978-1285866352 Chapter 12 Solution Manual Part 1

Unlock access to all the studying documents.

View Full Document

234 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

CHAPTER 12

Crisis Leadership and the Learning Organization

Chapter Outline

I. Crisis Leadership

A. Crisis Communication in the Age of Social Media

B. Formulating a Crisis Plan

C. The Three-Stage Crisis Management Plan

D. The Five-Step Risk Assessment Model

E. Effective Crisis Communications

F. Guidelines to Effective Crisis Communication

II. The Learning Organization and Knowledge Management

A. Learning Organization Characteristics

B. What Is Knowledge Management?

C. Traditional versus the Learning Organization

D. The Learning Organization Culture and Firm Performance

E. The Role of Leaders in Creating a Learning Organization Culture

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 235

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

New To This Edition

 The chapter has been updated throughout. There are 121 references and only 13 are from the 5e; so 108 or 89

percent of the references are new to this edition.

 The opening chapter case is new. It focuses on Antonio Perez and Eastman Kodak.

 The subsection on crisis leadership training has been dropped. Content has been incorporated under Crisis

Leadership.

 The section on Formulating a Crisis Management Plan has been reorganized with two new subsections added

one deleted. Also, in this section, Crisis Risk Assessment has received expanded coverage and elevated to a

level 2 subheading now titled “The Five-Step Risk Assessment Model.”

 The sub-section titled “Spotlight on the African Crisis” has been deleted.

 The end-of-chapter case is still on Ken Frazier and Merck but completely new in its content and focus.

Lecture Outline

PowerPoint: You may use the PowerPoint supplement to enhance your lectures. Even if your classroom is not

equipped to use PowerPoint, you can review the material on your personal computer to get teaching ideas and to

copy the slides. Copies of the slides can be made into overheads. (Chapter title on Slide 12-1 and LOs on 12-2)

I. CRISIS LEADERSHIP

Learning Outcome (LO) 1. Explain why crisis leadership competency is an important consideration

when hiring new leaders.

Crises are inevitable. It is not a question of “if” a crisis will happen, but “when.” A crisis can inflict severe

damage to an organization if not properly managed. In a crisis, stock prices plummet and operating costs

escalate, causing both short- and long-term financial losses. A crisis that is mismanaged can also damage an

organization’s reputation and diminish consumer confidence in the organization’s mission, or in some cases

can lead to its demise altogether. For these reasons, leaders must show some competency in crisis leadership

and management.

A crisis is a low-probability, but high-impact event that threatens the viability of an organization and is

characterized by ambiguity of cause, effect, and means of resolution, as well as by a belief that decisions must be

made swiftly. (Slide 12-3)

Crises come in many forms:

 Natural disasters (the 2011 earthquake in Japan and subsequent nuclear accident),

 Mass shootings (December 2012, Sandy Hook Elementary School in Newtown),

 Product failures (GM’s recall crisis of 2014),

 Human error disasters (Bangladesh factory collapse in 2014 that killed 1100 workers),

 System failures (the disastrous debut of Healthcare.gov in 2013).

In planning for a crisis, the leader has to focus on five integrated tasks: (Slide 12-4)

1. Formulate an overarching vision of crisis management for the organization.

2. Establish strategic goals and program objectives for crisis management.

3. Coordinate the creation of a crisis management plan.

4. Establish a communication plan for notification and mobilization when needed.

5. Develop a training and testing plan for crisis team and entire organization.

These five tasks point to the essential competencies of crisis leaders, which are the ability to:

 Craft a vision

 Set objectives

 Formulate, Execute and Evaluate crisis plan

 Communicate

 Manage people

236 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

A. Crisis Communication in the Age of Social Media (Slide 12-5)

Technologies such as e-mail, Web pages, cable news, and social-networking sites (such Facebook, Twitter,

YouTube or snap chat) are weapons for affected organizations and the outside world to use during a crisis.

Social networks must be part of an integrated communication strategy that ensures that all affected parties are

receiving a coherent and consistent message.

These technologies have diminished an organization’s ability to control crisis communications by opening

alternate channels that others can use to disseminate their views and build support.

A crisis is instantly visible and viral with the potential to inflict terminal damage on the affected organization.

A company today may have only minutes, not hours, to contain a crisis.

Stakeholders may have more information at their fingertips about an ongoing crisis than the company itself.

