Crisis Planning in Small Businesses: Importance, Impetus and Indifference

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1 Pergamon doi: /s (03)00046-x European Management Journal Vol. 21, No. 3, pp , Elsevier Science Ltd. All rights reserved. Printed in Great Britain /03 $ Crisis Planning in Small Businesses: Importance, Impetus and Indifference JOHN SPILLAN, Penn State University DuBois MICHELLE HOUGH, Penn State University McKeesport This study examines crisis planning in a survey of small businesses. It specifically focuses on the perceived importance of crisis planning by small business managers. In particular, we investigate whether the experience of an actual crisis event by a business generates concern for future crises, if concern is generated more from the occurrence of a crisis event or from the presence of a crisis management team. Results of the study indicate that crisis planning receives little attention in the small businesses surveyed, and for most small business managers, an actual crisis event must occur before crisis planning becomes a concern. Concern for crises is generated by experiencing crisis events, rather than by the presence of crisis management teams. It was found that even those businesses that had previously experienced crises did not have crisis management teams Elsevier Science Ltd. All rights reserved. Keywords: Crisis planning, Crisis management, Small businesses, Disasters Introduction As individuals, we understand that we probably will encounter some type of adversity in our lives. Whether by foresight or regulation, we plan for crises and seek ways to minimize their impact. Our automobiles are equipped with airbags and our homes with carbon monoxide detectors and smoke alarms, and our children receive a plethora of annual vaccinations. We pay into unemployment compensation and purchase health, vehicle, life, and homeowner s insurance in an attempt to mitigate some of the financial implications of adversity. As individuals associated with businesses, we are not immune to adversity; instead, it comes perhaps on a larger scale. In recent years, business adversity has been spotlighted in the aftermath of September 11, corporate ethics scandals, and a faltering economy. In business, the stakes become higher. Not only can a crisis adversely impact the individuals directly associated with the business, it can destroy the business entity and wreak havoc on suppliers, customers, partners, competitors, and the community in which the business is based. With such widespread potential impact, few would argue that businesses have a responsibility to plan for and protect against crises wherever possible. The old adage states, if you fail to plan, you plan to fail (Fitzhenry, 1993, p. 67). Clearly, planning is a key to success both for individuals and businesses. Not only should businesses plan for positive events, such as new products or factory expansions, they must also plan for adversity. Every business should have a crisis management plan in order to cope with unexpected and unwelcome events. Anticipating a crisis may make it less traumatic and costly. Unfortunately, many businesses mistakenly assume that crises will not blight their doorsteps. Not only is this assumption overly optimistic, it is certainly a formula for an ineffective response when a crisis does occur. The US Small Business Administration (SBA) Disaster Office estimates that every State in the US will suffer a national disaster in the next two years. The SBA notes that the community s survival depends on the ability of businesses to minimize risk and damage by anticipating the worst (US Small Business Administration, 398 European Management Journal Vol. 21, No. 3, pp , June 2003

2 2003). With an effective plan, businesses may even be able to turn adversity into advantage. The late President John F. Kennedy noted, When written in Chinese, the word crisis is composed of two characters. One represents danger and the other represents opportunity (Fitzhenry, 1993, p. 12). There are many examples where implementation and execution of a well-developed crisis plan both controlled the crisis and turned it into an advantage for the business (Wilderoter, 1987). There are at least as many horror stories where the lack of a plan caused severe and sometimes irreparable damage to both businesses and communities. Whether the crisis is like the one that occurred at the Union Carbide Corporation plant in Bhopal, India, or the hurricane Andrew in 1992, which swept across South Florida with unparalleled devastation and destruction (Kruse, 1993), a business needs a plan of action to address potential incidents. While the chance of a crisis completely destroying a business might seem slim, the odds are higher that some type of traumatic crisis event could seriously disrupt its operation. Crisis management entails minimizing the impact of an unexpected event in the life of an organization. Many large organizations have highly developed crisis management plans and teams that are ready and rehearsed for crises. Small businesses, generally defined as those having fewer than 500 employees, may believe