Looking at trends and discontinuities and gaining possible alternative futures to build a framework within which unexpected future events can be managed.
One way managers cope with greater uncertainty is with a forecasting technique known as scenario building. Scenario building involves looking only at history and thinking about what have managers been thinking about what could be. Managers can’t predict the future, but they can rehearse a framework within which future events can be managed. With the scenario of building a broad base, the managers mentally rehearse a different scenario based on anticipating varied alternative vivid pictures of what the future will look like and how managers will respond. Typically two to five scenarios are developed for each set of factors ranging from the most optimistic to the most pessimistic view. Scenario building forces managers to mentally rehearse what they would do if their best laid plans collapse.
Royal Dutch / shell has long used scenario building to help managers navigate the turbulence and uncertainty of the oil industry. One scenario Shell managers rehearsed in 1970, for example, focused on an imagined accident in Saudi Arabia that severed an oil pipeline which in turn decreased supply. The market reacted by increasing oil prices, which allowed OPEC nations to pump less oil and make more money. This story caused managers to re-examine the standard assumptions about oil price and supply and imagine what would happen and how they would respond if OPEC increased prices. By rehearsing this scenario Shell’s managers were much more prepared especially when OPEC announced its first oil embargo in October 1973. This speedy response to massive shift in the environment enabled Shell to move within two years from being the world’s eighth largest oil company to being number two.
Crisis Management Planning:
Managers can’t always anticipate future events and build scenarios to cope with them. In addition, some unexpected events are so sudden and devastating that they require immediate response. Consider events such as the November 12, 2001 crash of American Airlines Flight 587 in a New York neighbourhood already devastated by terrorists attacks. The 1993 deaths due to e-coli bacteria from Jack in the box hamburgers or the 2003 crash Columbia space shuttle. Companies also face many smaller crises that call for rapid response such as conviction of Martha Stewart, chairman of Martha Stewart Living Omni media on charges of insider trading allegations of trained Coca-Cola in Belgium or charges that Tyson Foods hired illegal immigrants to work in its processing plants. Crises have become integral features of our organizations. For managers to respond appropriately they need carefully thought out and coordinated plans Although crises may vary, a good crisis management plan can be used to respond to any disaster at any time of the day or night. In addition, crisis management planning reduces the incidence of trouble much like putting a good lock on a door reduces burglaries.
Exhibit outlines the three essential stages of crisis management . The prevention stage involves activities managers undertake to try to prevent crises from occurring and to detect warning signs of potential crises. The preparation stage includes all the detailed planning to handle crises when it occurs. Containment focuses on the organization’s response to an actual crisis and any follow up concerns.
Three stages of Crisis management
1) Build relationships
2) Detect signals from environment
1) Designate crisis management team and spokesperson.
2) Create detailed crisis management plan.
3) Set up effective communications systems.
1) Rapid response: Activate the crisis management plan.
2) Get the awful truth out.
3) Meet safety and emotional needs
4) Return to business
Source: New Era Management