LO 2. What are the benefits of having a crisis management plan in advance of a crisis.

Pre-crisis planning buys you time. You are ready when a crisis strikes. Having a crisis management plan in

place can: (a) reduce the duration of a crisis, (b) enhance or retain a corporation’s image and reputation, (c)

allow for quick and effective responses, (d) improve communications, (e) enhance coordination and

cooperation, (f) ensure ready and available resources, (g) ensure fewer costly mistakes, (h) ensure less panic

(i) ensure quicker resolution of the crisis and (j) limit or protect financial loss

B Formulating a Crisis Plan (Slide 12-6)

The literature suggests that organizations with early crisis identification methods and crisis management plans

already in place before the occurrence of a crisis are significantly better prepared to manage and survive a crisis

event.

Better prepared organizations have the opportunity to reposition themselves and turn a crisis event into a

strategic opportunity.

An organization’s readiness to respond to a crisis is a function of:

 The skills, abilities and experience of the designated crisis leader.

 A trained and well prepared crisis team

 Organizational preparedness through regular drills and training.

 Adequate organizational resources.

 Top management support and commitment

1. The Benefits of a Crisis Plan (Slide 12-7)

Though suffering some loss is almost unavoidable, having a crisis plan in the event of an actual crisis has

several benefits. Having a crisis plan in place can:

a) reduce the duration of a crisis,

b) enhance or retain a corporation’s image and reputation,

c) allow for quick and effective responses,

d) improve communications,

e) enhance coordination and cooperation,

f) lead to the accumulation of ready and available resources,

g) lead to fewer costly mistakes,

h) create less panic

i) lead to a quicker resolution of the crisis

j) limit or protect financial loss.

LO 3 Briefly describe the three stages of a crisis management plan.

The three-stage crisis management plan consists of pre-crisis planning, leading during a crisis, and adapting

after a crisis. Pre-crisis planning addresses two key questions: (1) do we have a crisis response team and

who is on it? And (2) what is our crisis plan of action? Having a standing crisis response team increases an

organization’s ability to respond to a crisis in a timely and effective manner. On the second question,

developing a crisis plan of action involves imagining the worst possible scenarios that could happen to the

organization and the impact on employees, customers, or operational systems. Action plans for high ranking

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 237

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

crisis scenarios are developed and practice. Leading during a crisis requires a rapid response. The crisis

leader must step forward and lead. The leader’s job is to insure that everyone plays their role as spelled out

in the pre-crisis plan. Adapting after a crisis is about lessons learned. Most forward-looking organizations

do a postmortem. That is, in the aftermath of a crisis, top management authorizes a review of the

organization’s effectiveness in managing the crisis.

C. The Three-Stage Crisis Management Plan (Slide 12-8)

See Exhibit 12.1: Three-Stage Crisis Management Plan

WORK APPLICATION 12.1

Find out if your college or university has a pre-crisis plan. If you find one, read

and critique it for its effectiveness and present your findings to your classmates.

If there is none, present an argument for having one.

1. Pre-Crisis Planning (Slide 12-9 and Discussion Question on Slide 12-10)

Pre-crisis planning addresses three key questions: (1) do we have a crisis response team and who is on

it? (2) What is our crisis plan of action? and (3) Do we have all the necessary resources in place?

A crisis response team should involve a good mix of representatives from all parts of the organization.

Unfortunately, it is often the case that during a crisis, people who must work together have no history

of doing so because they have never practiced or rehearsed the plan; thus, they have no understanding

of each other’s roles and responsibilities.

During pre-crisis planning, questions on information flow and chains of command are addressed.

On the second question, developing a crisis plan of action involves imagining the worst possible

scenarios that could happen to the organization and the impact on employees, customers, and other

stakeholders.

The crisis leader and the team should then assess the risk of these potential events, and evaluate their

possible ramifications.

On the third question of resources, both financial and non-financial resources are needed.

It is often the case that during a crisis, resources (people, technology and equipment) that are brought

to bear may never have been deployed to see how well they function together.

This underscores the importance of training and drills that simulate actual crisis situations or scenarios.

Another aspect of pre-crisis planning is deciding on the appropriate communications strategy when a

crisis hits.

WORK APPLICATION 12.2

Identify someone who has been or is part of a crisis prevention and management

team, preferably someone on your campus’s crisis prevention and management

team. Ask him or her to describe the makeup and function of the team.