that crisis planning is less important. Many small organizations have the mentality that crises don t happen in our industry/field or we have a well-managed business and could manage our way through a crisis without a plan (Caponigro, 2000). They assume that crisis events only happen to other organizations or that they are somehow protected from a crisis (Mitroff, 1989). Other small businesses may believe that they need not plan for crises because they carry insurance. Unfortunately, insurance does not cover intangible items such as company reputation, customer goodwill, and professional rapport. After September 11, civil litigation attorney Jeffrey Lang found his office across the street from 5 World Trade Center indefinitely closed. He chose to work from his apartment, but now regrets his choice. Because I no longer have an office, I don t have the give and take that I had with other lawyers. The whole network that I had established emanating from my office was obviously terribly impacted. Although Lang sent a mass mail to his clients, he is still struggling to develop a plan to resurrect his practice (Chanen, 2002, p. 57). Another argument that smaller businesses cite for not adequately preparing for crises is that they lack the resources to meet the readiness requirements (Barton, 1993). Finally, some business managers claim that they do not have enough time to be preoccupied with crisis planning. They indicate that today s problems are so difficult and time consuming that there is no time to plan for tomorrow s uncertainties (Caponigro, 2000). While the challenges of running a small business make these justifications somewhat understandable, a lack of crisis planning can be harmful to the success of the small business operation. Long-planned business strategies, alliances, and deals often are sacrificed to the immediacy of managing a crisis. It may be prudent to establish a crisis management plan to save the company today and then focus on the strategies and deals that will come tomorrow. Managers have to weigh the difference between the investments in planning for a crisis versus the potential costs that result from failure to plan. This choice is integrally linked to an understanding of the types of crisis that exist. To quote John F. Kennedy again, There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction (Fitzhenry, 1993, p. 13). Research Question Not all small businesses lack foresight regarding adversity. As small businesses become more immersed in technology, many implement at least minimal disaster recovery procedures such as regular data backups. Others have basic business insurance coverage to cushion the effects of adverse events. A few might indicate that the events of September 11 made management start to think what if? Many small businesses, though, fail to engage in any preparedness planning activities. This discontinuity leads to some interesting questions regarding crisis planning. Why are some small businesses more concerned about crises than others? Is the experience of a crisis the catalyst for concern, or is concern generated as a consequence of having a management team that considers crisis planning an integral part of business strategy? To attempt to answer these questions, one research question and three related hypotheses regarding small businesses are proposed. They are as follows. Research question. What differentiates small businesses concerned about crisis events from those lacking concern? Hypothesis a. There is a higher degree of concern among businesses with crisis management teams than in those businesses with no such teams. Hypothesis b. Small businesses that have experienced crises are more concerned about those crises than those businesses that have not experienced crises. Hypothesis c. The degree of concern for a crisis event is dependent more on the actual occurrence of the crisis event than on the formation of a crisis management team. European Management Journal Vol. 21, No. 3, pp , June

3 These hypotheses were tested using a survey mailed to small businesses in the northeastern part of the US. It is hoped that the results of this study may provide insight on the subject of crisis planning in small businesses. Literature Review Historically, crisis management scholars have focused on larger organizations with little written relating this discipline to smaller businesses. The existing literature can be grouped into the topics detailed here. Crisis Identification A crisis can be defined as a turning point where events or activities run the risk of escalating in intensity, interfering with the normal operations of the business, endangering the business public image, and damaging its bottom line in any way (Fink, 1986). Gorski (1998) reports that a crisis can encompass events from a natural disaster such as a flood or hurricane to a form of human tragedy. A crisis can cause an operational production failure and/or it can lead to a public relations fiasco. Crisis events can also lead to legal problems that can disrupt the normal functioning of business activity. Crises not only encompass natural disasters, terrorism, fraud, and