This summary is presented by the IPR Behavioral Insights Research Center

Key Findings

  • Crisis management teams often use strategies in time of crisis that run counter to the evidence-based best practices, despite including them in their plans.
  • Due to the need to respond to crises quickly, crisis managers often rely on intuition, which is prone to cognitive biases.
  • The cognitive of loss aversion and time discounting, a focus on the present over the future, leads crisis managers to take actions that mitigate immediate losses at the risk of greater damage in the future.

Implications for Public Relations

Public relations professionals should be aware that the stress and time pressures associated to responding to crises can lead them to making decisions that they might not under normal circumstances. By falling back on intuition in an attempt to solve problems quickly, practitioners may be more affected by cognitive biases, like loss aversion and time discounting, resulting in choosing strategies that can cause more damage in the long run, despite mitigating immediate losses.

Research on crisis communication provides empirical evidence for several different frameworks and theories like situational crisis communication theory, which centres on matching the response with the level of responsibility and reputational threat. Crises where stakeholders perceive organizations to be highly responsible for them or pose a large threat to organizational reputation should be met with accommodative strategies, like apology.

Research also supports the strategy of “stealing thunder”, where organizations reports crises before other sources can, in order to reduce reputational damage and maintain perceptions of credibility and transparency. Although not announcing crisis maintains the possibility that it will not become public, the potential harm of a discovery later on is great.

Both strategies accept greater risk of immediate losses for long-term benefits, which research suggests is the optimal choice. However, when facing the stress and time pressures of crisis communication, practitioners often rely on intuition instead of critical thinking, which can lead them to use other strategies that sacrifice long-term benefit to limit short-term loss instead. Despite being aware of better strategies, intuition is prone to cognitive biases like loss aversion and time discounting, the focus on the present over the future. Remaining cognizant of these biases and sticking with crisis management plans developed through careful evaluation instead of giving into gut feeling may help practitioners remain focused on the big picture and long-term impact of their actions.

Summary

An organizational crisis is an unexpected threat to an organization’s reputation and operation. The severity of the impact depends on the organization’s response, which is often guided by a crisis management team. Researchers have developed several theories for determining an organization’s best course of action during a crisis, based on both experiments and case studies of previous crises. However, it appears that crisis managers often make decisions counter to widely-agreed upon, evidenced-based best practices, despite incorporating them in their crisis plans. Claeys and Coombs looked to insights from behavioural economics to examine this discrepancy between understanding and action.

Behavioural economics aims to explain why people behave counter to predictions of traditional economics by incorporating findings from other behavioural sciences, like cognition and social psychology. Behavioural sciences suggest there are two main processes for decision-making – heuristic processing and systematic processing.

Heuristic processing is intuitive and unconscious, relying on mental shortcuts called heuristics. While this processing is fast, it can be prone to predictable error and biases. Systematic processing is logical and deliberate, carefully evaluating all the available information to formulate the best response. This processing requires much more time and energy, so when there are limits on either, heuristic processing is typically used instead.

Two key characteristic of organizational crises are the limited time to react and large amounts of information and perspectives to consider. Under these pressures, crisis management teams may unconsciously rely on intuition instead of critical thinking. Intuition can be successful, but that largely depends on a crisis manager’s experience, which determines whether good decisions become reflexive or not. The problem with this is that many practitioners will not have the sufficient experience, and experience can fail when encountering new and unexpected problems, which crises typically are. As a result, heuristic processing often has negative consequences because of decision making is led astray by cognitive biases.

While there are many evidence-based approaches to crisis communication, the authors highlight two well-researched and recommended strategies. Situational crisis communication theory emphasizes the importance of taking an accommodative approach to support the victims of the crisis, like consumers, when perception of responsibility is high. Practically, that includes actions like proactive recalls, compensation, or apologies. “Stealing thunder” focuses on reporting crisis before others do to reduce perception of crisis severity, media attention, and damage to credibility.

Both strategies accept the potential short-term loss for greater long term gain by mitigating the long-term impact on organizational reputation at the cost of an immediate financial loss. They also strengthen the relationship with stakeholders, though the benefits from this may take more time to come into effect. Research suggests that these strategies lead to better outcomes and are frequently included in crisis management plans. However, when crises actually arise, practitioners frequently choose sub-optimal strategies like reactive recalls, denials, or providing stakeholders and public with limited information. These strategies may reduce immediate loss, but sets organizations up for greater reputational damage down the road.

This loss aversion reflects a general human bias towards avoiding short-term loss and is one of several cognitive biases at play when heuristic processing is used. Combined with the cognitive bias of time discounting, a focus of the present over the future, people are much more motivated to reduce immediate loss. Claeys and Coombs point to real-world cases, like a salmonella outbreak affecting Peanut Corporation America in 2008 and a 2009 Toyota car recall, where crisis managers’ decisions to employ reactive recalls, limited information to the public, and responsibility minimization, led to greater long-term damage.

Behavioural economics provide an explanation for why crisis communicators chose strategies that research has shown to be less effective. With the volatile and time-sensitive nature of organizational crises, crisis management teams often rely on their intuition, which is prone to biases like loss aversion and time discounting. These biases lead practitioners to take actions that on focus immediate damage mitigation, ignoring evidence-based best practices and putting organizations in greater risk in the future

Citation

Claeys, A. S., & Coombs, W. T. (2019). Organizational Crisis Communication: Suboptimal Crisis Response Selection Decisions and Behavioral Economics. Communication Theory. https://doi.org/10.1093/ct/qtz002

 

 

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Heidy Modarelli handles Growth & Marketing for IPR. She has previously written for Entrepreneur, TechCrunch, The Next Web, and VentureBeat.
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