How to manage corporate crisis issues
Due to information asymmetry and insufficient sharing of resources. Our enterprises will encounter sudden crises such as financial, personnel, and media crises during decision-making. What are the causes of these crises? How we face them and how we manage them before and after the crisis has become our top priority.
1. Corporate crisis issues and crisis management
(1) Definition and characteristics of crisis
A crisis is an uncertainty that will cause potential negative effects Incidents, which are always minor at first, and their consequences can cause huge damage to an organization and its employees, products, services, assets and reputation, and even threaten the very existence of the organization. Foster found: ?A crisis has four distinguishing characteristics: an urgent need to make a decision quickly, and a severe lack of the trained staff, material resources, and time necessary to make it happen. ?
Rosenthal and Pienberg's concept of crisis: "Crisis refers to a situation with serious threats, uncertainty and a sense of crisis."
BARTON, in 1993, believed that a crisis is a large event with uncertainty that will cause potential negative effects. Such incidents and their aftermath can cause significant damage to an organization, its employees, products, services, assets and reputation. ?
However, these definitions do not reveal the real cause of the crisis. The definitions focus more on the consequences and harms of the crisis. After summary, the crisis is defined as: It is caused by competition and is caused by enterprises or organizations. In pursuit of one-sided profit maximization, social responsibilities are ignored, resulting in a series of wrong decisions that trigger a chain reaction. Here we define a crisis as a decision-making situation. In this scenario, the basic social values ??and code of conduct structure identified by the organization as the decision-maker are facing serious threats, and the decision-maker must make critical decisions and specific decisions within limited time and under extremely high uncertainty factors. Crisis response measures. From the definition of crisis, we can see that crisis mainly exhibits the following characteristics:
Universality. Every business faces crises and cannot escape them.
Sudden. That is, unpredictability. Those unpredictable, ignored, disruptive accidents are crises. At this time, the enterprise's internal environment or external environment suddenly changes, such as policy changes, important personnel changes, natural disasters, etc., which are often unexpected and difficult for the enterprise to resist.
Urgency. It means that the crisis suffered by an enterprise not only comes suddenly, but also develops rapidly. It requires managers to use limited resources and take practical and effective measures to prevent the incident from expanding and avoid ripple effects from spreading to other areas.
Dual nature. Crisis, that is, danger and opportunity, is the watershed between the turning point and the deterioration of an organization's destiny. Norman Augustine once said: "Every crisis contains the root causes of failure and the seeds of success." This dialectically illustrates the two sides of the crisis. The two sides of the crisis also show that correctly handling the crisis will promote the development and transformation of the enterprise, but if it is handled improperly, it will cause serious harm to the enterprise, and the consequences are often incalculable.
Sociality. With the development of the mass communication industry, any crisis in an enterprise will arouse widespread public attention and become a focus and hot spot, making every move of the enterprise have extensive social effects.
There is no way to avoid sex. Because we have to manage, make decisions, and make profits. Therefore, we cannot avoid crisis problems in enterprises. Sometimes management is just coordinating the problem and avoiding the expansion of the problem. This laid the fuse for the crisis to break out.
(2) Classification of crisis issues
If you want to classify crises, they can be divided into many types. Here we distinguish them according to the reasons for the outbreak of the crisis.
1. Financial crisis
Financial crisis generally refers to lack of working capital, accounting errors and financial indicators lower than expected. It will cause difficulties in the daily operation of the enterprise, and the financial crisis will seriously damage the credit of the enterprise, which will result in the reduction of corporate profits.
2. Personnel crisis
Personnel crisis refers to the impact on the business activities of the company due to personnel changes within the company, usually due to job changes, work accidents, or sudden changes in senior decision-makers Death, resulting in low employee morale. Without anyone to control the company, the company has gone astray.
3. Media crisis
Due to the defects or defects of its own products, it is not a quality problem from the perspective of implementation standards, but due to the negative impact of media reports, it has caused harm to the company Unforeseen effects. However, a large part of it is due to unobjective reporting by the media, which amplifies wrong signals and transmits them to consumers who do not know the details, resulting in destructive public opinion effects.
4. Sudden crisis
Due to the impact of policies, weather or other external environments, corporate lawsuits, product defects or quality problems, government investigations or fines, and technical defects may occur to the company. , natural disasters, economic boycotts, and strikes are what we call sudden crises.
