Экономические науки / 14. Экономическая теория

Onyusheva I.V., PhD, Professor of RAM, RANH,

Urazbekov S.V.

University of International Business, Almaty, Republic of Kazakhstan

Theoretical Approaches to Crisis, Its Types and Classification

Key Words: crisis, crisis management, anti-recessionary management, types, classification.

Nowadays knowledge concerning crisis, its types and consequences are becoming essential for an individual, organisation or state since crises act as economic, natural, social or political forces that are able to cause significant damage to any system (e.g. a household, firm, country or the world) and usually create a need for change. They are associated with threats to economic stability, demographics-related alterations, destabilisation of ecosystems, institutional reorganising processes and reconsideration of accepted assumptions and beliefs [1]. There were many examples in recent history that showed the essence of crises, the amount of harm they could do as well as the scale of problems following them. Such examples would include the 9/11 terrorist act with 2,996 people killed, the tsunami in the Indian Ocean that took place in 2004 and resulted in 230,000 casualties, the Spanish flu (1918-1919) claiming 20 million lives and a lot of other events both of similar impact and relatively less disastrous [1, p.2; 2].

In the corporate world, the extent of disruption attributed to crises is impossible to underestimate. Carrefour’s struggle to restore its public image in China following the torch relay incident before the 2008 Olympics in Beijing, the E. coli controversy surrounding Taco Bell, the fraud committed by the Tyco top-managers and countless other cases in which big and small companies are trying to manage a stressful and dangerous situation have demonstrated that no organisation is protected from a crisis [3].

Taking into account the fact that crisis has multiple dimensions and can be examined from different perspectives it is necessary to define what crisis is. Then, it is possible to determine whether a particular event can be classified as a crisis. However, the concept of crisis is complex and the crisis itself is a complicated phenomenon. As a result, there are debates in the academia concerning different definitions and classification systems of crises. One of the proposed criteria for defining crisis is the level of harm an event creates [1, p.3-4].

Table 1 – FEMA disaster declaration criteria

- Amount and type of damage (number of homes destroyed or with major

- damage);

- Impact on the infrastructure of affected areas or critical facilities;

- Imminent threats to public health and safety;

- Impacts to essential government services and functions;

- Unique capability of federal government;

- Dispersion or concentration of damage;

- Level of insurance coverage in place for homeowners and public facilities;

- Assistance available from other sources (federal, state, local, voluntary

- organizations);

- State and local resource commitments from previous, undeclared events; and

- Frequency of disaster events over recent time period.

Note: Source – [4]

In the US, for example, a snowstorm negatively affecting a community may be qualified as a crisis only in case it poses risk to public safety or winds may be considered a crisis only when they are followed by property damage. The Federal Emergency Management Agency has developed a set of criteria in order to determine a situation as a disaster (Table 1). This system enables the FEMA to evaluate the level of harm and disruption induced by a certain event [1, p.4-6].

Another system of considering magnitude of crises is based on the concept of perception. According to Coombs, the perception of a crisis is connected to a violation of widely shared expectations. People expect food to be safe and not contaminated by E. coli or they tend to think that seasonal influenza should not transform into a massive outbreak. If there is the violation of such expectations, public awareness of a crisis starts developing and people’s behaviour begins to change [5]. In addition, the concept of intentional harm plays an important role in understanding crises. Some scholars state that wars should not be qualified as crises since they are not surprising (although intentional) in nature whereas terrorist attacks represent crises because of their unanticipated, surprising and intentional character. So, it is obvious that crisis events possess various characteristics and are caused by different factors. In this regard, a number of crisis typologies have been introduced (Table 2) [1, p.5-12].

Table 2 – Typologies of crisis
Crisis types:
Lerbinger: - Natural disaster - Technological crises - Confrontation - Malevolence - Organizational misdeeds - Workplace violence - Rumours - Terrorist attacks/ man-made disasters	Seeger, Sellnow and Ulmer: - Public perception - Natural disasters - Product or service crisis - Terrorist attack - Economic crisis - Human resource crisis - Industrial crisis - Spills (oil, chemical) - Transportation disasters - Crises from - environmental factors	Coombs: - Natural disasters - Malevolence - Technical breakdowns - Human breakdowns - Challenges - Megadamage - Organizational misdeeds - Workplace violence - Rumour
Note: Source – [1, p.6-15; 5-7].

