Emergence of crises – do they always arise in the same way?
Story time!
At CompanyX, a SaaS provider, everything seemed to be going well. The company was growing fast, and their customer base was expanding. But, behind the scenes, there were some issues that were beginning to cause problems.
The company had a small team that was responsible for customer support. And as the company grew, this team was unable to keep up with the volume of customer inquiries. Customers were starting to experience long wait times and poor service. This was beginning to impact their satisfaction with the service.
The management team at the company was aware of the problem. But they focused on growing the business and not on fixing the customer support issue. They believed that the problem would resolve itself as the company grew and hired more staff.
As the issue persisted, customers shared their frustration on the Internet. This negative feedback started spreading, and the company’s reputation was starting to suffer.
The management team at the company realized that they had a crisis on their hands, but it was too late. They ignored the issue for too long. Now they were experiencing what we call a slow-burn crisis. Customer satisfaction plummeted. The crisis was damaging their reputation.
Once they understood the issue, they changed their customer support process. Still, they lost customer trust. Rebuilding their reputation will take a lot of time. They could’ve avoided this problem if only they would react quicker.
What a crisis is
A crisis is an unprecedented or extraordinary event or situation that threatens an organization. It requires a strategic, creative and rapid response on which the integrity and survival of the organization depends. You can read about it here. And I have another post that describes different types of crises.
In fact, although a crisis always happens suddenly, there are three ways in which a crisis can manifest itself, or happen. This article will discuss what is the difference between a sudden, slow-burn and a smoldering (creeping) crisis. It will also discuss how the emergence of crises impacts a business and how you can use the information to your advantage.
What is a Sudden Crisis?
Sudden crisis, as the name suggests, is a situation that arises out of nowhere and on an extremely short notice. No one gets warning signals, and such a situation is in most cases beyond anyone’s control. The event did the damage, and it can only get worse, the longer it takes to respond.
Examples of Sudden Crises
Consider the following scenarios as examples of sudden crises.
Example 1
HVAC in your server room breaks because of a thunderstorm. Your servers overheat, one of them started to burn, and the server room became engulfed in flames. The fire spread rapidly, making it difficult for the firefighters to contain. Due to the limited space, the fire crews must use water-hoses instead of clean agent fire-fighting methods. In the process, the server room was damaged beyond repair. And it resulted in the loss of important equipment, including the backup servers. Since the server room is in the heart of your company’s operations, you need to find a replacement within a few weeks. Otherwise, your operations will be disrupted, and you will have to re-start.
Example 2
Your key person is unavailable due to illness or changed jobs. The sudden absence of a key person affects your business severely. The organization might need to reorganize and adapt to the new situation. It may have to retrain employees or hire new ones. This takes time and effort. In some cases, the company can get stuck in a crisis state. If it gets to this point, it may cause damage to the reputation of the organization, as well as the bottom line.
Example 3
A serious on-site accident occurred in your company. Your staff is trapped and injured, and the building is damaged beyond repair. The emergency services arrive at the scene. All traffic must be diverted from the area and people must stay away. All available staff must be called in to help the injured. It’s possible that some of them may have suffered serious injuries. Your business stopped, you’re taking losses.
There is not much you can do to avoid these, but you can prepare. If you identify your key business processes, you don’t have to think of all the scenarios. Just think, what do you need to do if the key process get disrupted. All the assets are gone. What do you do?
What is a Slow-Burn Crisis?
Slow-burn crises have some advance warning, before the situation has caused any actual damage. Slow-burn crises are like slow-moving forest fires. You can see them coming and prepare accordingly.
Examples of Slow-Burn Crises
Now, some scenarios for the slow-burn crises. The last example in this section is a very fascinating one because it is actually caused by a success, winning a contract.
Example 1
We all know that the internet is full of activists. They are going to put pressure on companies for many causes. Your company is doing a controversial marketing campaign. There are threats that activists may hack your website, or they might make your website inaccessible. The activism will increase the cost of your business operation. It may result in your company losing customers, so your sales will go down. Your profits will go down. The activists are going to cause disruption, but only if you don’t act.
Example 2
Your company is considering moving to a new location, merging with another company, outsourcing core functions, acquiring another company etc. These decisions may create a lot of emotional stress for the employees of your company, especially when they impact them directly. People are afraid that they will lose their job, and they might even lose their salary. They feel uneasy about the future. They lack stability. So, they decide to get ahead of the potential problem and start leaving for other companies. Now your business is facing a severe shortage of personnel.
Example 3
Your company won a government contract, congratulations! But the government requires your company to comply with a series of regulations. Some rules require numerous changes. For example, your company will need to install a biometric security system, which requires significant investment. You have to change your business processes, which means changing software, which involves training of staff, which will take time and money. To implement the changes, you have to be able to identify what changes have to be made. The regulations may have the effect of limiting your business and forcing you to downsize your workforce.