(3) Crisis management
Crisis management is the process of planning and decision-making, dynamic adjustment, resolution, employee training and other activities carried out by enterprises to cope with various crisis scenarios. The purpose is to eliminate or reduce the threat posed by the crisis. Crisis management adheres to the positive code of conduct that "crisis means not only threats, but also dangers and opportunities." Crisis management has three major characteristics: uncertainty, contingency and prevention. Since the outbreak of a crisis often brings significant economic losses and image damage to the enterprise, improper handling may even lead to the collapse of the enterprise. Therefore, how to handle the crisis well before, during and after the crisis. And how to establish a crisis prevention system is the focus of our discussion.
It mainly includes three stages, namely prevention before the event, control during the event, and summary after the event.
1. Precaution
The focus of crisis management is to prevent crises, not to deal with them. Excellent crisis prevention management can not only predict possible crisis situations and actively take pre-control measures, but also prepare for possible crises and draw up plans to cope with them with ease. The main crisis prevention measures include the following:
(1) Establish a strong crisis awareness.
(2) Introduce a crisis management framework structure.
(3) Establish a crisis early warning system. The crisis early warning system uses certain scientific and technical methods and means to analyze the variables in the production and operation process of the enterprise and set warning indicators on the alarm sources of possible crises, capture warning signals in a timely manner, and monitor the operating status of the enterprise at any time , conduct advance prediction and analysis of problems that endanger one's own survival and development, in order to prevent and control the outbreak of crises.
2. Control during the incident
(1) Start the crisis management plan as quickly as possible. If the initial response is delayed, it will cause the crisis to spread and expand.
(2) The interests of the public should be given top priority.
(3) Develop efficient information dissemination channels.
(4) Choose appropriate crisis management strategies, such as crisis suspension strategy, crisis isolation strategy, and crisis elimination strategy.
(5) Give full play to the role of notarized or authoritative institutions in resolving the crisis.
3. Post-event summary
Crisis summary is the last important link in crisis management. It has important reference value for formulating a new round of crisis prevention measures. Therefore, in response to crisis management Make a careful and systematic summary.
2. Important types and characteristics of corporate crisis problems
(1) Financial crisis
Under the conditions of fiercely competitive market economy, the financial crisis of enterprises is the It exists objectively and is caused by various uncertain factors such as financing, capital recovery, asset price decline, investment and profit distribution. But common reasons include the following types:
1. Internal financial relationships are chaotic.
Department accounts are independent, leaving small treasury. There is no clear financial review and approval process, and only the leader can sign. For example, Luoyang Chuntu has established dozens of branches, large and small, and it is unclear who owes whom when it goes bankrupt and liquidated. A confused account.
2. Excessive debt.
Overly optimistic corporate development prospects and blind debt often appear in newly listed companies. Enron's glory was built on crazy fraud. It borrowed huge amounts of funds, but most of the borrowings were included in some partnerships controlled by the company's senior executives and were not reflected on the company's balance sheet, resulting in a debt of up to 13 billion US dollars unknown to investors. At the same time, Enron used huge borrowings to expand aggressively, but most of its investments were in vain.
3. Decline in efficiency
This is a problem that enterprises often face. Due to the saturation of the market, competitors are trying their best to compete for limited customer resources, resulting in a decline in enterprise efficiency. They mostly appear in sunset industries, such as the coal, textile and steel industries. This is often due to the slow technological updates and high energy consumption of old companies, resulting in high costs and often unable to compete with emerging small steel plants.
(2) Personnel crisis
Due to the loss of tangible and intangible assets caused by the brain drain to the enterprise, and the further deterioration, we call it the personnel crisis. The value of intangible assets and intellectual value in modern enterprises are increasingly important, and the individual intellectual capital of employees has gradually become an inseparable fixed asset of the enterprise. It is precisely because of the increase in employees' personal intellectual capital that the company's intangible assets are greatly damaged when employees change jobs. Specific situations include the following types.
1. The loss of confidential technology due to job hopping allows competitors to obtain the company's core technology, causing immeasurable losses.
2. Take away the team and resources. Once an important department employee changes jobs, he will get better treatment. There will be an unpredictable chain reaction, which will gradually cause the current employees to become mentally unstable and slowly choose to leave.
3. Important personnel have resigned and the company’s business has stagnated. Since important personnel control the entire process of the company from decision-making to supervision and execution, and know the operation and management of the company well, his departure will make the company face implementation difficulties. problems, causing business to stagnate.
