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Coping with a Crisis Century
March, 2003
by Ian I. Mitroff, Murat C. Alpasian
FROM THE PERSPECTIVE of crisis management, the first few years of the 21st century have been extraordinary. As a society, we went from the Ford/Firestone fire debacles (May to September, 2000) to the terrorist attacks of Sept. 11, 2001. These were followed in close succession by unsavory revelations that Catholic priests had committed serious acts of child abuse and, furthermore, that these acts were repeatedly covered up by the Church: massive fraud by the top executives of Enron and Arthur Andersen: and allegations that the CIA and FBI failed to do their basic jobs in compiling terrorist information that, if it had been collected and gotten to the right persons at the right time, 9/11 conceivably might have been prevented altogether. Moreover, serious breakdowns in communications occurred inside the CIA and FBI so that an accurate portrait of terrorist intentions could not be formed within their respective agencies, let alone an integrated portrait that could have been formed by sharing information between them.
When it surfaced that the top executives of Adelphia, WorldCom, and Tyco had engaged in criminal and fraudulent behaviors, added to the previous crises, the stock market plummeted. Furthermore, corporate heroes and major cultural icons such as Martha Stewart and General Electric's Jack Welch had their reputations seriously tarnished as the result of "corporate improprieties." While none of these events necessarily "caused" the others--with the possible exception of the relationships between the loss of confidence in the auditing and stock analyst professions, the criminal behavior of a few highly visible CEOs, and precipitous drops in the stock market--they led nonetheless to major drops in consumer confidence and a general lowering of trust in all of our major institutions, as evidenced by the wealth of stories in the major news and business publications.
The question "In which individual, organization, or institution, public or private, can one really trust?" is no longer moot. If the major business and popular press are to be believed, more and more Americans are asking this very question. The general feeling is one of serious and massive betrayal by prominent individuals, major organizations, and institutions.
The fact that the previous crises are unrelated causally does not diminish the general feeling that we are suffering from a psychological overload--in effect, a massive trauma to the nation's psyche. Indeed, overwhelming feelings of vulnerability are, in fact, prominent among the typical outcomes associated with every major crisis. These feelings are magnified and compounded when catastrophes are experienced in quick succession.
The near-simultaneous occurrence of major crises is no longer the exception. Instead, it is indicative of an ominous trend that has been developing over the last 20 years. It has been found repeatedly that a single crisis rarely, if ever, occurs in isolation. Indeed, any crisis can be either the cause or the effect of any other. In other words, every crisis is capable of setting off a chain reaction of other crises. For instance, consider 9/11. Not only was Sept. 11 a "psychopathic act" of unparalleled magnitude, it triggered all sorts of additional crises. For example, it directly affected the entire airline industry in general and the tourism business in particular. The moral is that. in today's world, it is no longer sufficient to plan for the occurrence of individual crises in isolation.
For this very reason, a highly select set of companies known as crisis-prepared construct multiple scenarios and carry out simulations that include the simultaneous occurrence of widely varying crises. These companies stress the importance of crisis capabilities over crisis plans. The reason is that, more often than not, such plans sit on shelves and are not rehearsed until they are necessary. By that time, it is often too late to implement them correctly.
The general thinking of crisis-prepared companies is that any activity which is important for the day-to-day conduct and operations of an organization is important enough to be practiced. Even more so, it is vital to develop working capabilities. A company wouldn't think of hiring an accountant or a finance officer who did not have a working knowledge of or her respective profession. Why should any less be true of crisis management?
Crisis-prepared organizations also understand that, since no crisis ever happens exactly as it has been planned or simulated, it is not necessary to include every conceivable type in one's crisis portfolio. It would be a virtual impossibility even to attempt to do this. Crisis-prepared companies attempt to include at least one type from each of the known categories, such as economic, psychopathic and/ or terrorist, product tampering, reputational, etc. The goal is to have at least thought about the unthinkable as broadly as possible prior to its occurrence.
It has been found that organizations prepared for a broad array of crises recover one-third faster and at substantially less cost than those that are not. An integrated and systemic approach to crisis management literally pays off.
In contrast, crisis-prone organizations prepare for a narrow and limited set of scenarios. If they even prepare at all, it is only for natural disasters, fires, explosions, and already known crises that are part of their day-to-day operations and industry. In short, they prepare for high-probability, high-consequence disasters and events. Low-probability, but high-consequence crises such as 9/11 don't make it onto their radar screens because such events have not happened in the past. Therefore, there are no reliable or historical data that exist to use in preparation for them. In addition, the probability of their occurrence is extremely low, thus acting to limit their consideration as well. The general thinking is that, "Without firm data, one does not have a solid basis on which to evaluate the benefits vs. the costs of preparing for crises that have not yet occurred."
Over the 20 years that we have been studying crisis management, the differences between these two types of organizations have remained relatively constant. Estimates with regard to the number of crisis-prepared organizations range from five to 25%, depending upon the time period in which they are studied and how they are assessed. In contrast, estimates of the number of crisis-prone organizations vary between 75 and 95%.
"Normal accidents"
Complicating the types of crises is another critical dimension--normal vs. abnormal. The term "normal accidents" was coined by Yale University sociologist Charles Perrow in his influential 1986 book, Normal Accidents. Perrow referred to modern disasters, such as nuclear power plant malfunctions--airplane crashes, and oil tankers running aground--as "normal" because they were "built into the system."
Modern technologies are so complicated that the potential for their breakdown is literally built into them through their initial design, subsequent operations, and maintenance procedures. For instance, in most chemical plants, the number of valves that can be opened and closed and the various temperature settings in the chemical reactors are so numerous that no amount of theoretical calculations or computer simulations can predict accurately all of the varied configurations or final end states that can result. It is thus extremely difficult--some would even say impossible--to know, let alone predict, all of the dangerous end states. This theory means that we are operating extremely complex systems with management systems that are not up to their intended task. Indeed, it is known from systems theory that, if a management system is at a lower level of complexity than the system it is attempting to control, a major, "normal accident" or crisis is virtually guaranteed. Prime examples are the Bhopal chemical disaster, the reactor leaks at Chernobyl and Three Mile Island, and the oil pollution from the Exxon Valdez.
If normal accidents weren't bad enough, recent occurrences such as the Enron/Andersen financial scandals and the Catholic Church sexual abuse cases have introduced a new and even-more-dangerous wrinkle. In this regard, 9/11 is one of the worst examples of all.
It is one thing for complex systems to experience breakdowns because of their inherent complexities. It is quite another for them to experience breakups because of evil actors and/or evil intentions. In the first case--i.e., breakdowns--crises are not necessarily intentional, although they can be through the deliberate neglect of safety and the failure to devote adequate resources to it. In contrast, "abnormal accidents"--if the word "accidents" is even appropriate in this case--are the result of planned, deliberate, and intended evil actions. Sept. 11 is not only the prime example, but the most horrendous.
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