intentional destruction of resources, but also can include such seemingly minor events as the illness of a key employee, a brief power surge, a product recall, or a less-than-flattering news story. One integral task of the manager undertaking crisis management planning is simply to recognize the full range of events that can be classified as crises. According to Simbo (1993), one of the reasons businesses lack effective crisis management plans is that they have failed to identify the types of adverse events that could impact their organization. Consequently, they lack the ability to develop comprehensive plans for dealing with crises. Fink (1986) asserts that crisis identification is important for two major reasons. First, when the crisis is properly defined, it can be managed. Second, once the crisis is defined, management can determine the degree of influence they have over the desired outcome. Because crises are generally followed by a variety of diversionary problems, it is important that the manager identify the real problem and focus interventions on the core issues rather than being distracted by the diversionary problems. Warwick s (1993) research shows that one of the major elements important to the preparation of a crisis management plan is the risk assessment of potential problems. Hence, the probabilities of a crisis in a particular area of a business activity vary among businesses. Some businesses identify the vulnerabilities, or crisis events that could occur in their organization. Often though, businesses have tunnel vision regarding crises that could potentially strike. The losses of September 11 were greatly magnified by the inability of the airline industry, the Pentagon, and the businesses occupying the World Trade Center to truly imagine the full implications of worstcase scenarios. The use of box-cutters as weapons, the ability to turn aircraft into missiles, and the melting point and stress-resistance of structural steel were certainly not perceived to be even far-fetched factors to be addressed in the crisis management plans developed in the pre-september 11 world. It is critically important that businesses anticipate not only the crisis events unique to their industry, but also those inherent in the world in which they operate. Crisis Aftermath With crisis so broadly defined, it is highly probable that all small businesses eventually will be confronted with some type of crisis. The business s ability to manage the crisis successfully can mean the difference between survival and disaster. Fink s (1986) and Offer s (1998) review of crisis preparedness indicate that 50% of all businesses stricken by a crisis will not survive if they do not have an adequate business recovery plan in place. Pedone (1997) offers an especially pessimistic observation indicating that 90% of businesses without a disaster recovery plan would fail within two years of a disaster. Thus, the relevant question in crisis management planning is not whether a crisis will occur, but what kind and when it will occur (Caponigro, 2000; Kruse, 1993). Insurance as a Crisis Plan Although a comprehensive insurance policy certainly can provide assistance in resolving a crisis-provoked problem, insurance s value in a crisis situation is far from complete. Simbo (1993) notes that insurance can provide protection for extensive cost implications, but is, by itself, inadequate in terms of assuring the survival and recovery of a firm. Even a comprehensive insurance policy has a major weakness. It does not protect against the loss of soft dollar items such as goodwill, decreased productivity, low employee morale, increased absenteeism, stress, worker unrest, and increased workers compensation claims (Fink, 1986). Additionally, the business interruption caused by the crisis can have an impact on the customers, suppliers, and distributors who are major stakeholders in the business. Moreover, insurance does not provide a solution to the public relations and social responsibility problems that may be related to the crisis. For example, insurance is available and used by companies that experience oil spills, but it does not protect them from the public relations problems that occur as a result of the crisis. This point is 400 European Management Journal Vol. 21, No. 3, pp , June 2003

4 vividly exemplified in the Exxon Valdez oil disaster (Hartley, 1993). Managers and business owners who believe that insurance is the comprehensive solution for their crisis management problems may eventually find themselves out of business. Crisis Management Gorski (1998) states that a crisis can test the capabilities of an organization s staff and its leaders. According to Caponigro (2000), crisis management is the function that works to minimize the impact of a crisis and helps an organization gain control of the situation. It also operates to take advantage of any benefits that a crisis may present. As such, the demands of daily operations and crisis management are so important that organizations need to implement crisis management plans and teams in order to achieve continuity in business operations (Barton, 1993; Caponigro, 