What is a Smoldering Issue?
Smoldering crisis usually starts with neglecting issues which are minor in the beginning, and lead to a crisis later. People can often see the advance warnings, but for whatever reason they are not acting, they do not see it as a part of a pattern. Typically, they ignore the issue and wait for someone else to act.
Examples of Smoldering Crises
And some scenarios for the smoldering crises.
Example 1
The CEO of your company is known for his bad manners, but everybody downplays this. There were multiple warnings from many stakeholders that they will not continue cooperation if this does not change. The CEO went too far and now your company is in a scandal. Customers accuse your CEO of misconduct. The scandal impacts other employees, they are now involved.
It was very damaging news that hurts your company reputation. Some customers will stop doing business with your company. You need to find a solution quickly to prevent further damage. You have to keep your customers and other stakeholders happy, while at the same time preventing any further scandal. It is impossible to keep the whole story under wraps, but you can minimize its effects. Meanwhile, you should take immediate steps to mitigate the damage and restore your company’s reputation.
Example 2
Your business has invested heavily into building a brand image. You just signed a multi-million dollar deal. Then, your business suddenly loses all its data due to a disaster. In addition, it’s very difficult to restore operations because there is no strategy for that. Customers become furious and refuse to continue doing business with you. The media covers the story. The public perception of your company becomes negative, and your business begins to decline in reputation.
Example 3
Your company does not maintain its inventory properly, the humidity in the warehouse is far too high. As a result, a large part of its products no longer fulfills quality requirements. The company is unable to resolve the problem. The cost of repairing the product is very high, if at all possible. As a result, the customer’s leave and the company’s sales drop. Loss of customers leads to lack of revenue, which in turn leads to financial difficulties. The company can’t pay its employees. This could lead to workers leaving the company and going to work somewhere else. That would cause a shortage of workers, which would mean less business for the company.
How to prepare, then?
In today’s world, we are all prone to crisis. From the examples above, you can see, that there are many reasons for crises. It can be something, anything really, outside your control, or it can be caused by yours or your employees’ negligence.
The key takeaway, however, is that there is always something you can do before, during and after a crisis. That is why understanding the reasons why different crises happen is crucial. While everyone is aware that crises happen, few people know how to handle them effectively. The reasons for this are many.
So, what does this mean? Well, if you are a business owner or manager, you should know that business crisis is something that you can avoid, especially with slow-burn and smoldering crises. You can do things to prevent a crisis from happening, and you can also prepare for one. You should know what your employees are doing and what their mistakes are, and take preventive actions. Make people aware, and keep on reminding them, that nothing, not even the smallest mistake, should be ignored, as it can become a full-blown crisis.
The best approach would be to follow the six-step cycle of crisis management that should set your company up for becoming resilient. But that’s for another article.
Emergence of crises – Conclusion
In conclusion, crises are inevitable. It’s a fact of life. They simply occur. However, it’s up to you to decide whether you want to be proactive or reactive. You can prevent a crisis from happening, or you can react to a crisis once it has happened. It’s good to prepare yourself, or at least plan, for the worst. You have to be ready to respond to the crisis in a way that will help you to get out of it, not worsen it.
If you are afraid that you don’t have the necessary knowledge or skills, you can always turn to crisis management experts for advice. There are some excellent crisis management consulting companies on the market. I can help as well, please feel free to use the contact page to set up a free consultation.
There are a few ways that you can use the knowledge about how crises can emerge to help prepare for and manage crises:
- Identify crisis threats: By understanding the different ways that crises can emerge, you can better identify crisis threats that your organization or community may face. This can help you to be better prepared for a crisis when it does occur.
- Develop plans: Once you have identified the threats, you can use this information to develop plans for how to respond to these crises. This can include identifying the resources that you will need, determining who will be responsible for different tasks, and outlining the steps that you will take to manage the crisis.
- Monitor for early warning signs: For slow-burn and smoldering crises, it is important to be able to identify early warning signs that a crisis may be brewing. This can allow you to take proactive steps to prevent the crisis from escalating, or to respond more quickly if the crisis does emerge.
- Train and educate staff: Ensuring that your staff are trained and educated on how to identify and respond to different types of crises can help to ensure that you are prepared to manage crises effectively. This can include training on how to recognize early warning signs of crises, as well as how to respond appropriately.
The more you know about the emergence of crises and about your organization, the better you can monitor the situation. You are aware what the key business processes are, and what are the threats. There are often warning signs, especially for slow-burn and smoldering crises, that something is cooking. If you have proper monitoring in place, it is possible to act upon the problem or issue before it becomes a full-blown crisis. Obviously, you can’t control everything, but you can control your response to the crisis, and that is a lot in itself.