The Fukushima accident or the BP oil spill can be defined as crises. Both events had three common features: they were unanticipated (in other words, they violated people’s expectations), threatened important objectives and required an immediate/quick response in order to minimise the associated risk [7, p.40-43; 8]. Sellnow and Seeger, the authors of the book “Theorizing Crisis Communication”, claim that there are always warning signals before any kind of crisis does actually hit but, at the same time, in most cases crises are unanticipated by those affected. This fact in turn leads to disturbance that makes it impossible for the people influenced by the event behave in a regular way. In other words, there is a change in the status quo that almost always causes stress, uncertainty and sometimes a high extent of psychological dislocation. Weick uses the concept of ‘cosmological episode’ to describe such a negative behavioural pattern. The cosmological episode refers to a situation where people operating under stress suddenly develop an idea that the universe is not a rational system anymore [1, p.7-19; 9].

The concept of crisis also includes the fact of threatening ‘high priority goals’. Life, health, security and psychological safety among others are often considered as such type of goals. When one of them (or several ones simultaneously) are at risk, the need to respond to the threat emerges. There is a framework developed by Cannon and further advanced by Gray that review this response employing the four stage process: ‘freeze, flight, fight and fright’ [1, p.9-11; 10]:

- Freeze response may be exhibited by an organism at the first stage of problem awareness (hyper-vigilance);

- The second response is fleeing or ‘running away’ from the danger;

- If fleeing is not available, according to Gray, the fight mode is activated;

- The final effort of the organism to avoid the threat may be the ‘playing dead’ strategy (immobility) [10, p.56-62];

The third factor defining crises is an immediate action that is required in order to stop the situation from negatively affecting all those involved. Special agencies or other groups possessing necessary authority often take such actions to minimise or at least limit the harm. One of the numerous examples would be the system of measures and recommendations published by the Centers for Disease Control and Prevention (the USA) when the outbreak of H1N1 became a global issue in 2009. Those recommendations included statewide vaccinations, washing hands on a frequent basis, staying home, as well as a number of others [1, p.17-20].

There are also more narrowed views of what crisis is. Coombs, for example, says that although a universal definition of crises does not exist, there are certain conceptual similarities which can be found in works of those scholars writing on such topics as crisis management or crisis communication. In “The Handbook of Crisis Communication”, he presents the compiled structure of various opinions of different scientists on the essence of crisis (Table 3) [3, p.18-20]:

Table 3 – Definitions of crisis
Definition	Author
- A situation representing a negative outcome for an organisation/industry/publics (as well as products, services or reputation). It adversely affects regular business transactions and sometimes puts the very existence of such an organisation at risk.	Fearn-Banks
- Crisis is not always a bad thing. It can be a change for good or bad.	Friedman
- An emergency that affects the whole organisation. Therefore, if a situation only impacts on its relatively small and isolated part, this situation is not necessarily a major crisis. The major crisis has a significant influence on human lives, financial earnings, property, reputation or general well-being of the organisation.	Mitroff and Anagnos
- Turning points in life of organisations.	Regester
- A negative, overwhelming and unexpected incident.	Barton
- A non-routine, unexpected and specific event/series of events that cause uncertainty and perceived threat to high priority goals of an organisation.	Seeger, Sellnow and Ulmer
- Turning points for better/worse.	Fink
- A major threat or unpredictable event which may negatively influence an organisation/industry/stakeholders in case if it is not handled properly.	Coombs
Note: Source – Compiled by the author on the basis of [3, p.18; 11-18]

It is obvious that most of definitions above are given from the organisational and corporate point of view. Three of them link the concept of crisis to the probability of positive as well as negative outcome to occur. There is a widespread opinion that the symbol meaning ‘crisis’ in Chinese has both the elements of the words ‘opportunity’ and ‘threat’. Although the credibility of this interpretation is often doubted, Coombs thinks that opportunity and threat are not the main features of crisis but they rather represent the outcomes depending on the effectiveness of crisis management. There can be extreme situations where crises can serve as the only impulse for changes that can actually save the company. Despite this, a professional manager is not likely to strategically create a crisis within the organisation in order to advance its goals. Then Coombs presents his own understanding of what crisis is: the perception of an unanticipated event posing risk to stakeholders’ expectations and able to significantly influence the performance of the organisation by generating negative outcomes. Again, he highlights ‘the perceptual nature of crisis’ mentioning the role stakeholders play in understanding crises. Their concerns or, in other words, how they perceive a situation determine whether this particular event continues transforming into a crisis or not [3, p.21-22; 19].

