How to Predict an Organizational Crisis

An organizational crisis is a significant occurrence or event that brings damage or harm to employees, the public, or other invested individuals or organizations. Examples of an organizational crisis include product malfunction and recall, employee layoffs, government investigations, bankruptcy and environmental disasters. Predicting and addressing the signs of an organizational crisis are important steps for minimizing its severity and long-term effects. Financial distress, product inadequacies and environmental weaknesses can often be identified in their early stages. Here are ways to predict an organizational crisis.


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    Review crisis management plans. If an organization does not have a crisis management plan in place, the risks of an organizational crisis are greater.
    • Examine the planning and availability of contingency funds. If an organization experiences unexpected loss of revenue, it will need backup funds to meet organizational expenses. The absence of a contingency fund increases the acceleration of an organizational crisis.
    • Assess emergency plans. Determine if the organization has addressed worst case scenario and established plans for addressing emergencies. For example, if an organization is responsible for protecting the public in the event of a natural disaster, examine its evacuation plans and public communication systems.
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    Analyze the diversification of assets and income generation strategies. An investment in only one financial instrument or reliance on a sole product or service for generating revenue can potentially lead to crisis in the event of a market crash or the emergence of a strong market competitor.
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    Observe disruptions in intra-organizational processes. Taking longer to pay bills, complete projects and deliver products or services are potential signs of future crisis in a generally smooth running organization.
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    Examine conflict resolution patterns and procedures. Situations in which pressing organizational conflicts and problems are continually glossed over, ignored or placed unresolved on the back burner may be signs of an organizational crisis.
    • Pay attention to intra organizational conflicts. For example, several organizational leaders may be in conflict over an important decision or situation. If unresolved issues result in long-term silence, procrastination, indecision and/or persistent disagreement, the chances of an organizational crisis are greater.
    • Evaluate the organization's relationships with other organizations and/or the public. If the organization deals with public grievances by ignoring complaints, falsifying information or deflecting blame, these may be signs of an impending organizational crisis.
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    Read and listen to product or process complaints from reliable sources. Evaluate the validity of the complaints.
    • Consider the complaints of employees within the organization. Discern the expertise and reliability of the complaining individual or group. For example, concerns about a potential product malfunction are more predictive of future organizational crisis when coming from a seasoned and credible product developer and manager, rather than someone new to the field.
    • Determine whether public complaints are justified. For example, if the public complains about potential harm caused by your company's placement of nuclear power plants near residential areas, consider both the current and historical evidence about potential health risks.

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Categories: Stress Anxiety and Crisis Management