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KUZMANOVA M.
256 Trakia Journal of Sciences, Vol. 14, № 3, 2016
Trakia Journal of Sciences, No 3, pp 256-261, 2016
Copyright © 2016 Trakia University
Available online at:
http://www.uni-sz.bg
ISSN 1313-7069 (print)
ISSN 1313-3551 (online) doi:10.15547/tjs.2016.03.010
Original Contribution
CONTEMPORARY PROBLEMS RELATED TO CRISIS MANAGEMENT OF
ORGANIZATIONS
M. Kuzmanova*
Department of Management, University of National and World Economy, Sofia, Bulgaria
ABSTRACT
The paper discusses important issues related to crisis management of organizations. Organizations'
rebalancing and maintenance of upward growth face a number of challenges such as: continuous
monitoring of the environment and vulnerability analysis of organizations to crisis, stimulation of
innovation and expansion of the possibilities in terms of scarce resources, shortening the time for
response and maximum use of the internal potential for development, etc. Crisis management assists the
organization in solving the most important tasks related to its successful operation under crisis conditions
- determination of first alerts, analysis of the areas that deserve a stronger focus. Change stimulation,
balance in the organization and continuous learning within the organization are of great importance as far
as crisis management is concerned.
Key words: crisis, crisis management, organization, change management
INTRODUCTION
Crisis management is complex and requires the
integration of activities within the individual
functional subsystems of organizations, which
opens up more opportunities for the timely
identification of the symptoms and working
towards successfully overcoming them.
Organizations nowadays face huge challenges
related to handling crisis processes,
considering the persistent trends over the past
years towards an increase in the number and
the duration of crises. Furthermore,
globalization facilitates the spread of crisis
processes at faster rates affecting entire
industries, countries and regions.
ESSENCE AND CHARACTERISTICS OF
CRISIS MANAGEMENT AND CRISIS
In recent years, issues related to crisis
management, have become increasingly
relevant and important for the survival and
progressive development of organizations.
There are various definitions of the concept in
specialized literature. Some researchers
connect crisis management only with the
action taken during times of crisis. [1]
__________________________
*Correspondence to: Mariana Kuzmanova,
Department of Management, University of National
and World Economy, Sofia, Bulgaria, Sofia 1700,
Studentski grad "Hristo Botev", Phone: +359 02
8195 376, E-mail: kuzmanova_mt@abv.bg
According to I. A. Blank crisis management is
a system of principles and methods applied for
the development and implementation of a set
of specific managerial decisions aiming to
raise the awareness about the occurrence of
organizational crises and their management
while minimizing their adverse consequences
[2]. Therefore crisis management encompasses
a number of actions targeted at predicting the
risk of crisis, the analysis of its symptoms, and
taking measures to reduce its possible adverse
implications and to utilize all possible
opportunities with regard to the organization’s
further development.
The analysis of the business operations of the
contemporary organizations provides for
drawing the conclusion that many of them
make mistakes in the area of crisis
management. Among these mistakes are the
following:
Underestimating risks related to the
symptoms of an imminent crisis.
The decision-making process is slowed
down, despite the unfolding crisis
processes.
Underestimating the damage inflicted by
the crisis on the various groups of
stakeholders and as a result on the
organization’s reputation.
KUZMANOVA M.
Trakia Journal of Sciences, Vol. 14, № 3, 2016 257
Insufficient analysis of the key business
processes in the organization affected by
the crisis.
The organization underestimates the
lessons from the acquired negative
experience based on crisis-related
decisions.
There is lack of reserve resources which
can facilitate the process of tackling the
crisis, among other problems.
Therefore, the mistakes made in crisis
management result in grave problems that
jeopardize the existence of the organization:
difficulties related to overcoming the crisis
processes, development of full-scale crisis,
decline in sales and labour productivity,
tarnished company reputation, among other
problems.
Organizations undergo continual changes
related to both internal and external
environment. This calls for changes in the
management methods. This is a reason why
crisis management also undergoes changes and
makes it possible for organizations to adapt
adequately to the new conditions.
The following stages in the evolution of
understanding crisis management can be
outlined [3]:
First stage: emergence of an unexpected
crisis situation. The manager’s
organizational skills and his stress
resistance are of key importance in this
situation. Practice shows, however, that
the aim of crisis management cannot be
limited only to the survival of the
organization.
Second stage: crisis management entails
coordinating activities aiming at
preventing crisis, cushioning the severity
of the crisis and eliminating its negative
consequences.
Third stage: the prevalent argument is that
the efficiency of crisis management
depends primarily on identifying the crisis
on time and the prompt response of the
organization. Therefore, crisis
management has to identify the crisis,
plan the anti-crisis actions and conduct
anti-crisis measures.
