integrating the crisis management perspective into the strategic management process

INTEGRATING THE CRISIS MANAGEMENT PERSPECTIVE INTO THESTRATEGIC MANAGEMENT PROCESS*

JOHN F. PREBLE

University of Delaware

ABSTRACT

The ®elds of strategic management and crisis management have been evolvingseparately despite their potential for synergistic integration. This paper explicateshow adding crisis management's defensive/preventative capability to strategicmanagement's o�ensive market positioning orientation can yield a more compre-hensive approach to the strategic management of organizations. The traditionalstrategic management process is reviewed ®rst and then analysed with respect tothe gap that exists in this orientation. Examining the di�erences and similaritiesin perspectives between strategic management and crisis management and thenreviewing the crisis management process provides a basis to proceed with asynthesis of the two ®elds. The paper concludes with the presentation of a newintegrated strategic management process model that pushes forward the bound-aries of strategic management and internalizes crisis management activities intothat process.

INTRODUCTION

The ®elds of crisis management and strategic management have tended to evolveover the last several decades, for the most part separately and in a parallelfashion. Recently, several scholars have attempted to explore the commonground between these ®elds and have concluded that crisis management andstrategic management are inexorably linked to each other (Mitro� et al., 1992;Pauchant and Mitro�, 1992; Smith, 1992). However, the precise nature of theselinkages is just beginning to be speci®ed, integration into the prevailing strategicmanagement process model has yet to take place, and strategic managementscholars and practitioners are, by and large, not yet embracing this connection.The purpose of this paper is to show how integrating the crisis management

perspective into the strategic management process can provide organizations witha defensive capability for preventing crisis developments or lessening their e�ectsif a crisis occurs. This capability is not currently being adequately emphasized inthe strategic management process, which tends to focus on carving out sound

Journal of Management Studies 34:5 September 19970022-2380

# Blackwell Publishers Ltd 1997. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UKand 350 Main Street, Malden, MA 02148, USA.

Address for reprints: John F. Preble, Department of Business Administration, University of Delaware,Newark, DE 19716, USA.

o�ensive strategies in today's highly competitive marketplace. We begin by ®rstreviewing the traditional strategic management process and examining the gapthat exists in this orientation. Di�erences and similarities between strategicmanagement (SM) and crisis management (CM) perspectives are discussed next.This is followed by the presentation of a normative CM process model. Thesynthesis between CM and SM is then described, and the paper concludes withthe presentation of a new integrated strategic management process model.

THE STRATEGIC MANAGEMENT PROCESS

The ®eld of strategic management/business policy has been developing over thepast 25 years into a fairly distinct subdiscipline in management studies (Hoferand Schendel, 1978; Shrivastava, 1987a). However, SM is still evolving as a ®eldand consequently there is a certain degree of heterogeneity that exists as to thebeliefs of its members (i.e. de®nitions, taxonomies, schools of thought, etc.). Forexample, while Mintzberg (1994) is concerned that too little e�ort is beingdirected towards ®nding and anointing strategies that are emerging within theorganization, he views strategic planning as a useful device for programmingintended strategies, seeing that they are communicated clearly and used as ameans of control. In spite of the situation just described, a reasonable degree ofconsensus does exist on a normative model of the strategic management process.It is noteworthy that this prescriptive model of strategic management has beenfound to be an accurate representation of strategic planners' perceptions ofcontemporary practice (Gintner et al., 1985). The model is depicted in ®gure 1and includes three primary components: strategy formulation, strategy implemen-tation, and strategy evaluation (control) (David, 1995; Thompson and Strickland,1995). Strategy formulation is concerned with determining the future direction ofthe ®rm and has received considerable attention in the planning literature(Bourgeois, 1980; Fahey and Christensen, 1986; Hofer and Schendel, 1978;Miller and Friesen, 1978; Mintzberg, 1978). As the diagram illustrates, strategyformulation usually includes conducting some form of external audit or scan thatresults in the speci®cation of key external opportunities and threats and aninternal audit of the organization's most important strengths and weaknesses(SWOTs). Also included in this phase is the development of a mission and/orvision statement and the speci®cation of long-term objectives. Strategy selectionor choice follows the above steps and may be facilitated by using a TOWSmatrix (Weihrich, 1982) to systematically identify relationships between sets ofpreviously identi®ed SWOTs (e.g. strengths/opportunities, weaknesses/threats) tocreate numerous alternative strategies based on these combinations.Strategy implementation involves the modi®cation of organizational structures

and processes to ensure that planned results (i.e. strategies, long-term objectives)are obtained (Galbraith and Kazanjian, 1986; Lorange and Murphy, 1984; Nutt,1986). This phase includes processes such as the establishment of annual goalsand policies, the allocation of resources to obtain objectives, and adjusting moti-vation and reward systems to better match new strategic thrusts.Strategy evaluation is concerned primarily with traditional control processes,

which involve the review and feedback of performance to determine if plans,

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# Blackwell Publishers Ltd 1997

Figure 1. A strategic management process modelSource: David, 1995

strategies and objectives are being achieved, with the resulting information beingused to solve problems or take corrective actions (Daft and Macintosh, 1984;Schendel and Hofer, 1979; Steiner, 1979). Recently, theories of strategic controlhave been advanced which emphasize a `feedforward' approach to controllingstrategies that is future-directed and anticipatory in evaluating plans, activitiesand results (Goold and Quinn, 1990; Preble, 1992; Schreyogg and Steinmann,1987). As part of the strategic control process, special alert controls that incorpo-rate crisis management repertoires, have been suggested as an appropriatemechanism for an organization to thoroughly, and often rapidly, reconsider a®rm's basic strategy based on a sudden, unexpected event (Byars et al., 1996;Pearce and Robinson, 1988; Preble, 1992).The strategic management process just described was covered sequentially.

