Crisis management

Revision as of 22:12, 22 February 2019

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") ^[5], 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. ^[6]

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. ^{[5] [7]}

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 instantly. But, this methods adds no economic value, burns money, punishes people and destroys confidence within the project.

Proactive Crisis Resolution Approach: This approach is project management oriented and contains of known project management methods and frameworks. Hence, this approach will be analyzed and explained in detail further in this article. ^[3]

Regarding 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. ^[8]

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 make 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. ^[10]

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

1.) Build a Crisis Management Team (CMT)

2.) Create a Crisis Management Plan (CMP)

3.) Develop Crisis communication Management (CCM) 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. ^[5]

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 experience.
• 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 interests or the business continuity plan. ^[11]

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 (similar 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. ^[12]

Crisis Management Plan

It is highly recommended to create a management plan before a crisis has erupted. This implies to design a crisis management plan before the project has started. During the risk assessment process while the project is being planned it should not only be planned how a crisis can be prevented, but also how a crisis will be managed. The main advantage is that no decisions are being forced or rushed caused by time pressure. In fact, a crisis management plan has to strive to make as many routine decisions as possible. ^[13] Since project management teams are familiar with with project management frameworks it makes sense to use project management methods, to design the crisis management plan. The two most popular frameworks to build a project management plan are the Project Management Plan (PMP) according the the Project Management Institute (PMI) standard on the one hand and on the other hand the Project Initiation documentation (PID) based on the prince2 standard.^{[12] [14]}

"Eliminate guesswork and structure the crisis management plan in an easy way. You simply want to know where are the flashlights are before you need them" ^[10] Thus, organizations which operates in more hazardous businesses (chemical, oil, pharmaceutical and airline industries) create crisis management plans before they need them. However, several crisis arises without any concrete preparations and the crisis management plan need to be developed. it is needless to say, that each crisis needs its own individualized crisis management plan. An crisis management plan for an oil platform breakdown needs other requirements than a financial crisis. Nevertheless, the structure of a crisis management plan, indifferent which are the causes, has to follow four steps:

1.) Take charge quickly

After the acute-crisis stage has reached there is no time to waste and the Crisis Management Team has to be activated / build as soon as possible. Next, a crisis management command center has to be established. If the crisis occurs in long distance away from the headquarter, the CMT should visit the spot of the crisis, set up a command center and open lines for communications. If it has not been done yet, the crisis management officer has to be determined. Thereby, externals and internals of the organizations get a face to the crisis, which underlines that someone takes charge of the crisis. ^[10]

2.) Determine the facts

The second step is to determine the facts, which includes reconstructing the information to obtain the facts, recognizing the problems which will be encountered.

"The problem in this stage is that usually you don’t know what you don’t know. There may be too little information, or there may be far too much, with no way to sift out what is important." ^{[16] [5]}

However, the "real" facts have to be investigated and determined, which implies to differentiate between actual happened events and information which are mixed up with emotions. Therefore, the CMT should talk directly to the employees which were involved in the situation. If a number of employees are providing information, the stories might differ from one to the other, influenced by emotions and interpretations. Even if the information are not helpful for solving the crisis, it is very important to know about all details. Firstly, to ensure that the responsible persons know the full stories and do not get surprised during the next steps and secondly, to be ahead of the public press at any point of time.

3.) Communicate the crisis

The most sensible topic during the crisis is communication - intern as well extern the organization. In an age where information and news get spread all over the world through media channel within minutes, there is no chance to hide crisis or conceal particular details. Therefore, the biggest challenge is, when the crisis reaches public: Controlling the message. The CMT must be able to respond to all accusations and needs a rock solid communication strategy. The next step is to handle a hostile press. It is not unusually in project crisis that innocent people were hurt or lost their lives or the environment were significant damaged. As a consequence, it is just a matter of time until the press will blame the organizations or project team, whoever might seem responsible for the incident. A detailed crisis communication approach will be introduced in 3.4 Crisis Communication Management. ^[10]

4.) Fix the problem

The last step of the crisis management plan is to actually fix the problem. Therefore, classic project management methods can be used. Such as the PMI Kanban approach (I.initiating, II. planning, III. executing, IV. monitoring and controlling, V. closing) or Scrum framework for instance. ^{[17] [12]}. What the crisis management plan provides precisely is strongly depended on the type of crisis. An oil platform crash needs different provision than a cyber attack. The initial step should be to recoup losses. It will show to whoever who was harmed (employees, investors, stakeholders or customers), that the organization do care about them. Thereupon, the crisis management plan should implement any changes which are needed, no matter which resources are necessary to do so. ^[5]

Executing Crisis Management Plan

The Crisis Management Plan should be executed in 7 Steps:^[5]

1. Decide which option will be executed.

2. Prepare the best and worst case scenario.

3. Schedule the exercise (Gantt Chart).

4. Monitor the progress.

5. Evaluate the results.

6. Prepare a written report.

7. Ensure changes are made.

While taking care of the crisis itself, the CMT has always to keep an eye open for what is going on in the organization. Mostly, a crisis will not only yields external opponents, but also internal hostile pressure. Therefore the CMT has to look out and make sure, that they are always backed up by the executive management and does not some one else profit from the crisis.