The feud between Huawei and Harbor: In 1993, Li Yinan, a junior class student at Huazhong University of Science and Technology, entered Huawei's R&D department after graduating with a master's degree. With his outstanding technology, performance and leadership skills, he was promoted to President of Huawei's Central Research Department in 1995. Vice president of the company, he was appointed executive vice president of Huawei in 1998, and president of Huawei Electric Co., Ltd. in 1999. In 2000, he left Huawei and founded Beijing Harbor Communications Company independently, with independent research and development, production and sales. As soon as it started, annual sales reached 200 million yuan, and within two years it received 1 billion yuan in venture capital. At the same time, many key tasks were poached from Huawei, and many of them even brought the plans to the harbor after completing them. In other words, they used Huawei's resources to do things for Hong Kong, including later using Huawei's technology to grab Huawei's market, which had a considerable impact on Huawei. Until Huawei took Harbor to court, it ended with a happy ending for Huawei to acquire Harbor, which prevented Huawei from having a greater personnel crisis. But it reminds us once again that the role human capital plays in the new economy is immeasurable.
(3) Media crisis
Due to inconsistent publicity or various reasons, the media intervenes in advance in incidents that should be resolved through normal channels, causing serious public opinion pressure on enterprises and affecting consumers. Those who mislead public opinion may cause a media crisis. Because the media crisis can be classified as a sudden crisis, but because more and more shady stories are first reported by the media. I had to face it alone as a special atypical crisis.
Shi Yuzhu’s Melatonin and Journey are rubbish. At first I was very happy when I saw this title. I felt that finally some media stood up and told the truth. It was brave and the king of hype Shi Yuzhu fought for real. I started doing it, but after taking a closer look, I found that I had been fooled again! I had been fooled again by Shi Yuzhu, a rubbish media. His melatonin phrase: "No gifts for the holidays this year, only melatonin" resounded across the land. For a time, many media outlets denounced junk advertising and vulgar slogans, which did not comply with any principle of advertising. But the louder your noise, the greater his advertising investment, and he actually became the CCTV standard king. Later, Golden Partner was launched, and with the help of melatonin’s similar packaging and advertising, it soared again. No wonder some people say that Shi Yuzhu is a marketing geek who successfully used unfavorable factors to turn bad things into good things. The theory that crisis is a double-edged sword is fulfilled. Later, he launched the Zhengtu online game and shouted loudly that he would put the Zhengtu game on the market, which again aroused discussion and condemnation in the media. This time he used negative news again, first quoting the satirical language of the original work, and then citing the current situation of the journey to prove that he is the most profitable among free online games. This proves that no matter what Zhengtu Game is, if it makes money and the players make money, then Zhengtu is a good game. He successfully avoided the discussion of whether the game's content was garbage, and changed his tone from bad to good. High! Really high! (The original advertisement can be found on the advertising page of Dahe Newspaper)
(4) Sudden crisis
When faced with a sudden crisis, companies feel at a loss as to what to do, because Sudden crises may be caused by weather, suppliers, logistics providers, or even crises caused by third-party scholars and organizations. Although they have no direct conflict with the company, they all point their finger at the company's products, which are closely related to consumers. It has the following characteristics:
(1) It is fierce and can come and go at will
In the Teflon incident, third-party experts said it may contain carcinogenic ingredients, and various media There were reports one after another, which made Dupont unable to lift his head for a while. However, no one has definite evidence to prove cancer prevention. Just after DuPont invested huge funds to prove that it has no carcinogenic ingredients, it can no longer attract the attention of consumers, as if this matter has never happened.
(2) It is often caused by a third party
The most typical one is the Sudan red incident: On February 18, 2005, the British Food Standards Agency issued a report on food containing added Sudan red pigment. The food issued a warning to consumers and published on its website 359 brands of food produced by 30 companies including Heinz and Unilever that may contain Sudan Red 1, and stated that Sudan Red is a confirmed carcinogen. , and finally after layers of encirclement and suppression, the source was finally locked in an inconspicuous and very small raw material supplier. Later, a research report pointed out that Sudan Red is mutagenic and carcinogenic, and Sudan Red (No. 1) showed possible carcinogenic properties in human liver cell studies. However, it has only been found to be carcinogenic in experiments on mice, and its carcinogenicity to humans has not yet been determined. Sudan red is a chemical dye. The amount added to food is very small. In terms of dosage, it may not be enough to cause cancer. Citizens should not panic too much. It is impossible to cause cancer if consumed in small amounts. Even if consumed for half a year, there is no clear scientific basis for causing cancer if consumed in small amounts each time. There is no need to worry about causing cancer just because you eat a little, which has caused an uproar among many food manufacturers and consumers! For large companies such as KFC or McDonald's, Sudan red is not a necessary material for their products, but because third-party cooperation provides , and did not provide proof that Sudan Red is harmful to the human body, it acquiesced in its existence until the research department issued a notice, which was too late.