However, some scholars, notably Mintzberg (1991), would consider this distinc-tion (i.e. three phases) as arti®cial and view the three aspects together as strategy`formation'. None the less, from an analytical point of view the distinction isconsidered useful and the approach provides a logical, clear, and straightforwardexplanation of the process, which works well for training and pedagogicalpurposes. The actual process model is in fact highly interactive, with arrows andfeedback loops appearing throughout ®gure 1.

Strategic Management Process VulnerabilityThe objective of the strategic planning process is to design competitive strategiesthat enable the ®rm to ®nd a position in the industry environment faced by theorganization (Porter, 1979), and to go beyond current perceptions of the industrysituation to distinguish the enterprise into the future (Hamel and Prahalad,1993). This aggressive, forward-thinking orientation ignores an arena of potentialproblems that could seriously undermine the bene®ts of the SM process. Despitethe successful articulation of planned strategies, numerous ®rms may have paidinsu�cient attention to considerations such as the following: a company's activ-ities that could potentially do large-scale harm to the environment (e.g.Chernobyl); products that have not been examined for their potential negativeside e�ects (e.g. Dow Corning's silicone breast implants) or their vulnerability toproduct tampering (e.g. Tylenol capsules); stakeholders who may feel grieved ordisenfranchised from their organization and wish to do it harm (e.g. US postalworkers); or technological processes that have not been subjected to analysis ofworst-case scenarios that can evolve due to human error and technologicalfailures (e.g. Bhopal). Unfortunately, the situation does not seem to beimproving, as Sullivan (1993) reported that the frequency of chemical plantaccidents is increasing at a high linear rate and the associated costs at an expo-nential rate.In short, while the SM process results in strategies that provide a sound o�ense

in the competitive marketplace, it pays inadequate attention to defensive actionsthat could act to prevent unwanted, undesirable and unexpected crises fromhappening. The occurrence of these types of crises can undermine success in themarketplace as the ®rm may face multibillion dollar settlement costs, damage tothe corporation's reputation, and ultimately survival may even be threatened. Thepotential for these kinds of consequences should act as a major incentive forexecutives to embrace the kinds of changes being proposed in this paper. Integrat-

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ing the CM perspective into the SM process could strengthen it signi®cantly bydirectly shoring up this area of vulnerability. By examining the historical di�er-ences between SM and CM it is easier to envision the contribution that CM'sperspective could add to SM's orientation. It is to this task that we now turn.

CRISIS MANAGEMENT AND STRATEGIC MANAGEMENT DIFFERENCES

Strategic management is concerned with the formulation, implementation andevaluation of strategies designed to achieve organizational objectives (David,1995). Crisis management deals with attempts to identify and predict areas ofpotential crises, the development of actions and measures designed to preventcrises from occurring or from an incident evolving into a crisis, and minimizingthe e�ects or disruption from a crisis that could not be prevented (Wilson, 1992).The parallel development of the two ®elds can be explained when we considerthat SM and CM researchers and practitioners have di�ered historically on thefollowing dimensions: educational backgrounds and subsequent careers; stake-holder perspectives; adherence to dominant paradigms; cultural (norms andbeliefs) orientations; goal structures; environmental perspectives; and systemsviewpoints.While CM and SM are both ®elds that by their nature are multidisciplinary,

the disciplines represented in each are frequently di�erent. Individuals workingand conducting research in CM frequently come from the areas of economics,sociology, psychology, political science, public administration, public relations,environmental science, chemical engineering, computer science and communica-tion. Strategic management's proponents, on the other hand, have typically beentrained in business policy, general management, business and its environment,management, international business and organizational behaviour. Each disci-pline brings its own perspective to bear on these two ®elds that are still relativelynew and emerging. For example, Pauchant and Mitro� (1992) observe that econ-omists view crises in terms of negative movements in macroeconomic variablescaused by governmental policy failures; sociologists attribute crises to socialinequalities, an increase in `utilitarian individualism', the decline of family andcommunity, etc.; psychologists consider a crisis the breakdown of an individual'sidentity or his or her subjective sense of self and meaning; and managementscience de®nes a crisis in terms of a restricted number of e�ects and call formore mechanisms of control and security management.Terminological confusion abounds in this milieu with the words disaster, cata-

strophe, jolt, problem, threat and turning point all having been used interchange-ably in the literature with the term crisis (Reilly, 1993). Further, while crisismanagement is considered in this paper and elsewhere (Pauchant and Mitro�,1992) to be strategic in nature and has been de®ned earlier as encompassing allphases of that process, in the emergency management literature crisis manage-ment deals squarely with the tactical decisions and actions at the height of theemergency period of a disaster (Drabek and Hoetmer, 1991; Quarantelli, 1988).These same authors see preparedness planning as strategic as in organizing foran emergency response before an event (Drabek and Hoetmer, 1991), or as indeveloping an overall approach to a problem or objective (Quarantelli, 1988).