Fourth stage: enhancing crisis
management at the expense of forecasting
and preemptive functions, development of
crisis strategies, which include
eliminating the negative socio-economic
consequences of the crisis.
A crisis marks a turning point in the
performance of an organization based on
internal and external factors. There is need for
urgent changes in the management model and
the decision-making practices. The crisis is: "a
low-probability, high-impact event that
threatens the viability of the organization and
is characterized by ambiguity of cause, effect,
and means of resolution, as well as by a belief
that decisions must be made swiftly" [4].
According to Hermann, a given situation can
be considered a crisis when it is seen as
unexpected by the people affected, poses a
threat to them and has to be overcome in due
time [5].
Different characteristics of crises can be
outlined:
A crisis presents both a threat to the
performance of the organization and an
opportunity for its further development.
(Treating a crisis solely as a threat is а
narrow-minded and simplistic approach.)
Ambivalence of the outcome: survival or
end of the organization. According to
Krystek, a crisis is an unplanned, unwanted
process of a limited duration and the
possibility to have impact with ambivalent
outcome [6].
In general, crises are difficult to forecast
and present high risk.
A key factor to the successful handling of
crisis phenomena and processes is the
effective management of the relationships
of the organization with its stakeholders.
Crises quickly spread out of the unit where
they originate.
Crises generate surprises for the
organization since time is limited and there
is deficit of other resources.
A crisis quickly limits the possibilities to
take actions etc.
The causes of a crisis can be both objective
and subjective: the economic situation and the
market conditions, inefficient investment
decisions, employers’ actions, inadequate
managerial decisions etc.
Therefore the factors (reasons) for the crisis
are endogenous and exogenous with regard to
the business organizations.
The development of a crisis as a process
undergoes several stages [7]:
Potential crisis: the performance of the
organization is endangered by the
occurrence of a threat that requires
adequate managerial actions; the genesis
of a crisis process in the organization –
the crisis is not actual, but just possible
KUZMANOVA M.
258 Trakia Journal of Sciences, Vol. 14, № 3, 2016
(the quasi-normal state of the
organization: no reliable symptoms of the
crisis are evident); there is still time
before a crisis in the organization occurs.
Covert (latent crisis): in case no adequate
actions are undertaken during the
potential crisis; temporary difficulties in
the attempts to achieve the organizational
goals and resource allocation; the early
warning system and the potential of the
organization are not fully utilized to
overcome the crisis; efforts should be
aimed at the early identification of the
latent crisis.
Overt (evident crisis): if measures taken
to overcome the covert crisis prove
inefficient; explicitly evident threat to the
efficient performance of the organization,
which could be:
o controllable (acute controllable crisis):
the actual adverse impact of the crisis
starts; the intensity of the real
destructive factors intensifies; lack of
time, which requires immediate and
urgent managerial decisions; the
organization’s potential should be
pulled together in order to overcome
the crisis; the organization is still in a
position to overcome the crisis
successfully;
o uncontrollable (acute uncontrollable
crisis): final stage of the crisis process;
the organization’s potential needed to
overcome the crisis is insufficient; the
crisis should be resolved.
BUILDING CRISIS-MANAGEMENT
TEAMS
Depending on the size of the organization, the
organizational and management structure, the
form of ownership, the specificity of the
industry, the organization environment and
other factors, the individual organizations have
different structures in terms of the departments
engaged in crisis management.
The crisis management departments carry out
the following key tasks [8]:
Facilitating the active inclusion of all
partners and managers of the organization
in the crisis-management activities.
Stimulating employees’ qualification to
solve problems resulting from the crisis,
which might involve their willingness to
sacrifice their own interests.
Providing additional resources needed to
determine the weaknesses of the
organization and resolve them.
Supporting the drafting of documents,
procedures and other materials necessary
for the effective communication with the
mass media and the stakeholders during
the crisis.
Attracting consultants and organizing
training and qualification courses for
managers and specialists to act adequately
in times of crisis.
Generally, the crisis management team
performs operational and coordinating
functions: establishing relations between the
departments in the organization; drafting and
updating the anti-crisis plans; conducting and
supervising the crisis-management decisions;
conducting anti-crisis training, among other
tasks. The team comprises from 3 to 5 people
and the team leader is member of the crisis-
management commission. Team members can
be: directors of departments (production,
finance, marketing etc), director of public
relations department and other people holding
other positions. The team’s good performance
largely depends on the qualities of its
members: flexibility and adaptability to the
changing environment; modern attitude to the
possible consequences; organizational skills;
communication skills necessary in the
interaction with representatives of various
groups of interested parties in the organization
(associates, creditors, representatives of the
mass media and others); good knowledge of
the organizational and management structure
of the organization and the levels of
subordination.