As victims, Heinz and Unilever are not the adders of Sudan red, but they are also middlemen that indirectly lead to the sale of Sudan red to consumers, and have to bear responsibility for third parties.
(3) If it is not handled properly, the consequences will be serious. The most typical one is Sanzhu Oral Liquid.
In China in 1996, almost the same voice resounded throughout the entire market, and that was Sanzhu Oral Liquid. Its huge light and voice had covered the whole of China. At that time, people all over the country were studying and discussing Sanzhu. That year, Sanzhu created a miracle of corporate growth of 2,000 yuan and annual sales of 8 billion yuan, of which sales in the rural market accounted for more than 60%. However, the good times did not last long, and soon came the news that an old man in Changde drank eight bottles of Sanzhu oral liquid and died. This was learned by a newspaper reporter, who later used this to blackmail Sanzhu for hush money. The three plants themselves are not afraid of slanting shadows, and they will win the case in the first trial, the second trial, and the final trial. However, because a bottle of oral liquid was not sold while the lawsuit was ongoing, the giant three plants starved to death.
3. Establishment of crisis prevention system for crisis management
There is definite data that can prove that 80% of crises can be eliminated in the bud, and the cost of prevention is only the cost of prevention. The loss of 1 also conforms to the old Chinese saying. In view of the reasons for the outbreak of the crisis, at first we only wanted to solve the crisis through a series of prevention and treatment methods. Later, we found that treating the symptoms but not the root cause can only prevent problems before they occur. Therefore, our crisis warning system is divided into two parts: internal and external.
(1) Work hard on internal skills
1. Establish a sound corporate system and determine a detailed reward and punishment system
A good system can maintain the continuous progress of the enterprise. A complete system can ensure that the company regularly conducts self-examination and self-blame, monitors the daily operations of the company through various daily methods such as financial audits, performance appraisals, sales report analysis, etc., and ensures the healthy operation of the company. However, after many companies have established a complete corporate system, they do not have a strong organizational structure to supervise the implementation of the system. As a result, many complex work processes have been simplified at will, resulting in the failure of institutional supervision and control. Therefore, after we establish a perfect system, we must continue to supervise and improve the operation of the system.
Due to the establishment of a complete system, we can easily assign responsibilities to individuals. This will prevent the responsible persons from shirking each other when punishing the relevant responsible persons after the crisis. It also becomes easier to reward employees who share the same hatred during times of crisis.
2. Build a positive and harmonious corporate culture
The system protects the capital, and the culture makes money! With a good system, it can only be said that an enterprise has a body, and culture is the spirit of the enterprise. and thoughts. Making money from your body is a short-term manual job, because there will always be times when you are too old to do it. Making money through culture is a long-term solution. Although the body is gone, the ideas and culture will last forever and play an infinite role. If our company wants to last long, it can only discover a corporate culture with its own characteristics and connect every employee of the company with the company through the two organic ties of system and culture. Let them feel the overall view of the overall situation and the concept of honor and disgrace. It can enable the whole company to work together in the face of a crisis and successfully overcome the difficulties caused by the crisis.
3. Cultivate crisis awareness
In ancient China, there was a thought of being prepared for danger and taking precautions, believing that there is nothing more terrifying than being in a harmonious environment. Because everything that is harmonious can blind our eyes, and we can think that having achievements can cover up all problems. I have acknowledged from the outset that crises are inevitable and can only be dealt with head on. Being aware of a crisis is like getting vaccinated in advance when you are sick. Because you are mentally prepared in advance, you will not be thrown into confusion when the crisis comes.
4. Establish an early warning system and build a crisis alarm information system
Using modern information processing technology, a crisis early warning system will be constructed. Initially, a relatively ideal model will be established to combine the above four crises. Decompose it into quantitative equations that can be quantified, and incorporate a balance formula to carry out crisis simulation and early warning. At present, financial software such as Kingdee and UFIDA financial software already include financial crisis system early warning, but there is still a lack of a comprehensive crisis system. How to combine this is a question we will discuss later.