INTEGRATING THE CRISIS MANAGEMENT PERSPECTIVE 773


Obviously, these di�erences are suggestive of some of the di�culties of communi-cating across the di�erent disciplines that are currently participating in these two®elds.Professionals in the ®elds of CM or SM have been subject to extensive educa-

tional and organizational socialization e�orts (Schein, 1968). This socializationtends to result in a clear and stable set of attitudes, beliefs, values and behaviours(i.e. cultural orientation) being associated with a particular discipline or within anorganization. For example, while strategic management researchers and practi-tioners adhere to an open systems view that includes the external environment,CM proponents use an even wider lens in advocating the use of a total systemsviewpoint (Mitro� et al., 1992). CM's perspective includes consideration of boththe productive and destructive potential of organizations, the reliability ofmultiple systems, and the interaction e�ects of tightly coupled, complex newtechnologies (Perrow, 1984). One consequence of this perspective is a seriousinterest in CM inquiries on: how organizations can threaten their external envir-onment and ecosystem; how humans respond to disasters (Drabek, 1986); andhow `sustainable corporations' can be created and maintained (Shrivastava,1993). However, SM's practitioners tend to focus more on how the environmentcreates opportunities and threats for the ®rm and on how to create and sustain`competitive advantage' (Porter, 1980). While ®nancial performance is theprimary goal of SM, CM's proponents add quality, safety, and reliability to thegoal structure of the ®rm. The ®eld of SM considers shareholders, employees,suppliers, ®nanciers, government agencies, and customers to be its major stake-holders. CM advocates broaden this constituency base to include unborn futuregenerations (Pauchant and Mitro�, 1992), special-interest groups (e.g. ecologists),local politicians, competitors (Mitro� et al., 1996), and even terrorists (e.g. WorldTrade Center) and psychopaths (e.g. Tylenol) (Mitro� and Kilman, 1984).With the above discussion in mind, it becomes clear why the ®elds of CM and

SM have been evolving separately thus far. However, it is precisely these di�er-ences in perspectives and orientations that provide the integration opportunity.Fortunately, CM's perspective is complementary to SM's and, therefore, can beadded to the SM process to broaden it and strengthen it. The integration taskwill also be facilitated by a large area of common ground (i.e. similarities) thatcurrently exist between CM and SM.

CRISIS MANAGEMENT AND STRATEGIC MANAGEMENT SIMILARITIES

Mitro� et al. (1992) have argued that CM should be integrated into the SMprocess because they share the following six characteristics: a focus on environ-mental relations; a complex set of stakeholders; the involvement of top manage-ment; a concern for the whole organization; the expression of a consistentpattern; and a representation of emergent processes. Each of these characteristicswill be discussed in turn and others will then be added to this set.SM proponents have been increasingly concerned about rapid changes

emanating from the external environment. As a consequence, they have beenencouraged to adopt an `open-system' perspective (Thompson, 1967), to scan theenvironment to identify early events and changes taking place there (Aguilar,

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1967) and to devise adaptive strategies that improve the ®t or alignment of the®rm with the environment (Bourgeois, 1980; Hofer and Schendel, 1978). CMadvocates also embrace an open-systems perspective in order to better under-stand the dynamics of crises and for developing CM e�orts (Bowonder andLinstone, 1987). However, as mentioned earlier in this paper, SM's primaryinterest in the environment is outside-in (i.e. search for opportunities andthreats), while CM is additionally focused on inside-out (i.e. the ®rm's impact onthe environment).With the external environment playing an increasingly important role in the

strategic management of organizations, the emergence of a constituent (Elkinsand Callaghan, 1981) or stakeholder (Freeman, 1984) model of management hasdeveloped. The manager is seen as a system balancer of all the competing claimsand demands on the organization (e.g. shareholders, employees, suppliers,customers, bankers, government, etc.). Frequently, these constituents holddi�ering basic assumptions or frames of reference (El Sawy and Pauchant, 1988)for evaluating management actions. While CM is concerned with additionalconstituents (e.g. ecologists, terrorists, etc.), di�erences in stakeholder `frames ofreference' have been shown empirically both to contribute to the emergence ofcrises and to be a key of CM e�orts at remediation (Bowonder and Linstone,1987; Shrivastava, 1987a).The involvement of top management is widely viewed as a necessary condition

for both SM and CM e�orts to be e�ective (Preble, 1994; Thompson and Strick-land, 1995). In the ®eld of strategic management the role of the CEO/president,general manager, or top management team (Hambrick and Mason, 1984) is tostructure and guide the process, and to provide symbolic support to unit-levelmanagers who are actually devising plans and strategies (Kiechel, 1987). The®eld of CM views top management attitudes as key to getting any real CM activ-ities o� the ground and the direct participation of top managers on crisis teamsis seen as critical to their proper functioning (Preble, 1994; Wold and Shriver,1988). Pauchant and Mitro� (1992) have found that the emergence of crises, theextent of CM preparedness, and the e�ectiveness of CM e�orts are all in¯uencedto a great degree by the basic assumptions and activities of top management.The ®eld of strategic management has, since its inception, been concerned

with the management of the total enterprise (i.e. the whole organization) (Boweret al., 1991 [1969]). Similarly, CM attempts to manage crises that could poten-tially disturb the entire organization and is concerned with the survival or devel-opment of its stakeholders, the industry as a whole and the environment(Pauchant and Mitro�, 1992).Strategy-making is a complex blend re¯ecting consistency and emergent

