Crisis Leadership

8 Pages Posted: 21 Oct 2008  

Erika Hayes James

University of Virginia - Darden School of Business

Abstract

This technical note examines types of organizational crisis and five phases through which nearly all crises pass. Students are encouraged to move from a mindset that manages crisis to one that generates crisis leadership. Between corporate fraud, scandals, ethical dilemmas, mismanagement, national disasters, and workplace violence, organizational crises have become all too common in recent years. The corporation's reputation with stakeholders, financial well-being, and survival are all at stake. While the actual crisis situation itself is troublesome for the firm (e.g., faulty product leading to a product recall), often the real potential damage to an organization's reputation results from the (mis)/management of the crisis issue.

Excerpt

UVA-OB-0800

CRISIS LEADERSHIP

Between corporate fraud, scandals, ethical dilemmas, mismanagement, national disasters, and workplace violence, organizational crises have become all too common in recent years. The consequences of such crises for an organization's reputation can linger for decades. Consider, for example, how most people continue to hold Johnson and Johnson (J & J) as the standard for how to effectively manage a crisis situation when cyanide-laced Tylenol tablets caused numerous deaths in Chicago in the early 1980s. To this day, the popular press consistently rates J & J as one of America's top companies, despite a crisis situation that could have adversely affected consumer trust and firm performance. Contrast J & J's corporate image with the negative view that people still harbor for the Exxon Corporation nearly 15 years after an accident where the oil tanker Valdez precipitated one of this nation's most extensive oil spills off the coast of Alaska. Unlike the Tylenol scare at J & J, no one died from the oil spill, but EXXON (now ExxonMobil) was and is heavily criticized for both the accident and its handling of it. Consequently, and despite its unequivocal corporate success in the oil and gas industry, the EXXON brand suffered severely. It is no understatement to say that some crisis situations can literally make or break a firm.

The consequences of a business crisis range from mild to severe and from short term to enduring indefinitely. The corporation's reputation with stakeholders and its financial well-being, and survival are all at stake. While the actual crisis situation itself is troublesome for the firm (e.g., faulty product leading to a product recall), often the real potential damage to an organization's reputation results from the (mis)management of the crisis issue.

Defining Crisis

Organizations are susceptible to a number of events or situations that have the potential to severely threaten the firm. In fact, a business crisis is

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Keywords: crisis management, corporate strategy, leadership

Suggested Citation

James, Erika Hayes, Crisis Leadership. Darden Case No. UVA-OB-0800. Available at SSRN: https://ssrn.com/abstract=1281843

Erika Hayes James (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4796 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/james.htm

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