Expert answer:Crisis Management

Expert answer:1200 words. APA Format. 3 scholarly sources. Case starts on pg. 218. Crisis Management: Taking Action When Disaster Hits Case Study: Mini-Case- Taco Bell Thanks You for Suing Them Question 1 In a narrative format, summarize the key facts and issues of the case. Question 2 Update the information in the case by researching it on the Internet. Focus your response on the specific issues in the case. Question 3 Discuss two successful cases of organizations that managed a crisis successfully. What steps did they take to effectively manage the crisis? What criteria did you use to measure the success of their crisis management interventions? Compare their success to Taco Bells. Were they more or less successful? Question 4 Assume that you are the leader of the crisis management team (CMT) of a facility that has hazardous materials in storage for future use in manufacturing your products. Formulate a crisis management plan (CMP) that would prepare the facility and the organization for potential crises. Be specific and detailed in the development process.
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CHAPTER 7
M
C
D
O
N
O
U
G
Landscape Survey
Strategic Planning
H
,
Chapter 4: A Strategic
Chapter 6:
Crisis Management: Taking
Action When Disaster Hits
The
Internal
Landscape
The
External
Landscape
Approach to Crisis
Management
Chapter 2:
The Crisis
Management
Landscape
Chapter 3:
Sources of
Organizational Crises
Chapter 5:
Forming the
Crisis
Management
Team and
Writing the
Plan
Organizational
Strategy
and Crises
B
R
ICrisis
T
T
A
N
Y
Crisis Management
Chapter 7:
Crisis
Management:
Taking Action
When
Disaster Hits
Chapter 8:
Crisis
Communications
Organizational
Learning
Chapter 9:
The
Importance
of Organizational
Learning
Chapter 10:
The
Underlying
Role of Ethics
in Crisis
Management
Opening Case, Part 3:
The BP Gulf of Mexico Oil Spill
5
9
Before the Deepwater Horizon incident in 2010, British Petroleum (BP) was already
under scrutiny for some of its maintenance 9
and safety practices. Two incidents
that had occurred only a few years earlier had 2
gained much attention. An accident
involving worker fatalities occurred in 2005 at a Texas City refinery. In addition, a
B
large amount of oil had spilled in Alaska due to the faulty maintenance of pipes in
2006. Both events would be relived again as theU
public demanded accountability on
the part of the oil giant.
167
168
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
Previous Incidents
In 2005, a large explosion occurred at a BP refinery in Texas City, Texas, killing
15 employees and injuring another 170 workers. BP was found to be in violation
of the Clean Air Act and was the first company to be prosecuted under a section of
the act that was designed to prevent injuries to employees. The company was fined
$50 million (Sawayda & Jackson, 2011).
BP acquired the Texas City refinery in 1999 from Amoco. Upon purchase, the
M
refinery was in need of a major overhaul; Amoco had neglected maintenance and
C BP headquarters was in the midst of a
safety upgrades for years. Unfortunately,
25 percent budget cut (Elkind, Whitford,
D & Burke, 2010), meaning such upgrades
would be slow. The at-risk plant eventually had a malfunction on a cooking tank
O
processing gasoline additives. The tank boiled over, sending a vapor cloud over
N
the refinery. A pickup truck in the parking
lot backfired, igniting the vapor cloud
(Elkind et al., 2010). The accident attracted
a
lot of negative attention for BP as the
O
refinery declined further, making it vulnerable to this type of accident.
U
In 2006, BP pipelines leaked in the Prudhoe Bay region of Alaska. The leaks
G
were due to years of neglect in maintaining
the lines and addressing corrosion.
The pipeline failures triggered a 200,000-gallon
oil leak and resulted in another
H
violation of the Clean Air Act. BP was ordered to pay a total of $45 million in fines,
,
$12 million in criminal fines, $4 million to the National Fish and Wildlife
Foundation, $4 million in criminal restitution to the state of Alaska, and $25 million
for violating clean air and water lawsB
(Sawayda & Jackson, 2011).
R
The Arrival of Tony Hayward
I
T BP enlisted Tony Hayward as chief execuTo help address its safety problems,
tive office (CEO) in 2007. Hayward T
had joined the company in 1982, working as a
geologist and traveling the globe, helping the company find new sources of oil. At
A
the time, John Browne was a charismatic, celebrity-style CEO who had led the comN(Elkind et al., 2010). Under Browne’s reign,
pany through growth by acquisitions
BP took on more risks but also slashed
Y budgets, creating an atmosphere of vulnerability in the area of field operations. Texas City and the Alaskan oil pipe problems
were examples of how cost cutting created problems for the company.