1998; Hickman and Crandall, 1997). Whitman and Mattord (2003) define crisis management as the actions taken during and after a disaster. To them, crisis management focuses foremost on the people involved, and secondarily on the viability of the business. They categorize crisis management as a subfunction of contingency planning, which is defined as the entire planning conducted by an organization to prepare for, react to, and recover from events that threaten the security of information and information assets in an organization, and the subsequent restoration to normal modes of business. Regardless of where the line is drawn between crisis management and contingency planning, the literature strongly points to the need first to control a crisis situation, and second to use it to gain competitive advantage where possible. Crisis Management Teams There are convincing arguments supporting the formation of crisis management teams (Barton, 1993; Caponigro, 1998; Hickman and Crandall, 1997; Pearson and Clair, 1998). These teams are responsible for planning for crises before they occur, as well as managing the unanticipated problems that often emerge during crisis events. Fink (1986) states that it is necessary to establish a crisis management team before a crisis plan can be developed. As such, Pearson and Clair (1998) report that those organizations with crisis management teams show a greater concern for and attention to potential crises than organizations without crisis management teams. Moreover, Fink (1986) states that those organizations with no plans reported that their crises lasted two-and-a-half times longer than those organizations with plans in place. The presence of at least one of the two following conditions seems to lead to the formation of crisis management teams. First, a top management culture exists which stresses the importance of crisis manage- ment practices (Pauchant et al., 1992; Pearson and Clair, 1998). Caponigro (2000) states that the best way to help insulate a business from the damaging effects of a crisis is to establish a crisis management culture in the organization. The awareness in the organization that crises may happen typically leads to planning for those events; such preparations often involve the formation of a crisis management team. Second, Penrose (2000) notes that experience gained from actions or activities that pre-dated the creation of the crisis management team may have taught important lessons regarding the need for such a team. Similarly, McCartney et al. (1999) note that the rationale for developing a crisis management team may come from two directions. (a) A crisis or crises may occur, causing the organization to react to the event(s) and implement damage control and corrective action. The event(s) will create a process of organizational learning causing management to develop contingency plans that set forth actions that can either prevent or provide a response to a crisis event. (b) An organizational development process that focuses on continual improvement might recognize an organizational vulnerability stemming from lack of crisis planning; this leads to the cultivation of a culture that focuses on crisis planning, which in turn leads to the establishment of a crisis management team. This study focuses on discerning what crisis events concern small businesses, and the relation between concern for crisis events and the existence of crisis management teams. Methodology To conduct this study, a survey was sent to small businesses in Pennsylvania and New York. The methods used regarding data collection, determination of survey reliability, and data analysis are described in the following sections. Data Collection Data were collected using a survey adapted from an instrument developed by Crandall et al. (1999). The instrument was centered on the crisis events listed in Exhibit 1, and comprised four sections. Section I requested demographic information such as the type of business, the number of employees, and the number of years in business. Section II listed crisis events such as operational and legal crises, publicity problems, fraudulent activity, and natural disasters. For each crisis event, the respondent was requested to rate the organization s degree of concern regarding that event using a five-point Likert scale ( low to high ), and to indicate whether the organization had experienced that event in the last three years. Section European Management Journal Vol. 21, No. 3, pp , June

