readiness and
the preparedness of the Philippines and its Asian
neighbors will be regularly tested by the occurrence
of these disasters year after year. The World Bank
report classified Manila, Cebu and Davao as “among
the top metropolises at risk in the region”. Given the
increasing prevalence of disaster, the need for
preventive measures has become more imperative.
 RELATED LITERATURE
The situation calls for collaboration among government
agencies, private organizations and community to
render disaster management effective. Rapid and
timely dissemination of information from one unit to
another is key to achieving this goal. The rising
popularity of social media makes it an ideal channel to
connect people from different places in real time.
Disaster management efforts can be communicated
via social media platforms such as Facebook, Twitter,
Multiply etc. to make information readily accessible to
everybody.
 INTRODUCTION
The application of the crisis management theory is illustrated
in a series of experiments of complex managerial decision
making, using a simulated organization. Organizational
complexity and assigned performance standards also serve as
contributing influences. Path analyses reveal that perceived
managerial self-efficacy influences managers’ organizational
attainment both directly and through its effects on their goal
setting and analytic thinking. As managers begin to form a
self-schema of their efficacy through further experience, the
performance system is regulated more strongly and intricately
through their self-conceptions of managerial efficacy. Although
the relative strength of the constituent influences changes with
increasing experience, these influences operate together as a
triadic reciprocal control system.
 DEFINITION OF TERMS
Theory - a supposition or a system of ideas intended to explain
something, especially one based on general principles
independent of the thing to be explained.

Social Network - a dedicated website or other application that

enables users to communicate with each other by posting
information, comments, messages, images, etc.

Chaos - complete confusion and disorder: a state in which

behavior and events are not controlled by anything.

Transformation - a complete change in the appearance or

character of something or someone.

Surprise - any event that happens unexpectedly or any expected

event that takes an unexpected shape.
 DEFINITION OF TERMS
Structural-Functional - is a sociological theory that attempts to
explain why society functions the way it does by focusing on the
relationships between the various social institutions that make up
society (e.g., government, law, education, religion, etc).

Diffussion of Innovation -  Diffusion is the “process by

which an innovation is communicated through certain
channels over a period of time among the members of a
social system”. An innovation is “an idea, practice, or
object that is perceived to be new by an individual or
other unit of adoption”.
 
Unequal - not equal in quantity, size, or value.
 
Human Capital - refers to the stock of knowledge, habits,
social and personality attributes, including creativity,
embodied in the ability to perform labor so as to produce
economic value.
 DEFINITION OF TERMS
Situational Crisis - is not a diagnostic term. It is a phrase given
to a person whose coping mechanisms are affected due to their
circumstances – in the absence of a mental illness.

Communication (from Latin commūnicāre, meaning "to share")

is the act of conveying intended meanings from one entity or
group to another through the use of mutually understood signs
and semiotic rules.

Image - a physical likeness or representation of a person,

animal, or thing, photographed, painted, sculptured, or otherwise
made visible.
 THEORY OF CRISIS MANAGEMENT

1. Chaos and Transformation Theory

Is the prevalence of constant and rupturing changes
that occur out of order, disturb system equilibrium and
cause chaos eventually leading to a renewed order.
The cycle of chaos is an evolutionary process that
contributes to the transformation of social systems,
including organizations with political and managerial
implications. Long term transformations results from
short-term chaotic changes that cause system
disequilibrium, a phenomenon that has major
implications for crisis and emergency management
around the world.
 THEORY OF CRISIS MANAGEMENT

2. Surprise Management Theory

The advancement of this theory is

expounded by Farazmand (2014) and in his
book “Crisis and Emergency Management” he
laid down an excellent discussion of the
concept and principles and the strategic
conditions for the surprise management
theory.
ALI FARAZMAND is
Professor of Public
Administration, Florida
Atlantic University, and
Founding Editor-in-Chief
of "Public Organization
Review: A Global
Journal". Farazmand is
the author or editor of
more than 20 books and
reference
handbooks.Born: 22 May
1947 (age 69 years)
 SURPRISE MANAGEMENT
THEORY
D. Surprise management demands cutting-
edge knowledge, skills and attitudes beyond
the comprehension of most people in routine
environments of governance and
administration.

E. It requires extraordinary and disciplined

authority and power with unrestrained
resources.
 SURPRISE MANAGEMENT
THEORY
Concept and Principles:

A. It rejects anything that is routine and expected.

B. By extension, it is fluid and constantly changes it its

nature, degree of flexibility and adaptability.