The crisis-management committee includes
representatives of the top management of the
organization, as well as the leader of the crisis
management team. In some organizations only
one crisis management body is created. In this
case a representative of the top management is
included in the crisis-management team.
The committee approves the crisis plans,
developed by the team, including the
distribution of responsibilities within the crisis
management tasks. Representatives of the team
attend committee meetings and take part
(sometimes only in their advisory capacity) in
the activities of the committee. The committee
issues a protocol outlining the decisions made.
Effective crisis management requires that all
members of the organization be included in its
activities relevant to the different levels of
responsibility. Usually there are three levels of
responsibility outlined in the organizations
(there can also be two levels). In the event of
crisis the coordinating body (the crisis
management team) defines its level of
importance. The levels of responsibility are
connected to the levels of importance of the
KUZMANOVA M.
Trakia Journal of Sciences, Vol. 14, № 3, 2016 259
crisis situation and activities which are handled
by the respective level to help the organization
bottom out of the crisis. To this effect the
crisis-related events are positioned in a
pyramid. The events determined as slightly
unfavourable for the organization are placed at
the base of the pyramid. They present a low
risk, can be quickly dealt with and thus they
require few resources and incur low costs. The
more complex problems, which are believed to
present crisis situations, are positioned up the
pyramid. Generally, they require coordination
because they are related to several units in the
organizational structure and/or their
intervention is needed. The top of the pyramid
includes crisis situations that belong to the
third level and they concern the entire
organization and present a high-degree risk for
its regular performance.
The information about the crisis situation can
be received from different sources:
organization’s associates, mass media, clients
and other sources. In all three cases of crisis
situations, anti-crisis plans are implemented in
order to preserve the viability and
sustainability of the organization. The steps of
notification followed by the crisis-management
team are specified in the anti-crisis plans. Each
structural unit has an operational anti-crisis
plan valid throughout the year and updated on
regular basis (at least once a year) depending
on the changed conditions or the occurrence of
crisis situation. The operational anti-crisis
plans are developed on the basis of the
strategic anti-crisis plan of the organization
which is active for a period of 3 to 5 years and
is subject to annual ‘sliding’ update ( at the end
of the first year the plan is updated and the
sixth year as of its initial start is included etc.).
The strategic plan leads to attaining strategic
goals within the framework of the anti-crisis
planning: maintaining the reputation of the
organization, enhancing its crisis sustainability,
among other goals.
The crisis-management team should constantly
conduct explanatory (awareness raising)
activities and organize training courses for its
employees so that all associates should be
convinced in the need for crisis management
and their commitment to the process. This is
why the team members organize the anti-crisis
training sessions during which the employees
acquire knowledge and skills related to
organizational crises and learn how to
overcome them. Along with that, the managers
and experts take part in defining the
weaknesses of the organization. It should be
pointed out that this analysis is to be carried
out at least once a year. It is advisable that
pessimistic scenarios describing the unfolding
of several probable crises that might hit the
organization be developed. The results from
the monitoring of the environment and the
possible solutions to overcome the crisis
situations are presented to the top managers. In
such cases information about organizations
that have experienced crisis and the methods
they have implemented to manage them can be
used.
ENHANCING THE ORGANIZATIONS'
RESISTANCE TO CRISIS
In times of financial and economic crisis the
issue concerning the improved resistance of the
organization to crises becomes even more
topical. In this respect the desire to assess the
future changes in the business environment
relevant to efficient crisis decision-making
come to the fore. In this way preemptive
measures become one of the underlying
strategic factors for success related to defining
the latent (covert) opportunities and threats of
the environment.
Strategic forecasting as an essential element of
the strategic approach for organizational
management allows for:
Timely identification of crisis situations
relevant to the organization’s own
business and that of its competitors;
Utilizing to the full the opportunities
presented by the markets in which the
organization operates or intends to enter;
Timely introduction of new technical
norms and standards;
Timely assessment of sociopolitical
changes critical to the organization, such
as the legal and regulatory framework,
changes in consumer needs and other
factors;
Creating additional opportunities for the
efficient operation of the organization.
These advantages of strategic forecasting make
operational intelligence and its results seem
less important within the system of the
organization’s strategic management. The key
difference between the two types of forecasting
is related to the set of indices, the changes
(dynamics) of which is subject to examination.
As a rule, operational forecasting addresses
liquidity indicators and the evaluation of the
results from the performance of the
organization, while the strategic intelligence
places the focus on the strategic potential for
success (a portfolio of activities, technological
innovation etc.) The essential difference
between the two types of forecasting is based
KUZMANOVA M.