"Someone will take advantage out of the crisis - why shouldn't it be you?" ^[10]

Crisis Communication Management

As already mentioned, the CMT has to build a separate crisis communication management team (CCM), which takes care of the entire information flow among the crisis and the two main task are controlling the message in the first place and handling a hostile press afterwards. In crisis, even if it is time intensive, the group of interests, which has harmed (employees, shareholders, investors or customers) should be informed separately and - if the circumstances permit it - before the bad news reach the public. Even if the news are formidable, informing the group of interest preferentially appeals confidence-inspiring. There are several strategies to communicate the crisis with the press and all externals. This article will introduce the 3R approach by Stephen Carver: ^[18]

I. Regret - Firstly, before going into the facts, the crisis communication officer (CCO) has to show empathy, because the public only forgive humans and not corporations.

II. Reason - Secondly, it has to communicate in detail why the crisis happend. In communicating a crisis the CCO has only one shot to appear credible. There is no space for lies or secrets, if details reach the press afterwards it will create a second crisis.

III. Remedy - Thirdly, it has to be explained precisely how the crisis will be solved and what measures will being taken to prevent this from happening in the future again.

Recovery and Prevention

The last step of crisis management regarding the proactive project management approach is to bring the project back on track. The post crisis stage is reached and the project has probably taken several hits. First of all, the risk assessment should be supplemented by the findings which were made during the crisis and captured in the final crisis management report. Additionally, the project has to be evaluated once again and in cooperation with the executive management decided if the project will be continued or cancelled. This depends entirely on the constraints of the project, the consequences of the crisis and how well the crisis was handled. If the project will be continued, the objectives have to redefined, since the project probably extended all costs and time limits. From this point of time on, the project can be regarded as a troubled project and the Recovery Project Management can begin.^[19]

Annotated Bibliography

• ^{[1] [18]}: Is written / spoken by Stephen Carver, 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.
• ^[6]: 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.
• ^[10]: 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. ↑ ^{3.0 3.1} Boris Hornjak "The Project Surgeon - A Troubleshooter's Guide to Business Crisis Management", Project Management Institute; 2018.
4. ↑ Personal creation
5. ↑ ^{5.0 5.1 5.2 5.3 5.4 5.5} Edward S. Devlin "Crisis Management Planning and Execution" Auerbach Publications ;2007.
6. ↑ ^{6.0 6.1} 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.
7. ↑ Kerzner, Harold R. "Project Recovery" Case Studies and Techniques for Overcoming Project Failure, John Wiley & Sons; 2014.
8. ↑ Bożena Zwolińska "Use of the method VSM to identify MUDA", Research paper of the Department of Mechanical Engineering and Robotics, AGH University, Krakau; 2016.
9. ↑ Personal creation
10. ↑ ^{10.0 10.1 10.2 10.3 10.4 10.5} Steven Fink, "Crisis Management: Planning for the Inevitable", American Management Assocation; 2002.
11. ↑ Steven Fink "Crisis Management: Planning for the Inevitable", American Management Assocation; 2002.
12. ↑ ^{12.0 12.1 12.2} PMI "A Guide to the Project Management Body of Knowledge", Project Management Institute, sixth edition; 2017.
13. ↑ S. Roeser, R. Hillebrand, M. Peterson "Handbook of Risk Theory. Epistemology, Decision Theory, Ethics, and Social Implications of Risk" Springer; 2012.
14. ↑ The Stationery Office "Managing Successful Project with Prince2", Axelos Global Best Practice, 2017.
15. ↑ Personal creation
16. ↑ Norman Augustine "Managing the Crisis You Tried to Prevent", Risk Management Magazine; 1996.
17. ↑ Alaskar, A. H. "Managing troubled projects" paper presented at PMI® Global Congress, North America, New Orleans, PA: Project Management Institute; 2013.
18. ↑ ^{18.0 18.1} S. Carver, "lecture: crisis management in project management 3R", https://www.youtube.com/watch?v=NskMQLDdv0o, Cranfield University; 2013.
19. ↑ Moura, H. "How to deal with troubled projects" Paper presented at PMI® Global Congress, Marsailles, France. PA: Project Management Institute; 2012.