LO 4. Describe the role of top management during a crisis.

When there is a crisis, employees will look to the CEO or other top management personnel on how to cope

with the situation. During a crisis, top management should: (1) stay engaged and lead from the front, (2)

focus on the big picture and communicate the vision, and (3) work with the crisis leader and the crisis

management team. Effective leaders understand that their job during a crisis includes showing compassion

for victims and other affected parties.

2. Leading during a Crisis (Slide 12-11 and Discussion Question on Slide 12-12)

When a crisis erupts, a rapid response is vital. The crisis leader must step forward and lead. The

effective leader focuses on three key elements: goals, people, and resources.

The goals define the “What” – that is, the specific outcomes and objectives of the crisis intervention.

People define the “Who” – getting the right people in the right positions with the right teams. These

238 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

are elements that should already be spelled out in the pre-crisis plan.

Resources define the “how” – determining how resources will be allocated to the right people and how

they will employ such resources.

Within minutes or an hour of becoming aware that a crisis situation may exist, company officials must

be prepared to issue an initial statement to the media and other key stakeholder groups—providing

facts as they are known and an indication of when additional details will be made available.

The purpose of an immediate response on the part of the affected organization is to fill an information

vacuum with facts and perspectives.

Such quick action can help to preserve the credibility and reputation of the organization and its leaders

during the crisis.

Experience has shown that the longer companies wait, the more likely the vacuum will be filled with

inaccurate statements and outright misinformation that becomes accepted as truth.

Effective leadership from the top is critical during a crisis.

During a crisis, employees will look to the CEO or other top management executives on how to cope

with the situation.

CEO or other top executives who dig deeper into their foxhole during a crisis reminds us of the

familiar tale of Nero playing the fiddle while Rome burned.

A strategic leader’s physical presence is a matter of moral importance even when it lacks immediate

practical value.

Being there conveys moral solidarity, commitment, and concern, apart from the leader’s actual

empathy or sensitivity.

From a strategic leadership perspective, three key principles of crisis leadership are: (1) stay engaged

and lead from the front, (2) focus on the big picture and communicate the vision, and (3) work with the

crisis management team.

The most basic lesson of crisis leadership is to prepare for crises, respond quickly, act with integrity,

and disclose fully.

Another lesson is to be mindful of the “three As”—acknowledge, action, and avoid. Acknowledge or

admit the crisis, specify what action you are taking to contain or repair the damage, and tell the public

what you are going to do to avoid a repeat in the future.

WORK APPLICATION 12.3

Think of a leader whom you have observed in a crisis situation, either in person or

on TV. Critique the leader’s handling of the crisis using the text discussion as

your guide.

3. Adapting After a Crisis (Slide 12-13)

Most forward-looking organizations do a post mortem. That is, in the aftermath of a crisis, top

management authorizes a review (preferably conducted by an objective third party) of the

organization’s effectiveness in resolving the crisis.

The review should include performance indicators such as:

o Effectiveness in communicating with key stakeholder groups.

o Effectiveness in addressing the root cause(s) of the crisis.

o Crisis team effectiveness.

o Leadership effectiveness.

o Effectiveness in dealing with victims and family members.

The information generated from the post-crisis evaluation can help prevent future crises or improve the

effectiveness with which future crisis are handled.

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 239

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

LO 5. Describe the five-step process for crisis risk assessment.

The five-step process for risk assessment consists of: (1) risk identification, (2) risk assessment and ranking,

(3) risk reduction strategies, (4) crisis prevention and simulations, and (5) crisis management. In step 1 (risk

identification), crisis team members begin by identifying the worst-case scenarios that could have severe

consequences on people, the organization’s financial position, or its image. This process results in the

creation of a risk chart. Step 2 (risk assessment and ranking), potential crisis incidents are analyzed and

ranked. Step 3 (risk reduction strategies), there is debate and discussion of the crisis scenarios in step 2 and

strategies for countering each are formulated. Step 4 (crisis prevention simulations), pre-crisis drills such as

simulations are conducted to test employees’ responsiveness. Step 5 (crisis management), the plan is

reviewed and updated on a regular basis and ready to be put into action in the event of a real crisis.

D. The Five-Step Crisis Risk Assessment Model (Slide 12-14)

The five-step crisis risk assessment model is a scenario analysis and planning tool that highlights different

contingencies. For example, members may entertain questions such as, “What could happen? Where are we

vulnerable? What is the worst-case scenario? What are the short- and long- term outlooks?”