processes. It is consistent in the pattern that can be found in past actions ordecisions. Strategy's emergent processes are evident when strategies form inresponse to an evolving situation (Mintzberg, 1987; Quinn, 1980). Recently,Mintzberg (1994) has suggested that planners can assist managers in ®ndingthese ¯edgling strategies that are present in pockets of the organization and areripe for exploitation. Meanwhile, CM researchers see a consistency in the basicassumptions of top managers and others in the ®rm, i.e. a kind of organizationalidentity (Mason and Mitro�, 1981). Of course, this consistency can be associatedwith an organization being either crisis-prone or crisis-prepared. Crises are also



organizationally emergent, whether being dictated by the environment (imposed)or arising from the choices and actions of organization members (Mitro� et al.,1992).A key similarity that can facilitate the integration of CM into the SM process

is the fact that both ®elds have developed models which depict formulation andimplementation aspects in their processes (as will be discussed subsequently). Inaddition, both SM proponents and CM advocates argue strongly that theirprocesses be conducted continuously (Bower et al., 1995 [1965]; Pauchant andMitro�, 1992). Because of the importance of these two processes, SM and CMare primarily concerned with the long-term survival and well-being of the organi-zation and the constituents a�ected by it.Thus, SM and CM similarities include: a focus on the external environment;

numerous stakeholders; the need for top management involvement; a concernfor the entire organization; both consistent and emergent processes; processmodels that have similar components and are both conducted continuously; anda concern with long-term organizational survival. We will now examine brie¯ythe ®eld of crisis management and, in a more detailed way, its process.

THE CRISIS MANAGEMENT PROCESS

While crisis management is increasingly being recognized as an established ®eld,its practice and theory development are still in the formative stages with onlyabout 50% of large United States corporations having some level of CMprogramme (Fink, 1986; Mitro� et al., 1988; Reilly, 1987; Wisenblat, 1989).Although some research on CM was conducted in the 1960s and 1970s, acomputer search using the key words `crisis management' revealed that 80% ofCM publications appeared after 1985 (Pauchant, 1988). A similar computersearch conducted by the author in 1995 using the `ABI-Inform' database listed450 articles published in the last ten years. Dissertations that have dealt withsome aspect of CM totalled 62 for the period January 1988±September 1995,using the `ProQuest' dissertation abstracts database.It should be acknowledged at this point in the paper that the approaches

about to be discussed here to prevent and deal with crisis situations have theirgreatest applicability in the United States or in Western European type societies.However, there are ongoing e�orts to link disaster prevention and reduction tosocio-economic development in disaster-prone countries like China (Jingshen etal., 1992) and other developing nations through the World Bank's assistance inthe planning and management of environmental (both natural and technological)problems/risks (Kreimer and Munasinghe, 1992). But there remain signi®cantbarriers to the rapid transference of ®rst world disaster planning strategies todeveloping nations, including cultural di�erences (Ali, 1992), knowledge, skillsand resource constraints and de®cient infrastructures (Kreimer and Munasinghe,1992), and political considerations (Por®riev, 1992).The de®nition of a crisis chosen for this study is in fact a combination of

several de®nitions, the ®rst of which is, `an organizationally-based disaster whichcauses extensive damage and social disruption, involves multiple stakeholders,and unfolds through complex technological, organizational and social processes'

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(Shrivastava et al., 1988, p. 285). We would add natural disasters to this de®ni-tion and recognize that implicit in any de®nition of a crisis is some element ofsurprise, the need for a quick response, the threat to high-priority goals, and thestress brought on by any of the above (Hermann, 1972). It is believed that mostindividuals working in the ®eld of CM would accept the above characterizationof a crisis.Crisis management is de®ned as a systematic process by which an organization

attempts to predict or identify potential crises that an organization mayencounter, take precautions to prevent the crises, or minimize the e�ects of thecrises (Wilson, 1992). Crisis management is an emerging ®eld characterized by afair amount of heterogeneity and fragmentation. Crisis studies propose severalde®nitions, concepts, typologies, taxonomies, models, and frameworks for analyti-cal purposes (Mitro� et al., 1988; O'Connor, 1987) as well as programmes forpractical use by managers (Mitro� et al., 1996). The multidisciplinary nature ofthe ®eld (i.e. economics, sociology, psychology, environmental science, manage-ment, etc.) further leads to de®nitions and causal attributions biased by ®eld(Lagadec, 1991; Pauchant and Mitro�, 1992). With no single paradigm guidingthe research in CM (Shrivastava, 1993), researchers have tended to focus on oneor just a few of the elements in the process, for example, the crisis audit (Shrivas-tava and Mitro�, 1987), crisis management teams (Nelson-Horchler, 1986), crisismanagement plans (Truitt and Kelley, 1989), crisis readiness (Reilly, 1987),disaster recovery (Schreider, 1990), activities of crisis preparedness (Pauchant andMitro�, 1992), and crisis protocols (Truitt and Kelley, 1989; Wisenblat, 1989). Inlight of the above it is not surprising that comprehensive process models of crisismanagement that would encompass all of the elements of our de®nition of CMand their interaction(s) are rare in the CM literature.None the less, the US ®nancial industry, encouraged by a surge in recent

actual disasters and by numerous legal and regulatory requirements (see Woldand Shriver, 1988, pp. 1±5, for a description of these requirements) hasdeveloped a normative crisis management process model, which is su�cientlycomprehensive to be useful here (Preble, 1993; Wold and Shriver, 1988). Rapiddevelopment and acceptance of this approach to crisis management by ®nancialinstitutions has been driven by the recognition that these ®rms are so dependenton technology and automated systems that a disruption or crisis lasting just a fewdays can cause severe ®nancial losses and even threaten survival. The modelpresented here incorporates many of the process elements mentioned above (see®gure 2).The process, which is labelled contingency planning in the ®nancial industry

(Fritts, 1989), proceeds and recycles continuously through the following steps(Preble, 1993; Wold and Shriver, 1988):

(1) Top management initiates contingency planning. Senior management andthe board of directors (BOD) are legally and morally responsible for initiat-ing, overseeing and controlling contingency planning in ®nancial institu-tions. They begin the process by appointing a diverse management group(e.g. data processing, operations, internal audit, department heads) that isgiven adequate resources to pursue the task of formulating and implement-ing the bank's disaster plan.



