It is defined as taking decisions or finding effective solutions for crisis situations.
Though the term crisis management has not been defined properly, an attempt has been made here to define it. There are situations in one’s personal life or in the life of an organization where timely decisions have to be taken cautiously and properly. These situations may be referred to as crisis situations. Crisis management may thus be defined as taking decisions or finding solutions for crisis situations. Crisis management is thus the technique of managing crisis situations.
Most organizations are reluctant to prepare themselves and their staff for adversity. The management does not prepare itself of the worst circumstances, even when they know that the assumptions and conditions that underlie the plans may change quickly. In such situations the organization will not know how to react in the event of a crisis and will suffer heavy material and personnel losses. And the management, who do not know the causes of a crisis, will have little success in dealing with it. Once the crisis has struck the members of the board, without the proper knowledge of the crisis and the preventive steps usually get rid of the top management. The old team is fired and a new, vibrant team is inducted which is striving for success. All this is done with actually going into the causes of the problem. When the causes of the problem are not dealt with, it is likely to repeat itself and as a result the new group is destined to be swept away by the same forces that caused the downfall of its predecessors.
The management should therefore, deal openly and directly with the subject of crisis. The circumstances that led to the crisis should be carefully studied, so that mistake is not repeated. And the management should keep an open eye for the opportunities created by a crisis, because a lot can be done during crisis that would be difficult or impossible to accomplish during the usual business period.
Types of Crisis:
All crises are not alike. In spite of this fact, crises have some common elements which mean that there are some common means to understand and deal with them. Given below are nine distinct types of business crises:
1) Sudden shifts in market
2) Product failure
3) Top management succession
4) Shortage of cash
5) Industrial relations
7) Adverse international happenings and
8) Regulation and deregulation
Sudden Market Shift:
The general public is usually responsible for a crisis of this sort. The abrupt rise and fall of any product due to change in buying habits or in taste of the general public usually leads to such crises. The industries dependent on changing public tastes generally deal with such crises.
There are different reasons for product failure. But generally a product which has a serious threat to the health of the users is likely to lead to a crisis. In such a situation the management can minimize the effects of such failures if the crisis is handled at an early stage. If not done so, it can turn a bad situation into a worse one.
Frequently top managers / executives refuse to give way to successors, touching off a crisis of top management succession. Succession is one area where the board of directors has complete control, and can act to prevent a crisis before it develops.
Shortage of cash:
There are many instances where a business finds itself in situation here cash is scarce, outside sources of funds dry up, internal sources seem inadequate to cover the current needs.
In such situations adequate steps should be taken to deal wit the crisis and whatever cash is left should be protected. Apart from this, attempts should be made to look into untapped sources of cash. The payment terms to the customers should be shortened. The payment terms to the suppliers should be lengthened i.e. they should be delayed as long as possible. The non-essential assets should be sold off. Cash draining programs should be stopped and other sources of cash should be located.
Proper relations with the people of the organizations should be maintained. The consequences of a miscalculation in treating people organized or not, can be very damaging.