C. It demands certain preconditions to qualify as a

surprising and chaotic, non-linear and unexplainable,
as distinct from linear and predictable causal
behaviors.
 SURPRISE MANAGEMENT
THEORY
Strategic Conditions refer to 4 key points of attention:

 Foci – refer to the area of focus or stress in crisis situations

(political, social, disaster and international relations)

 Loci – refer to locations, organizational level and governance

areas (local, state, federal and global)

 Position – means the strategic positioning and repositioning of

key players, actors and participants in the crisis and surprise
management process.

 Who – refers to the individual and institutional actors in

strategic positions, making crucial decisions and acting
accordingly.
 SURPRISE MANAGEMENT
THEORY
Ex: Hurricane Katrina, the Crisis of Leadership and Chaos
Management: Time for Trying the Surprise Management
Theory in Action.
Four years have gone by since the historic Hurricane
Katrina hit and drowned the city of New Orleans and caused a
massive crisis of, and a global case of grand failure in
governance, leadership, and public management. Advancing
on an earlier work published in Public Administration Review
(Farazmand 2007), in which a global case of grand failure was
established with several lessons drawn for future crisis
management, this article argues further for developing and
applying a theory of ‘surprise management’ to manage future
crises and chaotic situations.
 SURPRISE MANAGEMENT
THEORY
Katrina type crises, and the like—carry a high
degree of “surprises " that tend to surprise
everyone, including those appearing to be in charge
of events. On the other hand, this theoretical
approach also points out that this surprise element
of the disasters can be effectively managed through
a proper development of a network structure and
adequate understanding of the functioning of this
structure by the actors involved within this network.
"Surprise management is the best approach to
managing or coping with crises and crisis driven
emergencies.
 THEORY OF CRISIS MANAGEMENT

3. Structural-Functional Systems Theory

Addresses the intricacies of information

networks and levels of command making up
organizational communication. Involve each
member of your management hierarchy in
dealing with the crisis and keep lines of
communication open and transparent.
 STRUCTURAL-FUNCTIONAL
SYSTEM THEORY
The structural-functional systems theory explains how
organizational communication takes place based upon Dunlop's
(1958) analysis. Dunlop referred to the structure of a functioning
system as being comprised of certain actors, certain contexts, an
ideology that binds the system together and a body of rules created
to govern the actors.
 Actors in a system are the hierarchy of managers and their
representatives in supervision, the hierarchy of workers, and any
spokesmen and specialized governmental agencies.
 The contexts of a system are the technological characteristics of
the organization, monetary factors, and the distribution of power
between a system and society.
 The ideology of a stable system would involve the views held
within the organization that is similar and working toward a
common goal.
 The body of rules refers consequences of achieving the
expected performance and the result of failure to achieve that of
which was expected.
Dunlop was the 
United States Secretary of Labor
 between 1975 and 1976. He
was Director of the U.S. Cost of
Living Council from 1973–1974,
Chairman of the U.S.Commission
on the Future of
Worker/Management Relations
from 1993–1995 and arbitrator
and impartial chairman of
various U.S. labor-management
committees, and also member of
numerous government boards
on industrial relations disputes
and economic stabilization
programs.
 THEORY OF CRISIS MANAGEMENT

4. Diffusion of Innovation Theory

Developed by Everett Rogers, the theory

describes how innovation is disseminated
and communicated through certain channels
over a period of time. It occurs when an
individual communicates a new idea to one or
several others.
 DIFFUSION OF INNOVATION
THEORY
The process involves:

An innovation
An individual or other unit of adoption that
has knowledge of or experience with using
the innovation.
Another individual or other unit that does
not yet have knowledge of the innovation
A communication channel connecting the
two units.
 THEORY OF CRISIS MANAGEMENT

5. Unequal Human Capital Theory

James postulates that organizational

crisis can result from discrimination. It
derives from economic theories of human
and social capital concluding that minority
employees receive fewer organizational
rewards than those with access to executive
management.
Dean Erika James
Goizueta Business School Dean Erika
James
has been selected to join the Leadership A
tlanta Class of 2016
. James, who was named the school’s first
female dean nearly one year ago, joins
more than 80 local leaders on the list.
According to a report in the
Atlanta Business Chronicle, Dean James
and other participants will “learn more
about metro Atlanta by participating in
retreats, full-day seminars, service
projects, discussion groups and
community tours, and other impactful
experiential activities.
 UNEQUAL HUMAN CAPITAL
THEORY
MANAGEMENT:

