Expert answer:Scandal at Penn State
Solved by verified expert:Complete: a minimum of 1,200 words (total assignment) and three scholarly sources.Consequently, when you are writing answers for the “Complete” section or the “Discuss” posts, always be sure to cite
(reference) your source material, including any material you reference from your course text. Bethel University uses the
APA (American Psychological Association, 6th ed.) style guide for citation.Complete section:1. In a narrative format, summarize the key facts and issues of the case.2. Update the information in the case by researching it on the Internet. Focus your response on the specific issues in the case.3. Consider the impact of the Sandusky scandal on Penn State. What organizational functions (management, marketing, human resources, etc.) were affected by the crisis?How were they affected?4. Who are the internal and external stakeholders? How were the stakeholders affected?5. Imagine you are a crisis management consultant called in to advise Penn State’s Board of Trustees after the scandal began. What steps would you recommend to contain the damage to long-term the university’s overall image and reputation? What factors should you consider and why? Please explain your reasoning regarding your recommendation.
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Copyright © 2014 by SAGE Publications, Inc.
CHAPTER 1
A Framework for
Crisis Management
G
O
I
Visualizing Crisis Management
N
Visualize the term crisis management,S
and a number of images may pop into your
head. Consider these possibilities: ,
■
■
■
■
Maybe you thought of a recent YouTube video of two Domino’s Pizza
employees, one of whom putY
cheese up his nose and then placed it on a
sandwich. The video received nearly one million views on YouTube before
V
it was removed (Beaubien, 2009).
O about numerous outbreaks of violent
Perhaps you remembered stories
weather, particularly tornadoes
N that have hit the Midwest and southern
portions of the United States in recent years. These weather patterns were
N
not only sudden, but were catastrophic the physical and human damage
E
they inflicted.
On a broader level, you might have envisioned a team of managers trying to
deal with a fire that has destroyed part of the production facilities at their
1
manufacturing plant. Indeed, fires remain one of the most prominent types
2
of crises that managers must address.
You might have thought of the
2 tsunami that hit Japan in 2011, causing
widespread death, destruction, and the interruption of global supply chains.
7 by the spread of nuclear fallout in the
This event was further complicated
5
air and water.
Indeed, the term crisis management invokes a number of images in the mind
of the reader. However, crisis management is not just a one-time response to an
unfortunate event. It is much broader than that. We view it as a strategic process
that must occur far before the first crisis ever takes place in the life of the organization. It is a process that must be planned both before and after the crisis occurs.
1
2
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
When we view crisis management as a holistic process, a conceptual framework
must be developed to understand how this process should be organized. A framework functions as a map that helps us see how the different parts of a process are
interrelated. This book offers a framework to help you understand the field of crisis
management and how you can better prepare for crisis events that may occur in
your organization.
The onset of crises in organizations is a common occurrence in our contemporary environment. And yet many people associate a crisis with a highly dramatic
event that produces mass destruction and even causalities. Most organizational
crises are far less dramatic but can still have a substantial negative impact on the
firm. The problem with associating only catastrophic events with a crisis is that
they sound so dramatic that most organizational leaders may assume an “It can’t
happen to us” mentality. But then, consider these crises that are still damaging, yet
less prominent:
■
■
■
G
In January 2012, Coca-Cola Company encountered a problem with its
O Simply Orange and Minute Maid. Some of the prodorange juice products,
ucts sold in the United
I States contained small amounts of carbendazim, an
unapproved fungicide used with oranges from Brazil. Although the fungicide is approved in N
that country, it is not in the United States, prompting
Coca-Cola to move S
into crisis management mode (Kiernan & McKay, 2012).
General Motors (GM)
, faced a setback in late 2011 when its electricity-propelled
Chevy Volt performed poorly in three crash tests that resulted in fires or sparks
from the vehicle’s battery pack. GM, realizing it was facing a crisis, offered
loaner cars to any of Y
the 6,000 Chevy Volt owners while engineers worked to fix
the problem (Terlep,V
2011).