Figure 2. A normative crisis management process modelSource: Preble, 1993; Wold and Shriver, 1988

(2) Risk assessment. The management group assigned to the project begins byconducting an internal and external organization-wide analysis (i.e. audit)of potential natural (e.g. earthquake, ¯ood), technical (e.g. electric poweror telecommunications failure), and human (e.g. malicious damage tosoftware or data) threats. Disaster sequences and worst-case scenarios arethen contemplated (Schwartz, 1991). Threats can then be evaluated as totheir likelihood of occurrence and impact on vital business functions.

(3) Develop alternative strategies. Several strategies should be developed tohelp prevent threats from becoming reality and to prepare for and copewith those threats that cannot be eliminated. Wold and Shriver (1988)describe procedural prevention techniques such as backing up data andsoftware, performing preventive maintenance, and developing emergencyprocedures to deal with natural disasters. Physical prevention techniquesinclude measures such as proper computer area design, protection andduplication of vital records, redundancy in air-conditioning systems, electri-cal supply stability safeguards and the posting of emergency procedures.Since actual disasters may still occur, it is necessary for ®nancial institu-tions to prepare for the worst by formulating and implementing back-upstrategies. For example, these strategies might include the use of hot sites,cold sites (empty shells), reciprocal agreements, electronic vaulting, servicebureaus/centres, branch buildings, modular buildings, vendor-suppliedequipment, and disaster planning teams.

(4) Plan documentation. It is essential to provide a written plan thatdocuments exactly what steps are to be taken by whom (employee andmanagement responsibilities) in the event of an actual disaster. All disasterrecovery strategies, procedures, and individual responsibilities must beclearly and concisely spelled out.

(5) Testing. Both procedures for and frequency of testing should be detailedand incorporated into the overall disaster plan. Testing via a `simulateddisaster' will allow individuals to practise their responses (rehearsal) andwill uncover areas in the plan that may need to be ®ne-tuned.

(6) BOD approval. Both the contingency plan and test results with respect toit are reviewed, approved and recorded by senior management and theBOD.

It is worth noting that in the United States the public sector analogue to the®nancial industry's normative crisis management process model just described isthe Integrated Emergency Management System (IEMS). This system is built onthe concept of a common set of functions for all emergencies and is theframework recommended by the Federal Emergency Management Association(FEMA). E�ective community-based emergency management is pursued via theco-ordinated e�orts of local, state and federal government agencies and the useof the IEMS approach, which includes key elements such as hazard analysis,community capability assessment, emergency planning and response, andrecovery (McLoughlin, 1985).We will now examine in more detail why the crisis management perspective

should be integrated into the strategic management process. In so doing we willexplore some of the causes for the slow integration to date and also examine if



crises are indeed inevitable. We will then be in a position to propose an inte-grated strategic management process model.

RATIONALE FOR THE INTEGRATION OF CRISIS MANAGEMENT AND STRATEGIC

MANAGEMENT

Crisis management is strategic in nature (Pauchant and Mitro�, 1992) and Smith(1992) contends that there is an inexorable link that binds CM and SM together.The similarities, orientations, and characteristics that the two ®elds have incommon would seem to help de®ne and support this linkage. The actual occur-rence of an organizational crisis can cause changes in existing strategies andstrategic actions (Mintzberg and Waters' `imposed strategy', 1985; Starbuck andMilliken, 1988). Conversely, the lack of strategic actions in the form of crisismanagement repertoires, can determine crisis outcomes (Reilly, 1987). Corporatecrises are events that threaten an organization's key goals of survival and pro®t-ability (Nystrom and Starbuck, 1984; Shrivastava and Mitro�, 1987). Examplesof recent large-scale crises include the Three Mile Island and Chernobyl nuclearpower plant accidents, the contamination of Tylenol capsules, the ChallengerSpace Shuttle explosion, the Bhopal gas leak, and the Exxon Valdez oil spill.Additionally, it has been argued that numerous crises occur because of earlierfailures in an organization's strategic management process (Shrivastava andMitro�, 1987; Smith, 1992).Despite the proported relationship between CM and SM discussed above,

Pauchant and Mitro� (1992) observe that the ®eld of strategic management hasseldom acknowledged the importance of industrial crises and the discussion ofcrisis management issues is rare as a part of the basic curriculum in businessschools. Petak (1985, p.3) suggests a parallel problem may exist in the manage-ment of public organizations when he states: `Public administration, as a disci-pline, has generally neglected to consider emergency management within themainstream of its activities.' In the actual operation of private organizations,Wisenblat (1989) found it surprising that so many companies did not includecrisis planning as an integral component in their business planning, despite thefact that crises threaten both strategic objectives and the very foundation of acompany. Of course, the current condition may be attributable in part to thefact that SM and CM are relatively new and emerging ®elds that possess severalapparent di�erences (discussed earlier) which while providing areas of integrationopportunity tend to slow actual integration e�orts. But we have also discussednumerous similarities or common ground between SM and CM, and there is animpetus to move quickly towards integration, as complex, tightly coupled, socio-technical systems proliferate and actual disasters of increasing magnitude increasein frequency. So why the slow rate of progress on integration e�orts thus far?Overcoming any impediments to progress requires a deeper exploration of theircauses and can provide support for why change is critical in the near future.For crisis management to be an integral part of strategic management an orga-

nization's key managers or top management team must recognize the strategicnature of CM. However, several perceptual, psychological, and behaviouralprocesses are at play that provide ready rationalizations for why serious CM