In his article “The Protective Powers of Crisis Response Strategies: Managing Reputational Assets During a Crisis”, Coombs examines the stakeholders’ perception of different crisis response strategies within the framework of the Situational Crisis Communication Theory. The first major component of the SCCT is ‘crisis situation’ that assesses reputational threat. Such threats are a function of two variables: crisis responsibility and intensifying factors. Crisis responsibility measures the extent to which stakeholders link the cause of crisis to activities of the organisation. It depends on two factors: a crisis type (or the crisis’s category/class) and severity of damage. Different crisis types induce different levels of responsibility attribution. The SCCT is based on a number of works written by well-known scholars (e.g. Fearn-Banks, Lerbinger, Pauchant and Mitroff, etc.) and presents crisis types divided into three clusters characterised by the level of crisis responsibility associated with each of them (Table 4). Different clusters possess distinct peculiarities enabling crisis managers to work out specific plans tailored to the whole group of like crises. As a result, the decision-making process becomes easier since the crisis management plan is adaptable to all kinds of crisis within one crisis cluster the company may need to deal with [20; 25; 26].

Table 4 – Crisis Clusters
Victim cluster	An organisation is a victim of the situation
- Natural disaster	Natural forces that cause damage to the organisation (e.g. floods, earthquakes)
- Rumours	Flow of false (and negative) information about the organisation
- Workplace violence	Current employees of the company being attacked by another current/former employee on-site
- Product tampering/Malevolence	Damage caused by external agents
Accidental cluster	Unintentional actions of the organisation cause the crisis situation
- Challenges	Stakeholders accuse the organisation of operating in an unacceptable way
- Megadamage	A technical accident followed by significant environmental damage
- Technical breakdown accidents	An industrial accident caused by a technology/equipment failure
- Technical breakdown recalls	Product recalls caused by a technology/equipment failure
Preventable cluster	The organisation was aware of the possible negative consequences of its actions (e.g. deliberately placing stakeholders at risk/violating laws)
- Human breakdown accidents	An industrial accident caused by human error
- Human breakdown recalls	Product recalls caused by human error
- Organisational misdeed (without injuries)	Stakeholders are misled without injuries
- Organisational misdeed (management misconduct)	Management violates regulations/laws
- Organisational misdeed (with injuries)	Management decision to put stakeholders at risk results in injuries
Note: Compiled by the author on the basis of [6, p.144-149; 11, p.212-230; 21-24]

The concept of damage severity focuses on the degree of physical, financial, emotional or environmental harm inflicted by the crisis. According to the SCCT, there is a positive relationship between the severity and the perception of crisis responsibility. In addition, the greater the amount of crisis responsibility stakeholders attribute to the situation, the more unpleasant consequences for the company’s reputation there can be [20, p. 243-244; 23, p.175-176; 27-29].

The SCCT also presents two factors that play a role of intensifiers. They are crisis and relationship history. Crisis history demonstrates if the organisation faced similar crises before and relationship history reflects the essence of interactions with its stakeholders. Coombs states crisis intensifiers are able to increase reputational damage from any type of crisis substantially. In the past, it was believed that presence of intensifiers made stakeholders consider the situation as the company’s fault thereby increasing their perception of crisis responsibility. The modern view on this issue is quite different: the intensifiers do not indirectly impact on company’s reputation through crisis responsibility but there is rather a direct effect. To sum up, the SCCT offers four components of the crisis situation [28 p.325-326; 30]:

- Crisis type;

- Severity of damage;

- Crisis history;

- Relationship history [20, p.244-247];

Mitroff, the author of “Combatting Disruptive Change: Beating Unruly Competition at Their Own Game”, analyses the applicability of the Jungian personality typology in terms of preparing for various kinds of crises (Table 5). He considers the Jungian framework a useful tool for understanding all organisational phenomena [31].

