Crisis management

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Developed by Tom Ruetgers

Abstract

Crisis Management in general terms defines how an organization or Individuum respond to an unwanted (suddenly) occurred event. The terminology gets used in several different contexts. The most popular are: politic, nature, financial and organization sector. This wiki article focus on crisis management within an organization in a project management environment. It will introduces how project manager identify crises and states how to deal with crises and how to recover a troubled projects based on the proactive crisis resolution approach. No matter how well a project is planed and prepared, due to the rapidly changing world and conditions it is impossible to eliminate all unknown variables. therefore, a special focus on risk management should be set in the preparation of a project to prevent events which could lead to a crisis as much as possible. Which sounds theoretical spoken quite simple is in the practical world often more difficult. Almost all projects run under tough conditions regarding all resources as budget, manpower and time. Subsequently, it is not surprising that approximately 70% of all major projects and programs fail to achieve their objectives. ^[1]

Introduction

A crisis can emerge in two different ways: On the one hand by a suddenly occurred fatal event, collapse of a construction for instance. On the other hand, a crisis can also occur slowly. Due to badly monitoring or even suppressed expenditures, projects can get out of control and exceed objectives drastically. In such a situation it is necessary, that the project manager realizes that the current circumstances are no longer manageable to meet requirements of the project. A crisis in general is defined as a time of intense danger or when a difficult and important decision must be made. ^[2]. Related to project management, a crisis can usually be aligned to one of the following rubrics:

• financial crises (Project budget exceeded so drastically, that it's not continue-able)
• schedule crises (It became impossible to finish the project before deadline)
• legal crisis (the project is threaten to fail due to law changes)
• crisis caused by an accident (most common situation, which leads immediately to a crisis: construction accident with harmful consequences for humans and / or environment) ^[3]

A crisis usually proceed in three stages: Pre-Crises Stage, Acute-Crisis Stage and Post-Crisis Stage.

Pre-crises Stage

The first stage is the pre-crisis stage (also called "precursor stage" or "prodromal stage") ^[4], when someone on the project recognize pre-warning signs or discovers a critical situation. Mostly, the person escalates the situation and shares the information with its supervisor. At this time, the information about the critical situation is not visible outside the project or organization. It is up to the project manager if he takes action to prevent the problem to eradicate the problem or not. ^[5]

Acute-crisis stage

If the authorized person underestimates, overestimates or is not aware of the pre-warning signs, the critical situation the critical situation develops to a crisis. As soon as the critical situation becomes known outside the organization, it gets considered as a crisis. Most likely, the project and the associated companies are attracting negative public attention, which harms the firms reputation and puts even more pressure on the project management team. Thus, managing and the project team may be weakened and infighting begins. The project management teams stops it's continuous process and starts to develop a crisis management strategy, which includes: defining a crisis management team, crisis communication team, developing a crisis management plan and execute it.

Post-crisis stage

Lastly, after the crisis is under control, the Post-Crisis stage begins. The responsible parties start to communicate with the customer, consumer or society and try to restore its faith. The crisis communication team is in charge for this task. Subsequently, the crisis will be analysed and evaluated to identify the root of causes. Additionally, the project will be canvassed regarding all aspects which were identified in lesson learned sessions. Depending on how badly the project was damaged, a project recovery team and manager will be determined to keep the continuous progress of the project back on track. ^{[4] [6]}

Crisis Management

For the completeness of this article, the three most common crisis management approaches apart from the proactive crisis resolution approach will be mentioned and shortly described.

Belt-and-Suspenders Approach: This approach implies that buying sufficient insurance will immunize the project against problems. It illustrates that it is statistically cheaper to buy insurance against a loss than to correct it. Moreover, it follows the 'betting on odds' mindset, since the probability of a crisis is so low, that it does not warrant a proactive approach.

Pint-the-Blame Approach: This approach is similar to the first one and basically implies that taking responsibility for the crisis should be avoided from the start. The plausible denial culture is prevalent in the heavily bureaucratic companies. The communication strategy has to be defined by denials, excuses and alibis. Most important is to reasonable claim another party to put them in charge for the crisis.

Slash and Burn Approach: This approach cannot be strictly assigned to crisis management. Nevertheless, especially old fashioned organizations tend to use this approach in crisis. Instead of following a proactive approach and mitigate the crisis, the slash and burn approach implies to find the "guilty" individuals within the project and fire them. The fact of firing people can be used in the communication strategy by stating that the responsible persons were dismissed directly. But, this methods adds no economic value, burns money, punishes people and destroys confidence within the project.

Proactive Crisis Resolution Approach The proactive crisis resolution approach is project management and contains of known project management methods and frameworks. Hence, this approach will be analyzed and explained in detail further in this article.

Rearding the proactive crisis resolution approach, the first step after the crisis is identified is to isolate it. Once the crisis is isolated, it becomes enormous easier to manage it, since any misleading and possibly dangerous diversionary paths have been blocked off. Useful project management tools which could be implemented to isolate the crisis is the Muda, Mura, Muri method.