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e�orts should be minimal or postponed. For example, some managers see littleneed for additional CM e�orts because they view contingency planning as themechanism already in place to handle unexpected occurrences (Smith, 1992).Unfortunately, contingency plans (except in the ®nancial services industry wherecontingency planning is the term used for full-scale crisis management) usuallyexamine only a few alternative futures, assume a crisis will follow a predictablepath (Silva and McGann, 1995), and are directed towards damage limitationrather than crisis prevention (Smith, 1990).While David (1995) asserts that contingency plans should be simple and cover

only high priority areas, Smith (1990) argues that crises arise through a failure ofmanagement to fully consider all the possible disaster scenarios that face an orga-nization. Rather than merely hiding behind contingency plans, other managersare more transparent in their denial of the need for crisis management. In asurvey of Fortune 500 ®rms, several respondents in ®rms lacking crisis capabilitysaid that they believed their companies to be immune from crises (The Journal ofCommerce, 1985). Similarly, Fink's (1986) survey of Fortune 500 CEOs found 50%without a crisis plan for their organization, yet 97% felt con®dent that theywould respond well if a crisis occurred. Perhaps these managers believed thatthey faced a placid (i.e. little change) environment and were responding as Smartand Vertinsky (1984) predicted by defending the status quo and their belief intheir ability to control events. Another possible explanation, given by Mitro� andPauchant (1990), is the concept of `bounded emotionality', which is used todescribe managers who are unable to deal with their feelings and the anxietyassociated with crisis situations and, therefore, use various forms of denial ascoping mechanisms. Janis and Mann (1977) have explored group processeswhere the ìllusion of invulnerability' is a dominating theme and a cause ofuncon¯icted inertia (the belief that no serious risks are involved in pursuing thecurrent course of action) when responding to a threatening environment. Inte-grating CM into the SM process can help to overcome: ready rationalizationsthat minimize the need for serious CM e�orts; a view that contingency planningis an adequate safeguard against surprises; the di�culty of denial that threatsexist; and will provide cognitive and emotional rehearsals for coping with crisissituations.An organization's culture often plays a major role in whether or not crisis

management e�orts are extensive. Organizations with an òrganizational identity'(Schwartz, 1987) that is narcissistic, self-in¯ated and internally focused are likelyto be weak in CM e�orts and can be characterized as `crisis prone' (Pauchantand Mitro�, 1988). Further, managers of crisis prone organizations tend torede®ne reality to suit their own fantasies and beliefs (Mitro� et al., 1989) andblock action because they lack the èmotional' resources to face up to criticalsituations realistically (Pauchant and Mitro�, 1992). Similarly, managers maydistort their interpretation of danger signals emitted from technological systems(Perrow, 1984; Weick, 1986). Additionally, organizations that pursue or haveachieved what they perceive as òrganizational excellence' are also less inclinedto develop CM plans (Pauchant and Mitro�, 1992). Integrating CM into the SMprocess can lead to cultural change. For example, Truitt and Kelley (1989)indicate that one of the most useful functions of conducting a crisis audit isconvincing management that something catastrophic could actually happen



today to their organization. Integrating a full array of CM activities can movethe organization from being crisis prone to being crisis prepared.A number of other variables may also explain why CM is underemphasized or

not yet integrated into the long-range planning process. The rise in globalcompetition, shifting priorities, short managerial attention spans, pressure forshort-term pro®ts (Augustine, 1995), mergers, acquisitions and divestitures, down-sizing of employees (including those engaged in planning), scarce resources, andthe like may all play a role in causing management to conclude that crisisplanning is not an immediate problem (Meyers, 1986; Phelps, 1986). Of course,management needs to balance both short-range and long-range considerations ifit is to assure pro®tability and survival.There is also the general impression held by numerous managers that there is

little or nothing that organizations can do to mitigate crises (Mitro� et al., 1988).However, these authors, in the same article, detail some 37 preventative organi-zational actions such as tamper-proof packaging, detection training, expert moni-toring systems, crisis management units, etc., that can be utilized to block crisesfrom occurring. Crises are not inevitable; some organizations operate complexand potentially hazardous technologies (e.g. nuclear power, air tra�c control,Navy aircraft carriers) that have been able to operate error free for very longperiods of time. These organizations focus on operational reliability that resultsin outcome reliability and rivals productivity or e�ciency as a key goal. Thistype of organization has been characterized as a `high reliability organization'(HRO) (Roberts, 1990; Weick, 1987). Some of the prevention strategies utilizedby HROs to achieve high levels of reliability include continuous training ofoperators, operational redundancy, personal accountability and responsibility,and system ¯exibility.We have just discussed some of the reasons why CM and SM should be more

closely connected and looked at a number of the causes of why that integrationis proceeding at a slow pace. We have suggested that crises are not inevitable,but are preventable through early incident interventions and extreme diligence(i.e. HROs). As Smith (1992) has suggested, what is needed now is a moreformal linkage between models and processes utilized by researchers and practi-tioners in both the CM and SM ®elds. In the next section of this paper we willtake an initial step in that direction by presenting an integrated strategic manage-ment process model and explaining how this model could be utilized in practice.

