Expert Answer:MOD4455_96ID Unit 1 Scandal at Penn State Sexual A

  

Solved by verified expert:Fundamentals of Crisis ManagementCase Study: Mini- Case – Scandal at Penn State Case Summary1.In a narrative format, summarize the key facts and issues of the case.editClick here to edit your answer.Words: 02.Update the information in the case by researching it on the Internet. Focus your response on the specific issues in the case.editClick here to edit your answer.Words: 03.Consider the impact of the Sandusky scandal on Penn State. What organizational functions (management, marketing, human resources, etc.) were affected by the crisis? How were they affected?editClick here to edit your answer.Words: 04.Who are the internal and external stakeholders? How were the stakeholders affected?editClick here to edit your answer.Words: 05.Imagine you are a crisis management consultant called in to advise Penn State’s Board of Trustees after the scandal began. What steps would you recommend to contain the damage to long-term the university’s overall image and reputation? What factors should you consider and why? Please explain your reasoning regarding your recommendation. editClick here to edit your answer.Words: 0Case AnalysisApplication
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S
A
N
F
O
R
D
,
B
E
T
H
A
N
Y
1
3
5
3
T
S
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Copyright © 2014 by SAGE Publications, Inc.
CHAPTER 1
A Framework for
Crisis Management
S
A
N
F
Visualizing Crisis Management
O
R
Visualize the term crisis management,D
and a number of images may pop into your
head. Consider these possibilities:
,




Maybe you thought of a recent YouTube video of two Domino’s Pizza
employees, one of whom put cheese up his nose and then placed it on a
sandwich. The video received B
nearly one million views on YouTube before
it was removed (Beaubien, 2009).
E
Perhaps you remembered stories about numerous outbreaks of violent
T
weather, particularly tornadoes that have hit the Midwest and southern
portions of the United States H
in recent years. These weather patterns were
not only sudden, but were catastrophic
the physical and human damage
A
they inflicted.
N
On a broader level, you might have envisioned a team of managers trying to
Y part of the production facilities at their
deal with a fire that has destroyed
manufacturing plant. Indeed, fires remain one of the most prominent types
of crises that managers must address.
1
You might have thought of the tsunami that hit Japan in 2011, causing
widespread death, destruction,3and the interruption of global supply chains.
This event was further complicated
5 by the spread of nuclear fallout in the
air and water.
3
Indeed, the term crisis management
T invokes a number of images in the mind
of the reader. However, crisis management is not just a one-time response to an
unfortunate event. It is much broaderSthan that. We view it as a strategic process
that must occur far before the first crisis ever takes place in the life of the organization. It is a process that must be planned both before and after the crisis occurs.
1
2
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
When we view crisis management as a holistic process, a conceptual framework
must be developed to understand how this process should be organized. A framework functions as a map that helps us see how the different parts of a process are
interrelated. This book offers a framework to help you understand the field of crisis
management and how you can better prepare for crisis events that may occur in
your organization.
The onset of crises in organizations is a common occurrence in our contemporary environment. And yet many people associate a crisis with a highly dramatic
event that produces mass destruction and even causalities. Most organizational
crises are far less dramatic but can still have a substantial negative impact on the
firm. The problem with associating only catastrophic events with a crisis is that
they sound so dramatic that most organizational leaders may assume an “It can’t
Sthen, consider these crises that are still damaging, yet
happen to us” mentality. But
less prominent:
A



