Crisis Management: Two Case Studies from China

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Crisis Management Two Case Studies from China

• Krishnamurthy Sriramesh
• Associate Professor
• School of Communication and Information
• Nanyang Technological University
• Singapore 637718
• Dr. Zengzhi Shi
• Associate Professor
• Peking University, Beijing, China

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Importance of Crisis Management

• Crises are ubiquitous in modern times
• The cost of mismanaging crises is higher than
  ever because of
• Increased stakeholder activism resulting from
  more open communication and flow of information
• New Technologies
• Interpersonal communication vs. mass comm
• Economies in transition and impact on society

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PetroChem Explosion and its effects

• On Nov. 13, there was an explosion at PetroChem,
  a govt. chemical plant
• For nine days the government and the mass media
  were silent about the event and the risks for
  those using the water of the river Songhua,
  polluted by the toxic chemicals from the plant
• Danger awaited the large city of Harbin which
  relies almost completely on the Songhua water

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PetroChem Explosion and its aftermath

• The main media were asked by the government not
  to report the risks of pollution
• But citizens used new media (mobile phones and
  the Internet) to transmit messages including to
  residents of Harbin mainly through interpersonal
  comm.
• Around Nov 19th, rumors, including that there
  would be an earthquake in Harbin, began to fly

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PetroChem Explosion and its aftermath

• The government reacted by selectively revealing
  the truth to only a few stakeholders
• Some true facts were revealed only to some
  officials about the danger to the river but not
  to all officials or to the citizens who would be
  affected
• The local officials abruptly announced on the
  morning of Nov 21 that the water supply to Harbin
  would be shut down for four days beginning Nov 22
  for conducting maintenance and repairs

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PetroChem Explosion and its aftermath

• This caused fear among the citizens who started
  emptying shelves of bottled water and other
  drinks at supermarkets
• Responding to this mass panic and the approaching
  chemical slick (to Harbin), the government was
  forced to announce the truth the same afternoon
• This crisis had international dimensions as well
  because the Songhua water also goes to parts of
  Russia

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Common features between SARS and Harbin

• Areas where improvements can be made
• 1. The local governments were not truthful until
  events forced them to become more open
• In the case of SARS this caused the spread of the
  disease within and beyond the borders
• 2. State-controlled mass media cannot (are unable
  to) communicate the truth
• media credibility in serious question

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Common features between SARS and Harbin

• 3. People couldn't get the truth from the
  Government and so they relied on
• Access to private (interpersonal) media such as
  mobile phones and the Internet to communicate
  among themselves
• And engaged in spreading rumors as well a
  classic response to poor communication during
  crises

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Common features between SARS and Harbin

• 4. People didn't know whom and what they could
  trust. It was chaotic and people were in panic.
• 5. The government has a very important role to
  play during crises AND the people still want to
  believe the government
• So, it is important for the government to try to
  be proactive in communicating facts
• 6. There is a lot of uncertainty in the way
  crises are handled lack of confidence

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Common features between SARS and Harbin

• We also believe there are some good aspects that
  should be continued in the future
• 1. The government held some high level officials
  who were found to have performed poorly during
  the crisis accountable and punished them
• 2. The government did admit that mistakes were
  made even if it took time to do so

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Some observations from these two crises

• Officers are often worried about their own job
  security and promotions, and so often underplay
  the seriousness of crises not telling their
  seniors what really happened
• Tendency among officials to wait and see or let
  their senior managers make the tough decisions,
  which delays response
• Due to media reforms, Chinese public have greater
  access to different kinds of media (including
  foreign) and use it for message sharing. The
  government can't exercise total control over
  information flow now

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Some observations from these two crises

• Globalization and a more open society means that
  many foreigners in Beijing or Harbin were able to
  convey the messages they had received from their
  own sources to locals
• The government wants to reduce losses from crises
  but seems to be deficient in doing it
  proactively. There is a distinct lack of trust
  for the media and the public
• Crises often have international dimensions as in
  the case of Harbin with Russia being involved

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Cirsis Mgmt Linking Theory and Practice

• A. Crisis Detection
• Through environmental scanning, identify warning
  signs
• Three organizational resources help in this
  process
• 1. Issues Management the identification of, and
  action taken to affect, issues (issues often are
  precursors to crises)
• Issue Evaluation sources likelihood and impact

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A. Detection of a Crisis

• 2. Risk Assessment organizational risk factors
  or weaknesses that may develop into crises
• 3. Stakeholder relationships Favorable
  organization-stakeholder relationships help
  during crises by cushioning negative effects
  Soft Power
• Good stakeholder comm. also helps you hear
  about potential crises

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B. Prevention

• B. Prevention Use warning signs (prodromes) to
  prevent crises from occurring
• Crisis prevention programs have two basic
  components change and monitoring
• Make changes that eliminate or reduce the
  likelihood of a warning sign becoming a crisis
• monitor the environment to see whether the change
  was effective did the change reduce or
  eliminate the chance for a crisis?

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B. Prevention

• Issues mgmt as crisis prevention tool identify
  and analyze issues and apply systematic
  procedures to influence issue resolution in the
  organizations favor
• Risk management as crisis prevention tool
• Two factors drive the use of risk mgmt strategies
  for crisis mgmt cost and technical
• a. Cost Risk managers use risk balancing
  (cost-benefit analysis) to compare the costs of
  the risk vs. cost of risk reduction

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B. Prevention

• b. Technical Can the risk be reduced or
  eliminated through technical expertise? Eg. Can a
  non-toxic chemical be substituted for a toxic
  chemical, thereby eliminating risk?
• This is also called risk aversion
• Relationship management as crisis prevention
  tool
• Three elements define organization-stakeholder
  relationships
• Staying close, credibility, and meeting
  expectations

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B. Prevention

• a. Staying Close dialogue with stakeholders
  builds mutually beneficial relationships
• b. Organizational Credibility has two components
  expertise and trustworthiness
• c. meeting expectations
• Organizations must conform to the legitimate
  expectations of stakeholdersfailure to do so
  results in conflict with key stakeholder publics
  (activism)

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C. Preparation

• Create a crisis portfolio organize the list of
  potential crises relevant to the organization by
  crisis type
• Diagnose crisis vulnerabilities
• Develop variations of the CMP (CCP) for each
  crisis type
• selecting and training the crisis mgmt team and
  spokespersons
• Stakeholder relationship management (including
  victims families)

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CMP is not enough!

• Do not let the presence of a CMP give a false
  sense of security
• 1. The CMP is a general guideline for action
  representing contingencies
• 2. The CMP is a living documentorganizations,
  and their environments, are dynamic
• Review the CMP periodically (once or twice a
  year) to make necessary updates
• 3. The CMP is of little value if it is not
  practiced in simulations
• Crisis drills help refine the CMP

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D. Performance and Learning

• Once a crisis hits, the crisis team must
• a. prevent it from spreading to unaffected areas
  of the orgn. or the environment
• b. limit its duration
• Comm. is critical to crisis containment and
  recovery
• Four areas are important during this phase
• Initial response (quick, consistent, open comm.)
• reputation management,
• enactment of contingency and business resumption
  plan, and
• follow-up communication