5. Clarify the crisis level through the early warning system
Different crisis states require different handling methods. Many companies have not established a crisis alert system and determined the crisis level, which has brought great confusion and inconvenience to the handling of the crisis. Enterprises must determine the level of the crisis and formulate corresponding crisis handling methods. Only in this way can they be able to stop the crisis when it comes.
6. Determine the appropriate corporate strategy and make timely adjustments according to the market.
It is necessary to clarify the position of the company in the industry, whether it is a follow-up strategy or a cost-leading strategy. Ensure that the enterprise is in the most advantageous position and has the flexibility to cope with unexpected practices at any time.
7. Be familiar with industry laws and regulations
Protect the company’s intangible assets and patented technologies through laws and regulations, and cultivate its own legal talents. Develop a unique prevention system based on its own characteristics, such as employees signing legal contracts prohibiting peers.
8. Establish handling procedures and implementation details
When various emergencies occur, what countermeasures should the organization take, what procedures should be used to handle them effectively, and what procedures should be determined? What people do and when is the key to establishing a crisis early warning system and an issue that organizations must consider when implementing crisis management.
When establishing processing procedures and implementation details, the following principles must be followed:
(1) Comprehensive. Classify all crises that may occur in the organization according to their nature and degree, and then provide specific countermeasures.
(2) Meticulous. All established procedures must be detailed, and every step and every operational link taken after a crisis must be designed.
(3) Clear. All procedures and by-laws established must be clear in their wording.
(4) Feasible. All established procedures and rules are operationally feasible.
(2) Watch from the outside and listen in all directions
1. Pay close attention to the dynamics of consumers, suppliers and competitors
The market is driven by consumers When deciding, what they pay most attention to is price. The price of raw materials is directly related to the price of products. At the same time, competitors will inevitably engage in price wars. How to coordinate the relationship between the three has become the primary information collected in crisis prevention.
2. By making good use of media relations, you can achieve twice the result with half the effort in crisis management.
The effects of media intervention at different stages of a crisis are different. At the beginning of the crisis, the media reported the idea of ??exposing the dream material because of the idea of ??having a hit. It will greatly exaggerate the facts, and its perspective is biased towards the vulnerable - consumers. This misleads the general audience into thinking that it is all the company’s fault. Often, follow-up media reports slowly reveal the truth to the world, but this has already caused irreparable losses to the company. Therefore, I don’t recommend practicing Buddha’s feet on a temporary basis. The practice should be done at ordinary times. In normal times, we must strive to have a good relationship with the mainstream media. Even if there is a negative report, it may give us a time to react first.
3. Pay attention to policies and regulations
The promulgation and implementation of a new policy may bring opportunities to enterprises, or it may also cause harm to enterprises, even fatal. For example, the newly promulgated new standard for jelly clearly states that jelly with a diameter less than 3.5cm is not allowed to be put on the market. Enterprises that originally produced jelly with a diameter less than 3.5cm are facing great difficulties.
Paying attention to policy changes in a timely manner can increase initiative and minimize losses. Because policy changes often mean changes to past rules, such changes will inevitably have an impact on the company's operations.
4. Understand cultural differences
Different countries have different cultural backgrounds. When companies conduct transnational marketing, they must pay attention to the differences between foreign cultures and local cultures, and respect the cultural habits and cultural traditions of consumers in other places. Failure to pay attention to cultural differences will cause great obstacles to marketing and cause a brand crisis for the company. In serious cases, it will be boycotted by consumers, such as: Nippon Paint's "Coiling Dragon Sliding" incident, Nike's "Fear Chamber" incident. event.
4. Summary
Crisis is not terrible. What is terrible is that companies do not have the courage to face it, but choose to face it in silence or with the mentality of being clean. Enterprises will inevitably face crisis problems in the process of production and operation. Crisis management in enterprise operations should focus on crisis prevention. Cultivating crisis awareness, conducting crisis simulation exercises, and establishing a crisis early warning system are long-term solutions; at the same time, When a crisis strikes, it is expedient to act calmly, actively communicate with the outside world, be open and fair, and not run away or shirk responsibilities. And after the crisis is over, lessons must be learned to prepare for the next challenge. However, crises are inevitable. Establishing a good corporate system can reduce losses, but cannot avoid them. And companies with integrity and self-discipline are not afraid of crises. As long as they are handled properly, crises can also be opportunities, and they can even be turned into opportunities for victory. ;