In January 2012, Coca-Cola
Company encountered a problem with its
N
orange juice products, Simply Orange and Minute Maid. Some of the prodF
ucts sold in the United States contained small amounts of carbendazim, an
O used with oranges from Brazil. Although the fungiunapproved fungicide
cide is approved in R
that country, it is not in the United States, prompting
Coca-Cola to move into crisis management mode (Kiernan & McKay, 2012).
D
General Motors (GM) faced a setback in late 2011 when its electricity-propelled
, poorly in three crash tests that resulted in fires or sparks
Chevy Volt performed
from the vehicle’s battery pack. GM, realizing it was facing a crisis, offered
loaner cars to any of the 6,000 Chevy Volt owners while engineers worked to fix
B
the problem (Terlep, 2011).
E online advertisement by Johnson & Johnson (J&J)
In 2008, a now-infamous
promoting its pain T
reliever, Motrin, met resistance from young mothers.
The ad stated that mothers who carry their babies in a sling are making
H
a “fashion statement,” something that many of the moms found offenA Johnson & Johnson quickly pulled the ad from the
sive (Wheaton, 2008).
Internet.
N
As these examples illustrate,
Y not every organizational crisis is dramatic, but each
one can have a far-reaching impact if it is not managed properly.
1
3
Setting the Context
5
3
Unfortunate events will occur in the life of most organizations. We refer to these
T broad approaches to the managing of these events:
events as crises. There are two
(1) Try to keep them fromS
occurring in the first place, and (2) mitigate or soften
the impact of the crisis when it does occur. Crisis management is the discipline that
addresses these two approaches.
Crisis management is a field of growing interest because many managers now
realize that their firms are not immune to those sudden, unexpected events that can
FOR THE USE OF SAVANT LEARNING STUDENTS AND FACULTY ONLY.
NOT FOR DISTRIBUTION, SALE, OR REPRINTING.
ANY AND ALL UNAUTHORIZED USE IS STRICTLY PROHIBITED.
Copyright © 2014 by SAGE Publications, Inc.
Chapter 1. A Framework for Crisis Management
3
put an organization into a tailspin, and sometimes even out of business. This book
is written for managers and students of crisis management. As present or future
leaders in your organizations, the key issue you will face is not whether a crisis will
occur, but when, and what type. As a result, an understanding of crisis management
is an essential part of your toolkit for organizational and professional success.
Developing a Framework
for Studying Crisis Management
A starting point for understanding crisis management is to view it in terms of a
S what we experience in organizational
framework. Frameworks group or organize
life. In this book, we develop a framework
A that looks at crisis management in four
distinct phases. In addition, each phase is divided into its internal and external
N . Our framework begins with a definidimensions, a distinction we call landscapes
tion of the term, presented in the nextFsection.
O
R
Definition of Crisis
D
The word crisis has been used interchangeably with a number of other terms,
,
including disaster, business interruption, catastrophe, emergency, or contingency
(Herbane, 2010). Hence, the definition of a crisis must be established before a suitable framework can be developed. Numerous
definitions have been offered, and
B
most synthesize previous definitions to some extent. Pearson and Clair (1998) have
E
offered the most widely used definition of an organizational crisis:
T
An organizational crisis is a low-probability,
high-impact event that threatens
H
the viability of the organization and is characterized by ambiguity of cause,
effect, and means of resolution, as A
well as by a belief that decisions must be
N
made swiftly. (p. 60)
Y
The following implications of this definition should be highlighted:



A crisis is a “low-probability” event. This characteristic makes the planning
1
for a crisis even more troublesome. Events that are not perceived to be immi3
nent are hard to plan for. In addition,
it is often difficult for management
to find the motivation to plan5for such an event. The notion is, “Why plan
for something bad if it may not occur?” (Spillan & Crandall, 2002). Many
3
managers have asked that same question until they were confronted with a
T
major crisis.
A crisis can have a high-damage
S impact. A crisis can devastate an organization, even kill it, or at best, leave it badly wounded.
The reference to “ambiguity of cause” means that the origins and effects of
the crisis might not be known initially. As humans, we instinctively like to
point to simple causes. We especially seek to look for human stakeholders
4
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Copyright © 2014 by SAGE Publications, Inc.
CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE


such as management or company owners who might have contributed to
negligence, ultimately causing a crisis. However, as we will see throughout
this book, multiple interrelated factors can lead to a certain trigger event
that can initiate a crisis.
The ambiguity in this definition also implies that the means of resolving
the crisis are often debatable. In other words, several viable options may
be available for the crisis management team to use in its goal of mitigating
the crisis.
Certain aspects of managing a crisis may require swift decision making.
The failure to act decisively during the acute stage of the crisis can often
intensify the ordeal.
All of these definitions provide a starting point for understanding crisis manageS
ment. As more understanding of crisis management has emerged, more contempoA of crisis and crisis management have been developed.
rary ideas and interpretations
Timothy Coombs’s (2007)
N has developed one of the most recent conceptualizations of a crisis:
F
A crisis is the perceptionO
of an unpredictable event that threatens important
expectancies of stakeholders
R and can seriously impact an organization’s performance and generate negative outcomes. (pp. 2–3)
D
This definition emphasizes
, perception. A crisis is generally perceived to be a
threat by the organization’s stakeholders, various groups that have an interest in the
organization. Employees, customers, and the community in which the organization
B
resides are considered stakeholders.
Coombs infers that not all stakeholders will
perceive that a crisis is occurring.
E A product defect that is detected by consumers,
but not individuals inside the
T company, is an example of the incongruity that can
take place. Nonetheless, a crisis has occurred, because the perceptions of at least
one group of stakeholders H
have been affected in a negative manner by the event.
Recognizing this distinction
Ais important because there are occasions when management has gone into denial, proclaiming that no crisis has occurred (or could
N
ever occur, for that matter), when in fact one has transpired (Sheaffer & ManoYfull of examples of this type of denial, such as General
Negrin, 2003). Textbooks are
Motors’ denial that anything was wrong with its Corvair automobile (Nader,
1965). In this early 1960s example of a corporate crisis, consumers and the media
1
claimed that the Corvair automobile was subject to instability when going into a
3 involving fatalities had occurred as a result of this
turn. Indeed, several accidents
structural problem. GM maintained
that the problem of instability was caused by
5
driver error, not a defect in the car. This denial by GM that a crisis existed resulted
3
in a huge public image problem for the company.
This book follows these T
crisis definition guidelines. We build on the definition
offered by Pearson and ClairSin 1998 (which is the most frequently cited in the crisis
management literature), but we also include the perspective offered by Coombs. To
paraphrase Pearson, Clair, and Coombs, we offer the following definition to serve
as our reference point throughout the book:
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Copyright © 2014 by SAGE Publications, Inc.
Chapter 1. A Framework for Crisis Management
A crisis is an event that has a low probability of occurring, but should it occur,
can have a vastly negative impact on the organization. The causes of the crisis, as well as the means to resolve it, may not be readily clear; nonetheless,
its resolution should be approached as quickly as possible. Finally, the crisis
impact may not be initially obvious to all of the relevant stakeholders of the
organization.
One characteristic of a crisis that should be mentioned is this: they rarely occur
without warning. Instead, a number of preconditions usually exist that breed a
crisis. Put differently, crises have life cycles, and understanding what occurs before
a crisis commences is important to helping prevent it.
S
The Life Cycle of a Crisis
A
Researchers usually examine a crisisNin a sequential manner to better understand
its evolution. One approach is to lookFat a crisis in four stages: preconditions, the
trigger event, the crisis itself, and the postcrisis.
O
1. Preconditions. Smith (1990) was
R one of the first to point out that a set of
smaller events typically interact before a crisis occurs. This combination of events
D
eventually leads to a significant occurrence, commonly called the “trigger event”
, causes the crisis to commence. For exam(Roux-Dufort, 2009; Smith, 1990), which
ple, the trigger event at Union Carbide’s Bhopal India plant in 1984 was the entry of
water into a gas storage tank that subsequently caused the unit’s temperature to rise.
The resulting pressure increase forcedB
the dangerous gas methyl isocyanate (MIC)
to escape, resulting in the deaths ofEthousands of innocent civilians. However,
responsibility for the crisis cannot beT
attributed solely to those involved with that
step in the crisis because numerous preconditions contributed to the origin of the
H a refrigeration system, failing to reset the
accident. These included shutting down
A gas scrubber, and an inoperative flame
tank temperature alarm, the nonfunctioning
tower designed to burn off toxic gasesN
(Hartley, 1993).
2. Trigger event. The trigger eventYis the point at which the crisis escalates and
upsets the normal equilibrium of the organization. The firm has been functioning normally up to this point, but preconditions brewing “beneath the surface”
1 ultimately setting the crisis in motion
have been leading up to the trigger event,
and making it noticeable to the key stakeholders
of the organization. Some might
3
equate it to the point “where all hell breaks loose” or “the straw that broke the
5
camel’s back” (Crandall, 2007).
3
3. Crisis. The escalation of the crisis produces the greatest damage to the
T stakeholders include employees, manorganization and its stakeholders. Potential
agement, owners or stockholders, customers,
those who use social media outlets,
S
suppliers, the local community, and government regulators. Damage can be extensive during this acute stage of the crisis and can have a major effect on the business
or organization’s continuity.
5
6
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CRISIS MANAGEMENT IN THE NEW STRATEGY LANDSCAPE
4. Postcrisis. When the acute phase of the crisis is over, management should
reflect on the event and glean lessons on what changes need to be made to prevent future crisis events (Kovoor-Misra and Nathan, 2000; Smith & Elliott, 2007).
For example, after the first cyanide poisoning in 1982 of extra-strength Tylenol,
Johnson & Johnson switched to a tamper-proof container. After the second poisoning in 1986, J&J made additional changes and manufactured the product as a caplet,
a nonpenetrable material that cannot be adulterated by cyanide.
Strategic Orientation
In many instances, crisis events in organizations are addressed with a short-term,
reactive perspective. When S
a crisis occurs, select individuals in an organization—
perhaps those on an established
A crisis management team—convene to minimize the
damage and present a positive image to the public. Any preparations for dealing with
such crises often focus on N
effective communications and public relations. In contrast, organizations continually
F face strategic challenges. They must adapt to their
changing business environments and modify their strategies to survive and remain
O
competitive. In doing so, their managers tend to adopt a long-term perspective on
R
strategic planning.
Between the extremes ofDan organizational crisis and a strategic challenge are
obstacles to organizational success that are not always easy to classify. Indeed,
,
distinguishing between a crisis and a strategic challenge may be difficult. Consider
these potential scenarios, all of which are based on a number of events that have
occurred over the past several
B years:
■ A supplier in another
E country produces a product that turns out to be
defective and the product isTassembled as a component into a domestically manufactured product. The final product fails, and in the process, kills three people. Is
H
this a crisis or a strategic challenge?
The answer is both. It is a crisis because there
has been a loss of life because
A of a defective product. It is a strategic challenge
because the supplier might have been selected solely for its ability to manufacture
N
the component product at a low cost.
Y
A labor union stages a mass boycott of certain products that are sold by
domestic companies but manufactured overseas. The message from the protest
is that these products have1caused the loss of domestic jobs. The boycott causes
some revenue loss for the companies
that manufacture and retail these products.
3
In a few cases, vandalism occurs on retail store properties that offer the products.
Is this a crisis or a strategic5challenge? Again, it is both. It is a crisis because of the
sudden and unexpected loss
3of revenue for the companies involved. Furthermore,
the damage and public apathy
T is of concern because it requires swift and effective
decision making to ease the problem. It is a strategic challenge because the products
S
are made overseas for cost reasons.