Table 5 – Types of crises (the Jungian personality typology)
Economic/Technical
Internal	Cell 1	Cell 2	External
	- Product/Service Defects	- Widespread Environmental Destructon
	- Plant Defects/Industrial Accidents	- Large Scale Systems Failure
	- Computer Breakdowns	- Natural Hazards
	- Defective Information	- Hostile Takeovers
	- Bankruptcy	- Governmental Crises
		- International Crises
	Cell 3	Cell 4
	- Failure to Adapt to Change	- Sabotage
	- Organisational Breakdowns	- Terrorism
	- Miscommunication	- Executive Kidnappings
	- Employee Sabotage	- Off-site Product Tampering
	- On-site Product Tampering	- False Rumours/Sick Jokes/Malicious Slander
	- False Rumours/Sick Jokes/Malicious Slander	- Labour Strikes
	- Sexual Harassment	- Boycotts
	- Occupational Health
Organisational/Social/People
Note: Source – [31, p.42]

Table 5 examines the essence of crisis from two perspectives: its originating source and factors responsible for its occurrence. Thus, it is possible to differentiate between crises arising internally (e.g. bankruptcy or employee sabotage) and those of external origins. The framework implies that internal factors are considered in the short run, while external ones are evaluated from a long-term viewpoint. Such an important difference plays a crucial role in analysing those crises and developing proper management patterns. The second dimension presents the distinction between crises on the basis of factors causing them (economic/technical breakdowns vs people/social/organisational breakdowns). It is necessary to define whether human actions caused a particular crisis (e.g. miscommunication or labour strikes) or technical/economic factors triggered it (e.g. industrial accidents or government crises). The Jungian framework emphasises the fact that any crisis from any sell can be either cause or effect of other crises in other cells. One type of crisis can spark a chain reaction and be followed by one or more other crises of different types. In this regard, systematic thinking is required for the organisation in order to be ‘crisis prepared’. If the company is ready to deal with a series of interdependent crisis situations, then it employs systematic thinking [31, p. 42-45].

There are also a number of other approaches to causes of crises. Decision-making mistakes, natural changes, accidents and oversights are often believed to induce emergencies. According to Seeger, Sellnow and Ulmer, all causes can be divided into three groups [7, p. 12]:

- ‘Normal failure and interactive complexity’;

- ‘Failures in warnings, faulty risk perception and foresight’;

- ‘Breakdowns in vigilance’;

Normal accident theory or NAT describes the process by which normal routine failure can transform into a catastrophic crisis. The focus is on the concept of ‘interactive complexity’ that inevitably arises around large systems with complicated socio-technical structures. NAT emphasises that such systems are usually technology intense and therefore breakdowns can occur at one of their level or at several ones simultaneously. A good example of such a situation would be the electrical blackout that took place back in 2003 on the east coast of North America and resulted in 55 million people losing access to power in eight American states as well as in Ontario, Canada. Perrow claims such breakdowns are associated with tight coupling and interactiveness: one system/subsystem affects another. Indeed, in case of the 2003 blackout several factors contributed to the final negative outcome: hot weather and peak demand made untrimmed trees and expanded (because of high temperature) transmission lines come into contact. In complex systems, it is hard for managers to foresee such kinds of interactions. Perrow anticipates that a number of crises happening will increase as the world becomes more complex. The FEMA (the US) reported an increase in the number of federal disaster declarations up to 99 (the highest quantity ever reported for one year) in 2011. That compares to only 13 back in 1953. Such a negative trend may serve as a proof of Perrow’s predictions [32; 33].

The second approach highlights faulty risk perception, foresight and failures in warnings as the ultimate cause of crises. Turner linked crisis and the notions of ‘intelligence failure’ and ‘failure in foresight’. Signals of coming crisis may not be interpreted in the right way which makes it problematic for managers to take necessary actions before the crisis becomes obvious. Sellnow and Seeger suggest that the Bhopal Disaster, the Hurricane Katrina crisis and many others can be described as inability to perceive, understand and communicate associated risks [34].

The third approach to the crisis cause relate occurrence of crises to breakdowns in vigilance. This point of view was popularised by Janis using the term ‘groupthink’. The groupthink theory suggests that decision systems (e.g. companies) are prone to shape the way of thinking of people involved in their activities (e.g. employees) promoting the importance of consensus and compliance as well as creating the internal perception of invulnerability. As a result, the process of assessing risk and assessing information critically becomes imperfect (or even misleading). The crises caused by faulty decision-making included the Challenger Shuttle catastrophe of 1986 and the case of Enron. [1, p.28-29; 35]

In conclusion, countless theories and definitions concerning the essence of crisis have been developed and introduced. Moreover, there is a possibility that new models and theoretical frameworks are going to appear in the nearest future. Different scholars look at the issue from different points of view and, use different contexts to evaluate the impact crises have on people, organisations, nations and the world itself and present different causes of crisis. It is necessary to analyse deeply theoretical approaches in order to develop a comprehensive perspective on the issue.

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