The Learning Organization and Crisis Leadership

The Learning Organization and Crisis Leadership

A key aspect of a strategic leader’s responsibility is dealing with crisis. A crisis can strike any organization without warning. A crisis by its very nature is an event that could not be predicted or anticipated prior to its occurrence. Therefore, avoidance is rarely possible. Crises are indeed damaging 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 lead to its demise altogether. Also, an organization in crisis tends to be defensive and vulnerable to attacks from its competitors. An effective strategist must have the skills necessary to manage a crisis successfully.

The first half of this chapter discusses crisis leadership in depth. The last half of the chapter focuses on the important topic of organizational learning and knowledge management. The learning organization is one that emphasizes creativity, innovation, and knowledge creation.

Crisis Leadership

A crisis is a low-probability, high-impact event that threatens the viability of the 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.  Today, more than ever, there is a great need for leaders from all walks of life to show that they possess the skills and competence to lead during times of crisis. As one author bluntly puts it, “Mismanage a crisis today and your career may end up in the dumps. The importance of crisis management in every organization’s strategic plan is critical. We are all aware of the headlines involving corporate scandals, accounting fraud, ethical lapses in judgment, and allegations of workplace discrimination. In fact, according to one study, discrimination lawsuits now rank among the leading types of crises faced by business leaders in the United States today, with a 100 percent increase in the number of class action discrimination lawsuits in 2003.

In today’s volatile global marketplace, many experts believe that organizations (whether for-profit or not-for-profit) should recognize the inevitable—that crises can and will emerge. Unfortunately, crisis response plans are not as widespread as one would expect. The results of a recent survey revealed that about 53 percent of marketing executives said they have experienced a business crisis resulting in negative news coverage, declining sales, or reduced profitability. Surprisingly, about the

same number (57 percent) said their company does not have a crisis response plan currently in place. Many experts and scholars agree that while a pre-crisis response plan will not prevent a crisis, it can minimize financial loss and long-term damage to a firm’s reputation.