However, this does not automatically implicates that the optimal solution is suddenly presented. Probably there are still several options to take, which have to be considered by the decision maker (the crisis management team). But once the crisis is identified, isolated and different option are proposed, it is more uncomplicated to take decision, which is key in crisis. A crisis will not get solved by taking actions blindly, but the real danger in a crisis is to fall into "analysis paralysis". If the decision maker is obsessively over-analyzing he or she tend to end up totally incapable of managing the crisis. Therefore, the overall mindset in crisis management should be goal-oriented, pragmatic and time efficient. ^[7]

To manage the project out of the crisis the following steps have to be taken:

1.) Build a Crisis Management Team

2.) Create a Crisis Management Plan

3.) Develop Crisis communication strategy

4.) Execute Crisis Management Plan

5.) Recover the Project and bring it back on track

Crisis Management Team

After the acute-crisis stage is reached, the Executive Management Team (EMT) will activate build a Crisis Management Team (CMT), which has to execute the Crisis Managemenet Plan. The CMT’s role is to respond quickly and efficiently in providing their expertise and support. ^[4]

In certain organizations Crisis Management Teams do exist before a crisis has arisen, especially in industries such as the chemical, oil, pharmaceutical, and airline industries. In this case, the CMT just needs to get activated. If a crisis management does not exist it's need to be created as fast as possible. The team should be cross functional designed, to ensure to cover all aspects of the crisis. Therefore, the group of a CMT should consists of four pillars:

• Project experts: people who are very familiar with the project, which can help to identify the root of causes quickly.
• Crisis experts: manager who have been in a crisis before and can help to lead the CMT through the decision making process based on expierence.
• Communication experts: Someone in the CMT should be responsible for all internal and external communication channels and lead the crisis communication team.
• Stakeholder experts: Persons who ensure, that the project crisis does not conflict with stakeholders intrests or the business continuity plan. ^[8]

The CMT may be a mix of internal and external experts to widen the scope. The CMT has to analyze the essential and make decisions fast. Hence, a clear hierarchicly structure within the CMT is needed. Thus a crisis management officer has to be determined (similiar role to project management officer (PMO) in a project). He is responsible for the team and its decisions. Furthermore, the PMO / CMO has to lead, control and monitor the crisis / the project.^[9]

Crisis Management Plan

Kanban, Scrum, Waterfall, PMI approach (initiating, planning, executing, monitoring and controlling, closing)

The main task of the CMT 1.)Take charge quickly. 2.) Determine the facts. 3.) Communicate the crisis. 4.) Fix the problem.

new kpis, just for crisis - steven fink - devlin - https://www.pmi.org/learning/library/guide-project-management-body-knowledge-5836

Crisis Communication Management

Controlling the message Handling a hostile press [outside] -->3R

Executing Crisis Management Plan

Data Collection and Analysis Root to causes handling internal hostile pressure - "someone will take advantage out of the crisis - why shouldn't it be you?" monitor it https://www.pmi.org/learning/library/deal-troubled-projects-6316

Recovery and prevention

back on track / RPM / renew risk assessment / redefine project objectives

https://www.pmi.org/learning/library/critical-steps-recovering-troubled-projects-7352

Literature

• ^[1]: Is written by Stephen Carter, a Senior lecturer Professor in Project & Programme Management at Cranfield University. He worked on projects for the oil business before moving on to work at Virgin before working directly for a global CEO as head of Project & Programme Management Strategy.
• ^[5]: Is written by Mark Price Perry, who worked for 19 years as a business Driven project management consultant and contributed to over 1000 articles on the digital platform projectmanagement.com, which is powered by the Project Management Institute.
• ^[7]: Steven Fink is one of the US leading experts in crisis management and crisis communication. Moreover, he is the president of Lexicon communications (www.crisismanagement.com) and wrote the first book on crisis management (first edition: 1986). His work and findings are fundamental and constitute the basis for crisis management.

References

1. ↑ ^{1.0 1.1} Carver S. "Making projects fly", FT Handbook of Management, Pearson; 2004.
2. ↑ "Oxford Dictionary"; 2018.
3. ↑ Boris Hornjak "The Project Surgeon - A Troubleshooter's Guide to Business Crisis Management", Project Management Institute; 2018.
4. ↑ ^{4.0 4.1 4.2} Edward S. Devlin "Crisis Management Planning and Execution" Auerbach Publications ;2007.
5. ↑ ^{5.0 5.1} Mark Price Perry "PMO Tips: Ten Project Rescue Tips for PMO Managers", https://www.projectmanagement.com/blog-post/718/PMO-Tips--Ten-Project-Rescue-Tips-for-PMO-Managers, 2008.
6. ↑ Kerzner, Harold R. "Project Recovery" Case Studies and Techniques for Overcoming Project Failure, John Wiley & Sons; 2014.
7. ↑ ^{7.0 7.1} Steven Fink, "Crisis Management: Planning for the Inevitable", American Management Assocation; 2002.
8. ↑ Steven Fink, "Crisis Management: Planning for the Inevitable", American Management Assocation; 2002.
9. ↑ PMI, "A Guide to the Project Management Body of Knowledge", Project Management Institute, sixth edition; 2017.