 In general, it’s not a good idea to discuss compensation

with co-workers given the sensitivity of the issues
involved.
 Even worse, your employer may label you as a trouble
maker or problem employee if you create a stir about
compensation.
 In order to ensure equal pay in the workplace, employers
should implement and enforce policy prohibiting
compensation discrimination or wage discrimination based
on an employee's membership in a protected class.
 Employers need to make sure that all supervisors and
managers receive proper training on how to avoid wage
discrimination and make employment decisions based on
legitimate and nondiscriminatory reasons
 THEORY OF CRISIS MANAGEMENT

6. Situational Crisis Communication Theory

( SCCT 2007)

Posited by W. Timothy COOMBS is a theory

in the field of crisis communication. It suggests
that crisis managers should match strategic
crisis responses to the level of crisis
responsibility and reputational threat posed by
a crisis.
 THEORY OF CRISIS MANAGEMENT

7. Image Repair Theory (IRT)

William Benoit established this theory based on apologia
studies. IRT assumes that image is an asset that a person or an
organization attempts to protect during a crisis.
William L. Benoit is a
professor of
communication studies at
Ohio University. He has
published numerous
articles and books,
including Accounts,
Excuses, and Apologies,
1994. He holds a PhD
from Wayne State
University.
 IMAGE REPAIR THEORY

Basic Concepts of Image Restoration Theory

The key to understanding image repair strategies is to consider the
nature of attacks or complaints that prompt such responses or instigate a
corporate crisis. An attack has two components:
1. The accused is held responsible for an action.
2. That act is considered offensive.
 No matter what happened, it is not reasonable to form an unfavorable
impression of a firm unless that company is believed to be responsible for
that act. Responsibility can appear in many guises: for example, a
business can be blamed for acts that it performed, ordered, encouraged,
facilitated, or permitted to occur (or for acts of omission or poorly
performed acts that it appears responsible for).

 Second, for both conditions, perceptions are more important than reality.
The important point is not whether the business in fact is responsible for
the offensive act, but whether the firm is thought to be responsible for it
by the relevant audience. Of course, if the firm is not really to blame for
the offensive act, this can be an important component of its response. As
long as the audience thinks the firm at fault, the image is at risk.
 IMAGE REPAIR THEORY

 Benoit introduced 5 general categories the accused could harness during a

crisis it include denial, evading responsibility, reducing offensiveness,
corrective action and mortification.

1. Denial
 One general approach to image repair, with two variants, is denial. For
example, Pepsi-Cola accused Coca-Cola of requiring its other accounts to pay
higher prices, subsidizing its largest customer, McDonald's. Coke replied by
simply and directly denying Pepsi's charges: charges that Coke increased
prices for some customers but not all were absolutely false; price increases
were universally applied; there were no exceptions. Here, Coke rejects
Pepsi's charges as false. A firm may deny that the act occurred, that the firm
performed the act, or that the act was harmful to anyone.
 A second form of denial is shifting the blame, arguing that another person or
organization is actually responsible for the offensive act. After the Exxon
Valdez oil spill, Rawl, Chair of Exxon, "blamed state officials and the Coast
Guard for the delay, charging ... that the company could not obtain immediate
authorization on the scene to begin cleaning up the oil or applying a chemical
dispersant. If Exxon was not at fault for the delay, their image should not be
tarnished.
 IMAGE REPAIR THEORY

2. Evasion of Responsibility
This general image repair strategy has four versions:
 A firm can say its act was merely a response to another's offensive act, and
that the behavior can be seen as a reasonable reaction to that provocation. For
example, a company might claim it moved its plant to another state because
the first state passed a new law reducing its profit margin.
 Another specific form of evading responsibility is defeasibility. Here, the
business alleges a lack of information about or control over important elements
of the situation. For instance, a busy executive who missed an important
meeting could claim that "I was never told that the meeting had been moved up
a day." If true, the lack of information excuses the absence.
 A third option is to claim the offensive action occurred by accident. If the
company can convince the audience that the act in question happened
accidentally, it should be held less accountable, and the damage to that
business's image should be reduced. After charges of auto repair fraud, Sears'
Chairman Brennan characterized the auto repair mistakes as "inadvertent,"
rather than intentional.
 Fourth, the business can suggest that the offensive behavior was performed
with good intentions. Brennan also stressed Sears' good intentions, declaring
that "Sears wants you to know that we would never intentionally violate the trust
customers have shown in our company for 105 years." This remark functions to
stress Sears' good intentions toward its customers.
 IMAGE REPAIR THEORY

