LIFE-CYCLE PHASES

Crises can be shown to go through the life cycles illustrated in Exhibit II. Unlike traditional project management life-cycle phases, each of these phases can be measured in hours or days rather than months. Unsuccessful management of any of these phases could lead to a corporate disaster.

Most crises are preceded by early-warning signs or risk triggers indicating that a crisis may occur. This is the early-warning phase. Typical warning signals might include violations of safety protocols during technology development, warnings from government agencies, public discontent, complaints from customers, and warnings/concerns from lower-level employees.

Most companies are poor at risk management, especially at evaluation of early-warning signs. Intel, the Nestle case, and the Shuttle disasters were examples of this.

Exhibit II. Crisis management life-cycle phases

Early Warning Problem Understanding Damage Assessment Crisis Resolution Lessons Learned

Stakeholder Communication

Questions 555

Today, project managers are trained in the concepts of risk management, but specifically related to the management of the project, or with the development of the product. Once the product is commercialized, the most serious early-warning indicators can appear and, by that time, the project manager may be reassigned to another project. Someone else must then evaluate the early-warning signs.

Early-warning signs are indicators of potential risks. Time and money are a necessity for evaluation of these indicators, which preclude the ability to evaluate all risks. Therefore, companies must be selective in the risks they consider.

The next life-cycle phase is understanding the problem causing the crisis. For example, during the Tylenol poisonings, once the deaths were related to the Tylenol capsules, the first concern was to discover whether the capsules were contaminated during the manufacturing process (i.e., an inside job) or during distribution and sales (i.e., an outside job). Without a fact-based understanding of the crisis, the media can formulate their own cause of the problem and pressure the company to follow the wrong path.

The third life-cycle phase is the damage assessment phase. The magnitude of the damage will usually determine the method of resolution. Underestimating the magnitude of the damage and procrastination can cause the problem to escalate to a point where the cost of correcting the problem can grow by orders of magnitude. Intel found this out the hard way.

The crisis resolution stage is where the company announces its approach to resolve the crisis. The way the public views the companys handling of the crisis has the potential to make or break the company.

The final stage, lessons learned, mandates that companies learn not only from their own crises but also from how others handled crises. Learning from the mistakes of others is better than learning from ones own mistakes.

Perhaps the most critical component in Exhibit I is stakeholder communications. When a crisis occurs, the assigned project manager may need to communicate with stakeholders that previously were of minor importance, such as the media and government agencies, all of whom may have competing interests. These competing interests mandate that the project managers understand stake- holder needs and objectives and also possess strong communication skills, conflict resolution skills, and negotiation skills.

QUESTIONS

When a crisis project occurs, who should be the leader of the crisis team?

Will there be a crisis committee or a crisis project sponsor?

How important is effective communication during a crisis?

How important is stakeholder relations management during a crisis?

Should a company immediately assume responsibility for a crisis?

How important is response time when a crisis occurs?

How important is it to show compassion for people that may have been injured?

How important is it to maintain a paperwork trail?

How important is it to capture lessons learned?