260 Trakia Journal of Sciences, Vol. 14, № 3, 2016
on the type of collected information. With
operational forecasting the information used is
mainly well-structured, mostly in terms of
quantity with limited opportunities for
interpretation, whereas in strategic forecasting,
badly structured information prevails and it is
to a very great extent contradictory, thus
broadening the range of its interpretation.
Considering that, diverse skills are needed in
the two types of forecasting. Operational
forecasting requires analytical skills, expert
evaluation of the development regularities and
evidence analysis. Strategic forecasting
focuses on persuasiveness, though
contradictory conclusions are quite likely
because of the extensive use of discretionary
evaluation. Operational forecasting aims to
determine the possible deviations in the
forecasting indicators relevant to the expected
dynamics of their change, while in strategic
forecasting the assessments arrived at are in
most cases in an inappropriate form, these are
the so called weak signals. [9]
Considering the specifics of the two types of
forecasting, what becomes relevant is the need
to combine them effectively in order to collate
the results and facilitate the answer to the
following [10]:
What is the strength of the impact that
certain “weak signals” of strategic
forecasting have on the results from the
operational forecasting?
Is it possible that the established
regularities are better interpreted through
operational forecasting with regard to the
knowledge about the respective
phenomena acquired in the process of
strategic forecasting?
Where the line should be drawn to
determine certain changes in the
environment as “weak signals” or as
indicators of operational forecasting?
Could strategic and operational
forecasting be treated as equivalent and
complementary methods and as
informational foundation for the strategic
management of the organization?
Igor Ansoff was the first to use the notion "weak
signals" in scientific discussions [11]. He
believed that in general there is no phenomenon
that can occur unexpectedly, though it can cause
overall great surprise. Each phenomenon is
characterized with its own development
accompanied by symptoms of possible
manifestation. Ansoff defines these
accompanying symptoms as “weak signals”.
Their timely assessment considerably increases
the chances for the organization to maneuver,
which tend to decrease considerably with time
and the accumulation of the respective signals.
The cyclical nature of the development of the
organization is always accompanied by crisis
situations. It is therefore hard to imagine that
modern organizations can enjoy success in their
development without the continual monitoring of
the environment and the crisis diagnosis in the
process of the strategic decision-making. The
crisis as an element of the cyclical development
of the organization and rendering it as a deviation
from the equilibrium is inevitable.
CONCLUSIONS
The following conclusions can be drawn:
First, continual monitoring of the internal and
external environment implemented as a means
to analyze the crisis vulnerability of the
organization would minimize the adverse
consequences of the crises.
Second, it is imperative that anti-crisis plans be
prepared in order to minimize, and possibly
avoid risks related to the occurrence and
development of crises.
Third, a crisis-management team, trained to
deal with crises, should be set up.
Fourth, top management should be prepared to
tackle a possible crisis and see such a crisis as
a phenomenon that may possibly jeopardize
the achievement of the organization’s goals
and that requires immediate response.
Fifth, training the employees to act in times of
crises is mandatory.
Sixth, a modern information system should be
developed to facilitate the process of making
efficient crisis decisions etc.
REFERENCES
1. Coombs, W.T., Ongoing Crisis
Communications: Planning, Managing, and
Responding, Sage Publications, Thousand
Oaks, 2011, p. 8
2. Blank, I. A., Management of financial
stabilization of the company. Encyclopedia of
financial manager N 4, Kiev: Nika-Centrum,
Elga, 2003. (In Russian)
3. Yurieva, T. V., A. V. Volzhanin, Zhang Qing,
Competition policy of organization in crisis.
M.: Prospekt, 2010, pp. 52 -53 (In Russian)
4. Pearson, C. M., & Clair, J. A., Reframing
crisis management. Academy of Management
Review, 23(1), 1998, pp. 59–76, p. 60
5. Hermann, C. F., International Crises: Insights
from behavioral research. New York et al.:
Free Press, 1972.
6. Krystek, U., Unternehmungskrisen.
Beschreibung, Vermeidung und Bewȧltigung
überlebenskritischer Prozesse. Wiesbaden,
1987.
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Trakia Journal of Sciences, Vol. 14, № 3, 2016 261
7. Krzystek, M., Organisatorische
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Management: Visionen entwickeln, Strategien
umsetzen, Erfolgspotentiale aufbauen. Zürich:
Versus-Verl., 1997.
11. Ansoff, I., Managing Strategic Surprise by
Response to Weak Signals. In: California
Management Review 2/1995, p. 21