In 2008, a now-infamous online advertisement by Johnson & Johnson (J&J)
promoting its pain O
reliever, Motrin, met resistance from young mothers.
The ad stated that N
mothers who carry their babies in a sling are making
a “fashion statement,” something that many of the moms found offenN
sive (Wheaton, 2008). Johnson & Johnson quickly pulled the ad from the
E
Internet.
As these examples illustrate, not every organizational crisis is dramatic, but each
one can have a far-reaching1impact if it is not managed properly.
Setting the Context
2
2
7
5
Unfortunate events will occur in the life of most organizations. We refer to these
events as crises. There are two broad approaches to the managing of these events:
(1) Try to keep them from occurring in the first place, and (2) mitigate or soften
the impact of the crisis when it does occur. Crisis management is the discipline that
addresses these two approaches.
Crisis management is a field of growing interest because many managers now
realize that their firms are not immune to those sudden, unexpected events that can
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Copyright © 2014 by SAGE Publications, Inc.
Chapter 1. A Framework for Crisis Management
3
put an organization into a tailspin, and sometimes even out of business. This book
is written for managers and students of crisis management. As present or future
leaders in your organizations, the key issue you will face is not whether a crisis will
occur, but when, and what type. As a result, an understanding of crisis management
is an essential part of your toolkit for organizational and professional success.
Developing a Framework
for Studying Crisis Management
A starting point for understanding crisis management is to view it in terms of a
framework. Frameworks group or organize what we experience in organizational
life. In this book, we develop a framework that looks at crisis management in four
distinct phases. In addition, each phase
G is divided into its internal and external
dimensions, a distinction we call landscapes. Our framework begins with a definiO
tion of the term, presented in the next section.
I
N
Definition of Crisis
S
,
The word crisis has been used interchangeably
with a number of other terms,
including disaster, business interruption, catastrophe, emergency, or contingency
(Herbane, 2010). Hence, the definition of a crisis must be established before a suitY
able framework can be developed. Numerous
definitions have been offered, and
Vsome extent. Pearson and Clair (1998) have
most synthesize previous definitions to
offered the most widely used definition
Oof an organizational crisis:
N
An organizational crisis is a low-probability,
high-impact event that threatens
the viability of the organization and
N is characterized by ambiguity of cause,
effect, and means of resolution, as well as by a belief that decisions must be
E
made swiftly. (p. 60)
The following implications of this 1
definition should be highlighted:
■
■
■
A crisis is a “low-probability” 2
event. This characteristic makes the planning
for a crisis even more troublesome.
2 Events that are not perceived to be imminent are hard to plan for. In addition, it is often difficult for management
to find the motivation to plan7for such an event. The notion is, “Why plan
for something bad if it may not
5 occur?” (Spillan & Crandall, 2002). Many
managers have asked that same question until they were confronted with a
major crisis.
A crisis can have a high-damage impact. A crisis can devastate an organization, even kill it, or at best, leave it badly wounded.
The reference to “ambiguity of cause” means that the origins and effects of
the crisis might not be known initially. As humans, we instinctively like to
point to simple causes. We especially seek to look for human stakeholders
4
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
■
■
such as management or company owners who might have contributed to
negligence, ultimately causing a crisis. However, as we will see throughout
this book, multiple interrelated factors can lead to a certain trigger event
that can initiate a crisis.
The ambiguity in this definition also implies that the means of resolving
the crisis are often debatable. In other words, several viable options may
be available for the crisis management team to use in its goal of mitigating
the crisis.
Certain aspects of managing a crisis may require swift decision making.
The failure to act decisively during the acute stage of the crisis can often
intensify the ordeal.
All of these definitions provide a starting point for understanding crisis management. As more understanding of crisis management has emerged, more contemporary ideas and interpretations of crisis and crisis management have been developed.