5and get the company in “silent running” mode, a
Hayward’s role was to improve safety
term used to indicate “a quiet, methodical,
9 trouble-free operation, with no problems, no
surprises, and high productivity” (Campbell, 2008, p. 18). Hayward went to work insti9
tuting expansive changes to improve safety, including the implementation of a common
2 rules and training for all facilities (Mouawad,
management system with precise safety
2010). Under his reign, Hayward has been
B given credit for improving the safety culture
of BP and for its operational performance (Orwall, Langley, & Herron, 2010).
U
Individual Safety Versus Process Safety
Despite the improvements in the safety culture at BP, critics charged that too
much emphasis was placed on ensuring individual worker safety, and not enough
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Chapter 7. Crisis Management: Taking Action When Disaster Hits
attention was devoted to process safety. Individual safety in the workplace focuses
on ensuring that employees do not commit unsafe acts, such as lifting a heavy
object incorrectly. As a result, workplace rules such as requiring employees to wear
eye protection when working around machinery are established. At BP, strict guidelines were in place that prohibited employees from carrying a cup of coffee unless
it had a lid (Elkind et al., 2011). While these kinds of rules can decrease accidents,
they do not address the hazards that can occur on a drilling rig or in a refinery such
as the one at Texas City.
M
Process safety is much broader and does not assume that employee error is the
C it emphasizes the “process” that
primary cause for workplace accidents. Instead,
caused the employee to commit the error in theD
first place. For example, poor training of an employee—a process—can contribute to that employee’s involvement
O
in a workplace accident. Process safety does not blame an individual employee or
equipment failure (Schreiber, 2012). Instead, ifN
equipment did fail, the process that
caused the failure would be examined. Perhaps
O poor maintenance—a process—
caused failure. The process approach to safety seeks to identify root causes, at which
U can be addressed from a more
time safety issues and the prevention of accidents
G
holistic perspective.
For BP, one process in particular was suspect:
Hconducting of a negative pressure
test on a well. A correct understanding of the test results was necessary, because it
,
indicated whether hydrocarbons and oil were entering
the drill casing. However, BP
had a process problem because it did not have standardized procedure to conduct
the test, interpret the results, and respond if the
B test indicated the well had failed
(Crooks, Pfeifer, & McNulty, 2010). The process for checking the integrity of the
R
well was not defined, and therefore flaws compromised
the safety of the well, the
rig, and its employees. In hindsight, we knowInow that flammable hydrocarbons
and oil entered the drill casing, that the well was indeed compromised, and that a
T
fatal incident occurred.
T
A
Opening Case Part 3 Questions
N
Yoccurred where you work. Assume
1. Think of an example of an accident that
that you cannot assign the blame to employee error or faulty equipment.
Instead, analyze the process that led to the accident, and identify any flaws
5
that existed in the process.
9
2. Was the Deepwater Horizon accident a problem associated more with cost
9
cutting or with a faulty process safety culture?
Opening Part 3 Case References
2
B
U
Campbell, H. (2008). Keep on running. BP, Issue 8, 16–23.
Crooks, E., Pfeifer, S., & McNulty, S. (2010, October 7). A sea change needed. Financial Times, p. 9.
Elkind, P., Whitford, D., & Burke, D. (2011, February 7). An accident waiting to happen.
Fortune, 105–132.
Mouawad, J. (2010, May 8). For BP, a history of spills and safety lapses. New York Times,
p. A22.
169
170
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
Orwall, B., Langley, M. & Herron, J. (2010, July 26). Embattled BP chief to exit—American
Robert Dudley to succeed Tony Hayward as head of British oil giant. Wall Street Journal,
p. A1.
Sawayda, J., & Jackson, J. (2011). BP struggles to resolve sustainability disaster. In O. C.
Ferrell, John Fraedrich, & Linda Ferrell (Eds.), Business ethics: Ethical decision making
and cases (9th ed., pp. 342–354). Mason, OH: South-Western Cengage Learning.
Schreiber, J. (2012). Working with the CSB after a major accident. Chemical Engineering,
119(7), 49–51.