The five-steps in the crisis risk assessment model consists are: (1) risk identification, (2) risk assessment and

ranking, (3) risk reduction, (4) crisis prevention, and (5) crisis management.

See Exhibit 12.2 Five-Step Risk Assessment Model

Step 1: Risk identification.

Crisis team members will begin by first identifying the worst-case incidents that could have severe

consequences on people, the organization’s financial position, or its image.

It is a “what-if” scenario analysis that focuses on identifying realistic incidents under various crisis

situations.

This first step results in the creation of a risk chart.

Step 2. Risk assessment and ranking.

These incidents are analyzed and ranked using criteria such as loss of life, injuries, emotional trauma, or

minimal inconvenience for each incident’s human impact.

On the financial and image side, ranking criteria such as extraordinary impact (i.e., it will bankrupt the

organization), serious but insured (i.e., we are covered), or small impact (i.e., nothing to worry about) may

be employed.

Step 3. Risk reduction.

Formulate strategies for countering top-ranked potential crisis or threat.

Step 4. Crisis prevention simulations.

Pre-crisis simulations and drills are conducted to test employees’ responsiveness.

This step helps to sensitize and prepare the organization to any potential crisis.

Step 5. Crisis management.

Ongoing reviews and updates to the crisis plan become a regular part of doing business in the organization.

Ultimately, the best gauge to determine an organization’s readiness to respond to a crisis is how it rates

according to the following five factors:

 Quality of crisis plan

 Awareness and access to crisis management information

 Readiness for an effective and timely response

 Effective communication plan in place.

 Effective crisis leadership

240 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

WORK APPLICATION 12.4

Using your college or university as a reference, identify five risk areas that could

result in crisis if nothing is done now. Recommend a risk reduction plan or

strategy that can help your school avert or deal with a crisis for one of these risk

areas.

YOU MAKE THE ETHICAL CALL 12.1

Toyota Recall Crisis

Answers will vary based on opinion.

LO 6. Describe the importance of effective communication during a crisis.

Four questions that often emerge after a crisis are: (1) What happened? (2) How did it happen? (3) What’s

being done to address the crisis? And (4) What has been done to ensure it never happens again? Providing

honest, accurate, and timely answers to these questions is the essence of effective crisis communication.

Another potential problem during crisis communication is the seniority level of the person representing the

organization. It is important for the CEO or the most senior leader in the organization to show up rather than

retreat to the background. The level of seniority demonstrates to the public the seriousness with which the

incident is viewed.

E. Effective Crisis Communication (Slide 12-15)

Leaders must be able to communicate quickly and effectively during crises.

Four questions that often emerge after a crisis are: (1) what happened? (2) how did it happen? (3) what’s being

done to address the crisis? And (4) what has been done to ensure it never happens again?

Providing honest, accurate, and timely answers to these questions is the essence of effective crisis

communication.

It is important for the CEO or the most senior leader in the organization to show up rather than retreat to the

background. The level of seniority demonstrates to the public the seriousness with which the incident is viewed.

F. Guidelines to Effective Crisis Communication (Slide 12-16)

The first 24 hours of a crisis are crucial because of the media’s need to know what happened so they can tell

their audiences.

There is an information vacuum that, if left unfilled, will be filled by others. The longer organizations wait, the

more likely falsehoods will become accepted as truths.

An organization can use a number of media and tools to inform the public or tell its side of the story to weather

the storm brought on by a crisis.

These include press releases, press kits, news conferences, and one-on-one interviews with the various media.

A press release is a printed statement that describes how an organization is responding to a crisis and who is

in charge.

A press kit is a package of information about a company, including names and pictures of its executives, a fact

sheet, and key milestones in the company’s history.

See Exhibit 12.3 Effective Crisis Communication – Rules to Follow (Slide 12-17 and Discussion Questions on 12-18)

YOU MAKE THE ETHICAL CALL 12.2

GM’s Recall Crisis

Answers will vary based on opinion.

CONCEPT APPLICATION 12-1

Rules of Effective Crisis Communications

Answers to the Concept Application questions are at the end of the lecture outline.

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 241

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

II. The Learning Organization and Knowledge Management (Slide 12-19)

Because of environmental complexities, organizations are increasingly dependent on innovation to create value for

their customers.

