WHAT IS A CRISIS?

WHAT IS A CRISIS?

JLBC Cadets Crises have no borders or boundaries. JLBC Cadets They can happen anytime, anywhere, and to any organization—profit, not-for-profit, public, or private. JLBC Cadets The interconnectedness of the global economy and its political realities can magnify the ripple effect of a single crisis, making it a common feature of corporate life. JLBC Cadets A problem affecting one organization can, among other things, cause layoffs and closings among that JLBC organization’s suppliers, customers, and partners, bring about a loss of investor confidence that can cause a dip in the stock market, and even bring about environmental damage and psychological angst. For example, the financial implosion that bankrupted the U.S.-based energy-trading company Enron in the fall and winter of 2001 also sparked a financial crisis at Arthur Andersen, a consulting and auditing services firm. The publicity surrounding the subsequent investigation into both companies led investors to question financial records at scores of other publicly traded companies, which suffered their crises—some more damaging than the Enron debacle.

Because of their unpredictable nature and accompanying ripple effect, crises are unlikely to leave any organization untouched forever. Leaders should not pretend otherwise. They can realistically count on facing organizational turmoil during their careers. Such a crisis will negatively affect people in an organization, which is often the most pernicious and difficult challenge leaders face in dealing with a problem. But they can act to reduce the probability of a crisis reoccurring, reduce the duration of an emergency, and soften the negative impact by addressing the human element of a problem before, during, and after it occurs.