M
C
D
High-profile events such as the terrorist attacks of September 11, 2001, the Enron
O
scandal in 2001, and Hurricane Katrina in 2005 have highlighted the importance
N crises do not receive as much attention
of crisis preparedness. Most organizational
as these examples, but they still constitute
O major events for the firm and the community. As a result, many organizations have begun to analyze their vulnerabilities.
Ucrises is much less traumatic and costly than
Indeed, anticipating and preparing for
Gwithout a plan for managing it. Assuming a
experiencing an unexpected calamity
company will always remain free from
H any type of crisis is guesswork at best. For
some organizational leaders, this may involve confronting “paradigm blindness,”
a condition “where people are unable, to see information that threatens and discon-
Introduction
firms their worldview” (Wheatley, 2006, p. 18).
There are countless stories about the
B lack of a plan causing severe or even irreparable damage to a firm. Interestingly, however, there are also examples where proper
R not only kept the crisis under control but
planning and execution of a crisis plan
also resulted in positive changes for the
I business (Borodzicz & van Haperen, 2002).
This topic of positive change is explored in depth in Chapter 9, “The Importance
T
of Organizational Learning.”
T somewhat unexpected and unpredictable.
Most crises are, by their very nature,
A poorly managed crisis can severelyAdamage a firm’s reputation and profitability.
As mentioned, proactive organizations should develop crisis management responses
N
for managing an event should it occur. Some businesses encounter “smoldering”
crises that start internally and slowlyYcreate problems that can be more difficult to
resolve in their later stages (Institute for Crisis Management, 2011). Other crises
can occur externally and take the organization by surprise. Effective crisis manage5
ment requires managers to develop strategies that are integrated with the annual
corporate planning process (Preble,91997). Its effectiveness can be enhanced if
managers are able to identify a potential
9 crisis and develop appropriate strategies
to prevent it, or at least mitigate its effects.
2
This chapter focuses on the management practices and decision-making activiB beginning, duration, and conclusion of the
ties that should be implemented at the
crisis event. The first part of this chapter
U addresses the initial response actions that
are critical in the assessment of the crisis during its onset. The next part discusses
key issues relating to managing the crisis. Response strategies and mitigation of the
crisis are the major concerns here. In this stage, managers must make decisive decisions that will determine the success or failure of their crisis management efforts.
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Copyright © 2014 by SAGE Publications, Inc.
Chapter 7. Crisis Management: Taking Action When Disaster Hits
171
The final part of the chapter discusses what happens after the crisis, including the
issues of recovery, reentry, and business continuity. Ultimately, the organization
must regroup and return to normal operations or its survival may be in jeopardy.
Strategies at the Beginning of a Crisis
The first step in the formal response to a crisis M
is to convene the crisis management
team (CMT). Recall that the organization should
C have a preestablished team and
a crisis management plan (CMP). Activating the team may be as simple as one
D
member calling the team together. Alternatively, an employee in the organization
Oor developing crisis at hand. Once
may alert a member of the CMT to the potential
convened, the team begins the process of assessing
N the situation.
The response to the onset of a crisis depends on the nature of the event. Some
O
crisis situations, such as an industrial accident, the sudden death of a senior executive,
Ua chemical spill, can occur quickly
the notification of a government investigation, or
and often with little or no warning. Others, such
G as a hostile takeover, union labor
unrest, a consumer boycott, or corporate embezzlement, develop over a longer period
H to a crisis is related to its impact
of time. The length of time managers have to react
, a CMP makes it possible to think
on the organization and its stakeholders. Having
and act expediently during the first few hours of a crisis. The CMP is a key strategic
organizational tool responsible for initiating the crisis decision-making process by
B responsible for implementing
helping to frame the problem, determine the parties
various actions, and develop justifications for the
Rdecisions that are made.
I
T
Leadership of the CMT
T
Effective leadership is necessary during a crisis, both by the leader of the CMT
A This team is responsible for
and by top management (Wooten & James, 2008).
making and implementing decisions that helpNthe organization resolve the crisis.
Three components of the CMT that must beYpresent for crisis leadership to be
successful are (1) the right leadership, (2) the structure and resources necessary to
accomplish crisis response and containment, and (3) broad public support for the
organization (Cavanaugh, 2003).