INTEGRATED STRATEGIC MANAGEMENT PROCESS MODEL

A new integrated strategic management process model, which incorporates theCM perspective, is presented in ®gure 3. The previously described normativecrisis management process model has been blended into the traditional strategicmanagement process model. The combined model represents a procedural inte-gration in that strategy will be formulated and implemented with crisis proce-dures incorporated directly into the process. A cognitive/emotional acceptance isalso expected to result as conducting these processes simultaneously leaves muchless latitude for managers to consider the ®elds as possessing strictly independentboundaries.

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Figure 3. Integrated strategic management process model

It is instructive at this time to examine how the steps in the model mightactually be conducted. Utilizing this approach should help to further clarify thenew process model, and reveal many of the bene®ts that are expected to berealized by the integration e�ort. The strategy formulation process begins with a®rm developing a mission statement and then identifying the company's keyexternal opportunities and threats and its principal internal strengths and weak-nesses (SWOTs). But now, instead of just focusing on the positive aspects ofproducing a product or providing a service, conducting a crisis audit at this timecan reveal a ®rm's areas of vulnerability or susceptibility to potential crises. Thusthe risks or destructive potential of complex new technologies and systems will beexposed for consideration and re¯ection.Crisis audits are designed to examine the potential for failure in human,

production, organizational, technological, social, political and macroeconomicsystems, internal or external to the ®rm. The possible interaction among failuresin more than one domain is also considered (Shrivastava and Mitro�, 1987).Products and processes should be evaluated carefully to determine their potentialto create a hazardous situation. A wide array of worst-case scenarios must bewritten to determine worst-case contingencies. Companies may decide to usebrainstorming sessions to develop a greater consciousness of how crises candevelop. Environmental impact assessments are recommended in order toidentify potential areas of failure in social and technological systems (Shrivastavaand Mitro�, 1987). A clear bene®t of the above exercises is that, once threaten-ing scenarios have been brought into a manager's consciousness, it becomesextremely di�cult for him/her to deny their potential for happening or rationa-lize away their dire consequences (Preble, 1994; Truitt and Kelley, 1989).A crisis audit should reveal several low probability, high impact threatening

events and a number of internal weaknesses in systems and products that mightnegatively impact customers, employees, or the environment. These issues arethen merged with the results of a ®rm's SWOT analysis for further considerationand response in the form of alternative plans and strategies. It is important tonote that prior to generating actual strategies, a revised mission statement andset of long-term objectives (e.g. 3±5 years) will now be written. The updatedmission statement and objectives will include a much broader set of issues andstakeholders than considered previously, the lens used to envision an organiza-tion's current position will be outside-in and inside-out, and the goals of quality,safety and reliability will be directly incorporated and considered on par withvarious ®nancial criteria.The next step in the process is to develop strategies that take advantage of an

organization's internal strengths, minimize weaknesses, ®ght o� threats to the®rm or to the environment by the ®rm, and to exploit opportunities emanatingfrom the market environment or through the reduction or redesign of potentiallyharmful products or systems. While a TOWS matrix can still be used e�ectivelyand e�ciently to generate feasible alternative strategies (Weihrich, 1982), addi-tional crisis avoidance and prevention techniques need to be employed. A widearray of possibilities has already been presented (see item (3), page 779). Severalcompanies that have already made crisis management an integral part of theirstrategy development have found that these e�orts can result in strategic advan-tages over their competition (Pauchant et al., 1991). For example, an executive

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in an insurance company indicated that his organization had recently won alarge government contract over their competitors, partly due to their extensivecontingency capabilities in the area of information technology. Another executivein the banking industry claimed that continuous customer service had beenmaintained during a large telephone outage by operating a mobile unit in thea�ected areas. DuPont is developing a new generation of environmentally safeproducts and is actually selling specialized services in CM training (Pauchant etal., 1991).Royal Dutch/Shell Group has developed strategies that position them well to

respond e�ectively to high levels of risks that they perceive in their complexoperating environment. For example, Shell employs a decentralized organiza-tional structure, with six managing directors and a host of service companies (i.e.research and technical sta�) supporting some 260 principal operating units.These entities attempt to blend with their local communities, and operate withalmost complete autonomy under an organizational culture that encourages indi-vidual initiative. This overall approach to managing allows individual units torespond quickly to any crisis that might suddenly occur. The use of advancedtechnology is another device used to reduce the physical and environmental risks(i.e. operating in deep water or arctic terrain) faced by Shell. The companyspent $845 million on research and development in 1990 and is the world leaderin three-dimensional seismic technology, which signi®cantly improves the `hitrate' on striking oil and thus fewer wells need to be drilled (Knowlton, 1991).The next phase in the strategic management process is that of strategy imple-

mentation, which begins with the articulation of company policies (i.e. generalguidelines for taking action) and annual goals that are designed to help achievelong-term objectives. Detailed crisis plans should be formalized and put inwriting at this time. Crisis plan documentation should include elements such asthe expected procedures, and employee and manager areas of responsibility.Setting up crisis management `teams' that can swing into action when a