In a knowledge-based economy, learning and creativity are key to maintaining one’s competitiveness.

Leaders must develop knowledge-integration capabilities to dynamically integrate members’ knowledge and other

resources into higher performance.

Leaders of learning organizations have to make it a priority to build and maintain a learning culture that engages

employees in learning and that enables them to master new knowledge, skills and abilities.

Organizational learning is the pathway to knowledge-creation and knowledge is seen as a strategic resource.

LO 7. Describe the key characteristics of a learning organization.

The learning organization describes a work environment where: (a) work patterns, structures, and routines

are open to continuous adaptation and improvement, (b) everyone engages in continuous learning, (c) the

culture is supportive of experimentation, creativity and innovation, (d) knowledge creation and sharing are

imperative and (e) decision making is informed by objective facts and analysis.

A. Learning Organization Characteristics (Slide 12-20)

The learning organization describes a work environment with the following characteristics:

a) work patterns, structures, and routines are open to continuous adaptation and improvement,

b) everyone engages in continuous learning,

c) the culture is supportive of experimentation, creativity and innovation,

d) knowledge creation and application is an imperative and

e) decision making is informed by objective facts and analysis.

In rapidly changing environments, characterized by increasing globalization, intense competition, and

continuous demographic and technological shifts, employee skills and abilities can quickly become obsolete and

irrelevant.

In learning organizations, there is increasing pressure on everyone to continuously upgrade their skills, abilities

and knowledge.

Learning organizations are constantly reinventing themselves so much so that the process itself becomes a

distinctive capability.

For these organizations, change is a way of life.

A learning organization is skilled at creating, acquiring, and transferring knowledge, and at modifying

behavior to reflect new knowledge and insights.

Leaders, especially those in top positions, must create the type of environment that supports and nurtures

collective learning (also known as organizational learning).

Organizational learning can occur from interactions that take place internally or externally.

 Externally, an organization can learn from its customers, suppliers, competitors, industry and

academic publications, business partners, and consultants.

 Internally, organizations can learn from their employees.

B. What Is Knowledge Management? (Slide 12-21)

Organizational knowledge is the tacit and explicit know-how that individuals possess about products, services,

systems, and processes.

242 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

Self-Assessment 12-1

Learning Organizations

If you want students to complete the Self-Assessment exercises throughout the

book, you may want to tell students and spend a little time talking about them.

LO 8. Distinguish between the traditional and the learning organization.

The table below highlights some of the differences between the traditional and the learning organization:

Traditional (efficiency driven) Learning (innovation driven)

 Stable environment



Changing environment

 Vertical bureaucratic structure



Flat adaptive structure

 Strategy formulation is top-down



Strategy formulation is collaborative.

 Centralized decision making



Decentralized decision making

 Rigidly defined and specialized tasks



Loose, flexible, and adaptive roles

 Rigid organizational culture



Adaptive organizational culture

 Top-down communication model



Open, two-way communication model

C. Traditional versus the Learning Organization (Slide 12-22)

Discontinuous change occurs when anticipated or expected changes bear no resemblance to the present or the

past.

In rapidly changing environments, learning and innovation are critical.

In what used to be called stable environments, organizations focused on being efficient through highly

structured command systems with strong vertical hierarchies and specialized jobs. This is what we call the

traditional organization.

Given the realities of the current dynamic environment facing many organizations, this traditional organization

form is being replaced by the learning organization form.

See Exhibit 12.4: Key Differences between the Traditional and the Learning Organization (Slide 12-22)

WORK APPLICATION 12-5

Explain whether where you work or have worked is more of a traditional

organization or a learning organization. Identify some of the characteristics of the

organization to justify your response.

CONCEPT APPLICATION 12-2

Differentiating between the Traditional and Learning Organization

answers to the Concept Application questions are at the end of the lecture outline.

C. The Learning Organization Culture and Firm Performance (Slide 12-23)

Increasingly, researchers are finding that the higher the level of learning and knowledge creation, the greater the

level of firm financial and nonfinancial performance. For example:

Studies have found that a firm’s ability to create and share knowledge is positively related to new product

development success.

Productivity and profits increase in organizations that embrace a learning culture.

Organizational learning cultures show a positive and direct influence on a team’s creativity and innovation.

The learning organization culture has a direct positive impact on employee, customer, and supplier satisfaction

levels.