5
In a crisis response, CMT members should9not only be knowledgeable about
their own roles on the team but also willing to accept suggestions presented by
members who are experts in other areas. The 9
CMT leader must have an array of
both leadership and management skills. Drawing
2 from the experience of the military and the emergency services sector, Crichton, Lauche, and Flin (2005) identified
B
the following skills needed for the CMT leader:
U
■
■
■
Situation assessment: Being able to identify the problem accurately
Decision making: Deciding what the CMT should do
Team coordination: Getting the CMT and affiliated stakeholders to work
together
172
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
■
■
■
■
■
Communicating: Deciding how to receive and deliver relevant information
Monitoring: Keeping abreast of key developments
Delegating: Assigning tasks to individual CMT members
Prioritizing: Determining the importance of incoming information and
what should be done next
Planning: Taking part in the planning process and encouraging task completion
The CMT leader should utilize these competencies by taking charge of the situation, assessing the level of crisis seriousness,
determining the level of resources
M
needed, and then making the decisions
that
will
resolve the crisis (Cavanaugh,
C
2003). Simultaneously, the leader should be in frequent communication with his
or her team members to implementD
the crisis plan. Within the context of this role,
the leader must recognize and implement
O these actions while remaining visible and
available. Admiral Thad Allen of the U.S. Coast Guard led the incident command
N
efforts for the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. During
O demanded that he spend half his time in
the crisis, his visibility and availability
Washington, D.C., briefing members
Uof Congress, the rest of the administration,
and the media. The other half of his time was spent on board Coast Guard boats
G
in the Gulf. He commented, “If you’re not visible to your people out on the boats
H
who are trying to pull a boon in Barataria
Bay in 110-degree heat, then you’re
not a credible leader, because you don’t
, understand what they’re going through”
(Berinato, 2010, p. 78).
The leader must have the ability to remain calm and focused on the crisis manB under significant pressure. In fact, the
agement process while making decisions
CMT leader may be required to make
R decisions without certain desired information, because a crisis is characterized by high levels of ambiguity and stress (Baran
I
& Adelman, 2010). Moreover, those involved in the crisis are having their assumpT & Clair, 1998). Recall that some crises take
tions about reality challenged (Pearson
the CMT to places they have never been
T before in terms of experiences, what management scholar Karl Weick (1993) labeled as “cosmology episodes.”
A
All crises create tension and stress. Acute stressors for the CMT can include chaN time pressure, consequences and accountotic events, communication problems,
ability, fear of failure, dealing with the
Y media, and information problems including
overload, missing, and/or ambiguous information. Maintaining control allows
the leader to sustain an objective perspective and see the way through complex
and confusing scenarios. Hence, the5leader must present an objective perspective
quickly and methodically for all stakeholders
(Rolston & McNerney, 2003).
9
One final note should be mentioned concerning the attributes of the CMT
9 success. As Schoenberg (2005) noted:
leader: there is no one best profile for
2
A crisis leader in one situation may be a follower in a different situation. A criB
sis leader in a natural disaster will need to demonstrate different skills than a
crisis leader of a product recall. A U
crisis leader dealing with employee sabotage
or violence faces an entirely different situation. (p. 3)
Crisis leaders should also mentor less experienced team members. In fact, it is
likely that the leader is mentoring without even knowing it (Berinato, 2010).
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Copyright © 2014 by SAGE Publications, Inc.
Chapter 7. Crisis Management: Taking Action When Disaster Hits
Situational Assessment
One of the first tasks of the CMT is to assess the situation so that decisions
can be made to mitigate the crisis (Wilson, 2004). Situational assessment refers to
the information processing and knowledge creation aspects of crisis management
(Coombs, 2007). Endsley and Garland (2000) describe it as an awareness of knowing what is going on and then predicting how the crisis may evolve. Situational
awareness is critical to understanding the crisis and identifying its dimensions and
M
intensity. Unfortunately, the crisis management literature offers extensive examples
C were erroneous. We overview
of how the initial stages of assessing the situation
several of these.
D
O
The 1989 Hillsborough Soccer Tragedy
N
A tragic case involving errors in the situational
O assessment stage of a crisis situation occurred at the 1989 Hillsborough soccer match in Sheffield, England. In this
U
incident, 97 fatalities occurred in a section of the stands that had become thronged
Gdeath (Taylor, 1990). The response
with people. Most of the victims were …
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