disaster strikes has been a most popular crisis readiness strategy (e.g. Heinz,United Airlines, Dow Chemical, Waste Management). The composition of acrisis management team (CMT) should include a core group of managers withgeneral crisis management skills and di�erent sets of specialists who can be calledin quickly to manage di�erent types of crises (Shrivastava and Mitro�, 1987). Forexample, the CMT would normally consist of representatives from at least thefollowing divisions: (1) legal, (2) security, (3) human resources, (4) health andsafety, (5) quality assurance or operations, and (6) corporate communications orpublic a�airs (Mitro� et al., 1996). The core group should have CEO supportand su�cient authority to make decisions and commit resources (our modelactively seeks this support in a subsequent step). They must be able to handlethe stress and be ¯exible and creative enough to respond to novel high pressuresituations. Outside specialists might include neutral experts (e.g. Dow ChemicalCanada has used a regional public health o�cer to explain to the public thehazards of a chemical spill into a nearby river), `truth squads' of scientists readyto present the `facts' to the public (Nelkin, 1988), medical personnel, etc.Fink (1986) has argued that bene®ts can accrue by rehearsing for crises, such

as the way in which the military prepares for combat with war games. Preparingfor crises provides an opportunity for cognitive rehearsal of coping with high



uncertainty (Kiesler and Sproull, 1982). One consulting company, Hill andKnowlton, Inc., tests a company's crisis team performance by conductingsimulated emergencies. Similarly, United Airlines screens members of their crisisteam by conducting simulated crisis drills. Quarantelli (1988) recommends thatexercises and training be held on ways to be creative, imaginative, and to dealwith unfamiliar external groups in a crisis situation.Media communications with the public are considered key to the success or

failure of any crisis situation. The objective should be to build public trustthrough direct and open communication (Augustine, 1995). Initial secrecy ordelay in informing the public leads to anger and creates suspicion (Nelkin, 1988).Dow Chemical Canada believes that you need to be prepared to inform thepublic about a crisis during the ®rst 24 hours of its occurrence. Dow Canadahas an emergency-response team that is ready with information kits on thepotential hazards of each of the company's products, and executives who havebeen trained in interview techniques. Other organizations are retaining publicrelations, law and consulting ®rms to train them in the art of e�ective, rational,non-emotional crisis communication.The crisis plan has been written, crisis teams have been formed, a detailed crisis

communications strategy has been articulated and several simulations/rehearsalshave been run. As ®gure 3 indicates, this is an appropriate time to seek formalapproval and commitment from senior management and the board of directors.The timing of these activities directly parallels the company's resource allocationprocess, but now funds will be allocated to both competitive and crisis strategiesre¯ecting a comparable level of importance and commitment to each.The ®nal phase of the integrated SM process model is the evaluation of

progress to date towards the achievement of strategies and crisis plans using bothfeedback and feedforward controls (discussed earlier). The information obtainedis used to solve problems, take corrective actions, re®ne strategies and rewardperformance. Special alert controls have been blended into this process and crisisreadiness is continually determined through periodic simulations and drills.Should a crisis have occurred or been thwarted at the incident stage during thereview period, an extensive evaluation of the organization's crisis managementperformance can be conducted. Additional crisis prevention strategies can thenbe explored and, if needed, be incorporated into the new planning cycle.

SUMMARY AND CONCLUSION

This paper has discussed the reasons why the ®elds of strategic management andcrisis management have evolved in a parallel fashion to date. In spite of thesedevelopments, it has been shown here that numerous core similarities help tode®ne an inexorable link between SM and CM and that key di�erences inperspectives provide several areas of integration opportunity.In an e�ort to uncover more of the common ground existing between SM and

CM and to provide a tangible step towards integrating these ®elds we did thefollowing. First, a consensus model of the strategic management process wasexplicated and then examined with respect to a gap that exists in this orientation.We then discussed di�erences and similarities between SM and CM perspectives.

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Next we presented a prescriptive CM process model that has been widely usedin the ®nancial services industry. We then argued, at some length, why these®elds need to be brought closer together and in a timely fashion.It was then possible, using commonly accepted models of SM and CM, to

present an integrated strategic management process model that incorporates theCM perspective directly into the SM framework. The steps in the model werethen explained as well as the bene®ts that could be expected to be realized bythe integration. A key bene®t is, of course, adding CM's defensive capability forpreventing crises or lessening their e�ects if they occur to SM's o�ensive focuson markets and competition in order to make the SM process more comprehen-sive, thorough and e�ective. This new process should result in a better balancebetween the production orientation of ®rms and the destructive e�ects of causinga sudden catastrophic crisis or creating negative externalities like pollution on adaily basis. Additionally, a much needed bene®t is that the integrated modelrepresents an ideal pedagogical tool to bring the discussion of crisis managementissues directly into the business school curriculum ± for example, as part ofexisting strategic planning/strategic management courses. Further, it is expectedthat the direct incorporation of CM into SM should, as Pauchant and Mitro�(1992) have suggested, provide a positive stimuli to push forward the boundariesof SM and thus contribute to the scienti®c advancement of the ®eld. It shouldalso facilitate the reduction of barriers that have been blocking CM's more wide-spread practice and legitimation in the minds of some managers. In the ®nalanalysis, a strategic management process that doesn't strive for high reliabilityand crisis preparedness is no SM process at all, it is one doomed to failure ± anaccident waiting to happen.

NOTE

* I would like to thank C. Gopinath, Richard C. Ho�man, Arie Reichel and threeanonymous JMS reviewers for their helpful comments on earlier drafts of this paper.

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