3. Reduce Offensiveness
This general image repair strategy has six versions.
 First, a corporation may use bolstering to strengthen the audience's positive
feelings toward the itself, in order to offset the negative feelings connected with
the wrongful act. Businesses may describe positive characteristics they have or
positive acts they have done in the past. After the Valdez oil spill, for example,
Exxon's Chairman Rawl declared that "Exxon has moved swiftly and competently
to minimize the effect this oil will have on the environment, fish, and other wildlife."
He expressed his sympathy to "the residents of Valdez and the people of the
State of Alaska. These sentiments, if accepted, should bolster its image and offset
damage to its reputation.
 A second possibility is to try to minimize the negative feelings associated with the
wrongful act. After the Valdez oil spill, Exxon officials also tried to downplay the
extent of the damage. Baker explained that "On May 19, when Alaska retrieved
corpses of tens of thousands of sea birds, hundreds of otters, and dozens of bald
eagles, an Exxon official told National Public Radio that Exxon had counted just
300 birds and 70 otters. This statement works to minimize the apparent problem.
 Third, a firm can employ differentiation, in which the act is distinguished from
other similar but more offensive actions. Sears argued that the acts labeled
unneeded repairs were actually preventative maintenance. Clearly, its actions
sound much less offensive when understood as preventative maintenance instead
of as fraud.
 IMAGE REPAIR THEORY

 A fourth way of reducing offensiveness is transcendence, which

attempts to place the act in a more favorable context. A
company that experiments on animals could claim the benefits
to humans from such research outweigh the harms to animals.
 Fifth, those accused of wrong-doing may decide to attack their
accusers. After Coca-Cola argued that Coke is more profitable
than Pepsi, Pepsi-Cola counter-attacked in advertisements
aimed at retail outlets. One ad claimed that Coke charged other
firms more than McDonald's: Coke's pricing policy is requiring
you to subsidize the operations of your largest competitor. This
attack on Coke this might reduce the damage from Coke's
criticism of Pepsi.
 Compensation is the final form of reducing offensiveness. If it is
acceptable to the victim, the firm's image should be improved.
For example, a group of disabled people were denied
admittance to a movie theater. An official later apologized and
offered them free passes to a future movie to help compensate
for this offensive act.
 IMAGE REPAIR THEORY

4. Corrective Action

 Another general image restoration strategy is corrective action,

in which the company promises to correct the problem. This
action can take the form of restoring the state of affairs existing
before the offensive action, and/or promising to prevent the
recurrence of the offensive act. For instance, in 1993 AT&T
experienced a breakdown in long distance service to and from
New York City. Chairman Allen relied heavily on corrective
action: "We have already taken corrective and preventive
action at the affected facility" in New York City, including "a
thorough examination of all of our facilities and practices, from
the ground up." He also announced plans "to spend billions
more over the next few years to make them even more
reliable."(17) Thus, he not only promised to correct the current
problem but also to prevent future problems.
 IMAGE REPAIR THEORY

5. Mortification

 The final general strategy for image restoration is

to confess and beg forgiveness, which Burke
labels mortification. Another part of AT&T's
response was mortification, or apology: "I
apologize to all of you who were affected, directly
or indirectly. A potential drawback to this strategy
is that it might invite lawsuits from victims.
 CONCLUSION
It is difficult to distill all that is known about crisis
management into one, concise entry. I have tried to identify the
best theories, practices and lessons created by crisis
management researchers and analysts. While crises begin as a
negative/threat, effective crisis management can minimize the
damage and in some case allow an organization to emerge
stronger than before the crisis. However, crises are not the ideal
way to improve an organization. But no organization is immune
from a crisis so all must do their best to prepare for one. Relying
on only one approach or theory may limit an organization in its
actions. Therefore, I conclude that having a broader perspective
and approach makes the situational approach visible and
accessible from different views and gives opportunities to
manage a crisis well in advance and well prepared.
 RECOMMENDATION
For the understanding of this topic I have focus upon the
main dominant theories available. The main dominant theories
can be categorized according to three dominant definitional
camps: event-based approach, process-based approach and
systemic-based approached. The first theory of the combined
event based and process-based approaches which is provided
by Coombs. This theoretical observation is based on articles,
journals and books elucidated on different views. Secondly we
will elaborate on combined systemic-based and process-based
approaches: an alternative view that illustrates elements from a
cross-disciplinary approach in which it focus upon contextual,
cultural and psycho-dynamical influences. The elaborated
theories have been used for the analysis of two cases in crisis
management.
 RECOMMENDATION
I have chosen the Tylenol case of Johnson &
Johnson to illustrate good practice of crisis
management, whereas the case during disaster
management efforts can be communicated via social
media platforms such as Facebook, Twitter, Multiply etc.
to make information readily accessible to everybody.
There is no standard way in solving a crisis, as every
crisis is different. Information in crisis management is a
key element in acting accordingly to avoid mistakes in
crisis management and prevent further escalation of the
crisis.