G
Timothy Coombs’s (2007) has developed one of the most recent conceptualizaO
tions of a crisis:
I
A crisis is the perception of an unpredictable event that threatens important
N and can seriously impact an organization’s perexpectancies of stakeholders
formance and generate negative
outcomes. (pp. 2–3)
S
,
This definition emphasizes perception. A crisis is generally perceived to be a
threat by the organization’s stakeholders, various groups that have an interest in the
organization. Employees, customers,
and the community in which the organization
Y
resides are considered stakeholders. Coombs infers that not all stakeholders will
V
perceive that a crisis is occurring. A product defect that is detected by consumers,
O company, is an example of the incongruity that can
but not individuals inside the
take place. Nonetheless, a crisis
N has occurred, because the perceptions of at least
one group of stakeholders have been affected in a negative manner by the event.
N
Recognizing this distinction is important because there are occasions when manE proclaiming that no crisis has occurred (or could
agement has gone into denial,
ever occur, for that matter), when in fact one has transpired (Sheaffer & ManoNegrin, 2003). Textbooks are full of examples of this type of denial, such as General
1
Motors’ denial that anything was wrong with its Corvair automobile (Nader,
2
1965). In this early 1960s example
of a corporate crisis, consumers and the media
claimed that the Corvair automobile
was subject to instability when going into a
2
turn. Indeed, several accidents involving fatalities had occurred as a result of this
7
structural problem. GM maintained
that the problem of instability was caused by
driver error, not a defect in5the car. This denial by GM that a crisis existed resulted
in a huge public image problem for the company.
This book follows these crisis definition guidelines. We build on the definition
offered by Pearson and Clair in 1998 (which is the most frequently cited in the crisis
management literature), but we also include the perspective offered by Coombs. To
paraphrase Pearson, Clair, and Coombs, we offer the following definition to serve
as our reference point throughout the book:
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Copyright © 2014 by SAGE Publications, Inc.
Chapter 1. A Framework for Crisis Management
A crisis is an event that has a low probability of occurring, but should it occur,
can have a vastly negative impact on the organization. The causes of the crisis, as well as the means to resolve it, may not be readily clear; nonetheless,
its resolution should be approached as quickly as possible. Finally, the crisis
impact may not be initially obvious to all of the relevant stakeholders of the
organization.
One characteristic of a crisis that should be mentioned is this: they rarely occur
without warning. Instead, a number of preconditions usually exist that breed a
crisis. Put differently, crises have life cycles, and understanding what occurs before
a crisis commences is important to helping prevent it.
The Life Cycle of a Crisis
G
Researchers usually examine a crisis in a sequential manner to better understand
O
its evolution. One approach is to look at a crisis in four stages: preconditions, the
I
trigger event, the crisis itself, and the postcrisis.
N one of the first to point out that a set of
1. Preconditions. Smith (1990) was
smaller events typically interact before
Sa crisis occurs. This combination of events
eventually leads to a significant occurrence,
commonly called the “trigger event”
,
(Roux-Dufort, 2009; Smith, 1990), which causes the crisis to commence. For example, the trigger event at Union Carbide’s Bhopal India plant in 1984 was the entry of
water into a gas storage tank that subsequently
caused the unit’s temperature to rise.
Y
The resulting pressure increase forced the dangerous gas methyl isocyanate (MIC)
V
to escape, resulting in the deaths of thousands of innocent civilians. However,
responsibility for the crisis cannot beO
attributed solely to those involved with that
step in the crisis because numerous preconditions
contributed to the origin of the
N
accident. These included shutting down a refrigeration system, failing to reset the
N
tank temperature alarm, the nonfunctioning gas scrubber, and an inoperative flame
tower designed to burn off toxic gasesE(Hartley, 1993).
2. Trigger event. The trigger event is the point at which the crisis escalates and
upsets the normal equilibrium of the1organization. The firm has been functioning normally up to this point, but preconditions
brewing “beneath the surface”
2
have been leading up to the trigger event, ultimately setting the crisis in motion
2
and making it noticeable to the key stakeholders
of the organization. Some might
equate it to the point “where all hell7breaks loose” or “the straw that broke the
camel’s back” (Crandall, 2007).
5
3. Crisis. The escalation of the crisis produces the greatest damage to the
organization and its stakeholders. Potential stakeholders include employees, management, owners or stockholders, customers, those who use social media outlets,
suppliers, the local community, and government regulators. Damage can be extensive during this acute stage of the crisis and can have a major effect on the business
or organization’s continuity.