■ A major pharmaceutical company begins a program for the expansion of
products that involves addressing health needs for baby boomers, a market that is
seen as a major revenue source in the years to come. Several new drugs are approved
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Chapter 1. A Framework for Crisis Management
and introduced to the market. After a few years, however, one of the drugs is linked
to a deadly heart disease. Pressure to withdraw the drug is put firmly on the pharmaceutical company. Is this a crisis or a strategic challenge? Once again, it is both.
It is a crisis because stakeholder attention is questioning the credibility of the drug
and, indirectly, the credibility of the company. A major repercussion could result
from this event, and swift decisions are required. And it is a strategic challenge
because the drug was in the firm’s long-term arsenal of products that would be
popular and viable over the next 20 years.
■ A major corporation establishes a compensation plan for its management
staff that rewards them on the basis of performance. As hoped, performance indicators begin to look good in certain areas of the company, despite the fact that the
local economy has been faltering. For seven quarters, two managers receive bonuses
S
based on meeting the performance indices established under the compensation plan.
Unfortunately, it is discovered later thatA
both managers have been “cooking the books.”
They are eventually fired, and the company
N is fined. During the ordeal, the company
receives negative press because of the “unethical acts of its managers.” Is this a crisis
F
or a strategic challenge? Of course, this answer is both. The crisis aspect was manifested by the reputational and financialO
damage the company suffered. This dilemma
also has roots as a strategic challenge. R
The decision to set up a bonus plan based on
performance was, in itself, not a poor decision. Indeed, most ma …
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