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Crisis Management

The field of crisis management (CM) attempts to mitigate the losses incurred when a crisis occurs and to prevent crises that could occur in the future. An organizational crisis is defined as a low-probability but high-impact event that threatens an organization's existence by disrupting its normal operations and its social legitimacy. An organizational crisis can be distinguished from a natural disaster in that it implies human responsibility; furthermore, it is a highly complex event, both in terms of its genesis and its consequences.

First developed in the field of political science, the theory and practice of CM is today shaped by scholars from many disciplines, as diverse as administrative sciences, systems theory, risk management, positive psychology, and ethics. Gerald Mars and David Weir have rendered a great service to CM theory with their two compilations of papers by some of the most important authors in the field. CM is traditionally divided into two schools. The first, called high reliability theory, argues for the feasibility of designing systems that protect against crises and ensure organizational safety through the use of mechanisms such as centralization of decision making, redundancies, and downsizing of scales. The second school of thought, called normal accident theory, argues that while prevention can be achieved in relatively simple environments, crises cannot be adequately prevented and controlled in other more tightly coupled and complex environments, such as in the nuclear energy industry. Thus, this theory calls for such uncontrollable activities to be banned altogether.

The Crisis Management Model

Many scholars and practitioners consider the management of the Tylenol crisis by Johnson & Johnson (J&J) to be the prototypical example of efficient and ethical CM. In 1982 and 1986, the capsules of extrastrength Tylenol had been tampered with cyanide, leading to the death of six people in the first case and one in the second case. Even though J&J was exonerated of any wrongdoings, since the products were tampered with in the market place and not in the company's facilities or its distribution network, J&J reacted quickly and responsively and recalled 31 million Tylenol bottles—a retail value of more than $100 million. This case has been extremely influential on both CM practice and theory and has led to a checklist of what to do in the case of a crisis. Many observers have praised (1) J&J's quick response and actions; (2) the company's lack of defensiveness and acknowledgment of its responsibility to protect the public; (3) its recall of enormous quantities of product at great cost; (4) its extensive public relations campaign; (5) its redesign of the product, including the tamper-resistant triple-seal now standard in the industry; and (6) its effective defence of its brand name, corporate reputation, market shares, and stock price. J&J's response certainly stands out when compared with less successful CM interventions, such as Union Carbide's Bhopal disaster, the Exxon-Valdez oil spill, the Perrier water contamination incident, or the Three Mile Island nuclear accident. In addition to the points mentioned above, experts often attribute J&J's effective response to the company's mission statement, which stresses its ethical responsibility toward all its stakeholders, and the efficient and caring leadership of James E. Burke, then chairman of the board of McLean, which produces Tylenol.

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