5
6
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
4. Postcrisis. When the acute phase of the crisis is over, management should
reflect on the event and glean lessons on what changes need to be made to prevent future crisis events (Kovoor-Misra and Nathan, 2000; Smith & Elliott, 2007).
For example, after the first cyanide poisoning in 1982 of extra-strength Tylenol,
Johnson & Johnson switched to a tamper-proof container. After the second poisoning in 1986, J&J made additional changes and manufactured the product as a caplet,
a nonpenetrable material that cannot be adulterated by cyanide.
Strategic Orientation
In many instances, crisis events in organizations are addressed with a short-term,
reactive perspective. When a crisis occurs, select individuals in an organization—
perhaps those on an established crisis management team—convene to minimize the
damage and present a positive
Gimage to the public. Any preparations for dealing with
such crises often focus on effective communications and public relations. In conO
trast, organizations continually face strategic challenges. They must adapt to their
I and modify their strategies to survive and remain
changing business environments
competitive. In doing so, their
N managers tend to adopt a long-term perspective on
strategic planning.
S
Between the extremes of an organizational crisis and a strategic challenge are
obstacles to organizational, success that are not always easy to classify. Indeed,
distinguishing between a crisis and a strategic challenge may be difficult. Consider
these potential scenarios, all of which are based on a number of events that have
Y
occurred over the past several years:
V
A supplier in another country produces a product that turns out to be
defective and the product isOassembled as a component into a domestically manufactured product. The finalN
product fails, and in the process, kills three people. Is
this a crisis or a strategic challenge? The answer is both. It is a crisis because there
N
has been a loss of life because of a defective product. It is a strategic challenge
because the supplier mightE
have been selected solely for its ability to manufacture
the component product at a low cost.
■
■ A labor union stages
1 a mass boycott of certain products that are sold by
domestic companies but manufactured overseas. The message from the protest
2
is that these products have caused the loss of domestic jobs. The boycott causes
2
some revenue loss for the companies
that manufacture and retail these products.
In a few cases, vandalism occurs
on
retail
store properties that offer the products.
7
Is this a crisis or a strategic challenge? Again, it is both. It is a crisis because of the
5
sudden and unexpected loss of revenue for the companies involved. Furthermore,
the damage and public apathy is of concern because it requires swift and effective
decision making to ease the problem. It is a strategic challenge because the products
are made overseas for cost reasons.
■ A major pharmaceutical company begins a program for the expansion of
products that involves addressing health needs for baby boomers, a market that is
seen as a major revenue source in the years to come. Several new drugs are approved
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Chapter 1. A Framework for Crisis Management
and introduced to the market. After a few years, however, one of the drugs is linked
to a deadly heart disease. Pressure to withdraw the drug is put firmly on the pharmaceutical company. Is this a crisis or a strategic challenge? Once again, it is both.
It is a crisis because stakeholder attention is questioning the credibility of the drug
and, indirectly, the credibility of the company. A major repercussion could result
from this event, and swift decisions are required. And it is a strategic challenge
because the drug was in the firm’s long-term arsenal of products that would be
popular and viable over the next 20 years.
■ A major corporation establishes a compensation plan for its management
staff that rewards them on the basis of performance. As hoped, performance indicators begin to look good in certain areas of the company, despite the fact that the
local economy has been faltering. For seven quarters, two managers receive bonuses
based on meeting the performance indices established under the compensation plan.
Unfortunately, it is discovered later that both managers have been “cooking the books.”
G is fined. During the ordeal, the company
They are eventually fired, and the company
receives negative press because of the “unethical
O
acts of its managers.” Is this a crisis
or a strategic challenge? Of course, this
answer
is
both. The crisis aspect was maniI
fested by the reputational and financial damage the company suffered. This dilemma
also has roots as a strategic challenge. N
The decision to set up a bonus plan based on
performance was, in itself, not a poor decision.
Indeed, most managers in both service
S
and manufacturing …
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