5 Exhibit 1 Categories of Crisis Events Operational Crises Loss of records permanently due to fire Computer systems breakdown Loss of records permanently due to computer system breakdown Computer system invaded by hacker Major industrial accident Major product/service malfunction Death of key executive Breakdown of a major piece of production/service equipment Fraudulent Activities Publicity Problems Theft or disappearence of records Boycott by consumers or the public Embezzlement by employee(s) Product sabotage Corruption by management Negative media coverage Corporate espionage Theft of company property Employee violence in the workplace Natural Disasters Legal Crises Flood Consumer lawsuit Tornado Employee lawsuit Snowstorm Government investigation Hurricane Product recall Earthquake Adapted from Crandall et al., (1999). III asked if the organization had a crisis management team, and Section IV consisted of open-ended questions regarding organizational reporting of crises to management, and a prompt for respondents to list any other crises they may have encountered, but were not listed on the survey. A cover letter with brief instructions and a self-addressed stamped envelope were also included in each survey packet. The survey packets were addressed to the human resources or executive offices of each company, and each company was requested to return one survey, completed in its entirety. Packets were mailed to 1000 small businesses in Pennsylvania and New York. One hundred and sixty-two useable surveys were returned, providing a response rate of 16.2%. Reliability Analysis Cronbach s alpha measurement was used to estimate the reliability of questions related to crisis concern and crisis occurrence. The analysis indicated that reliability ranged from 0.78 to Specifically, the alpha coefficients are: concern for crisis event = 0.89; and occurrence of the crisis event = The summed scale revealed a 0.90 alpha coefficient. When presented with the scale, small business managers had little difficulty relating to them and the reliability coefficient for the overall scale was 0.90, which was considered sufficient based on criteria used in the literature (Nunnally, 1994). Data Analysis Since a goal of this study was to remain methodologically consistent with the McCartney et al. (1999) research, the primary analyses employed were t-tests and analyses of variance (ANOVAs) to evaluate the three different hypotheses. The first analysis examined the mean differences in degree of concern for those businesses that had crisis management teams and those that did not. The second analysis measured the mean differences in degree of concern for those businesses that had experienced a crisis event, and those that did not. The final analysis using ANOVA looked at degree of concern as the dependent variable and the occurrence of an event and the existence of a crisis management team as the independent variables. After testing for mean differences with t-tests, ANOVAs and descriptive statistics were conducted for the entire data set. Each of the analyses was followed up with a Scheffe post-hoc analysis to test for significant differences between levels of the independent variable. Results As illustrated in Table 1, the majority of organizations responding to the survey can be categorized as very small, based on the measurement criterion number of employees. Of the respondent companies, 58.0% indicated they had fewer than 25 employees while 16.7% of respondents had between 25 and 99 employees. Only 15.4% of responding companies had more than 100 employees, of which 3.7% indicated they employed 500 or more, exceeding the normally accepted definition of small. Sixteen organizations (9.9%) did not respond to this question on the survey. Overwhelmingly, the organizations responding to 402 European Management Journal Vol. 21, No. 3, pp , June 2003

6 Table 1 Size of Organizations in Survey Size of organization Number of Percentage Cumulative responses percentage Less than employees Between 25 and employees Between 100 and employees Over 499 employees Did not respond Total 162 the survey lacked crisis management teams. Table 2 shows that only 10.5% of respondents acknowledged the existence of a crisis management team, while 85.2% indicated they had no such team. Seven organizations, or 4.3%, did not provide a response to the question. Results of analysis show that, for the most part, small businesses with crisis management teams had no greater concern for potential crises than the businesses without crisis management teams. Table 3 ranks in descending order by t value the mean concern scores for businesses with crisis management teams to the mean scores for businesses lacking these teams for the crises detailed on the survey. Of the 27 events listed, only product recall (t = 2.345, p = 0.031) shows a significant difference in means at the 0.05 level. Businesses with crisis management teams show greater mean concern regarding product recall (M = 2.77) compared to businesses without teams (M = l.54), and the difference in concern cannot be attributed to chance. Because only one of the 27 events displayed a significant difference in mean concern scores, Hypothesis a is not supported. Table 4 illustrates the results of a comparison of mean concern values for small businesses that had experienced a given crisis event to the mean concern values for those businesses that had not experienced the event. The 27 crisis events are ranked in descending order by t value. The results show significantly higher concern for a given crisis by small businesses that had experienced the crisis within the past three years as compared to concern for the event by businesses that had not experienced it in that timeframe. Businesses that experienced 19 of the 27 crisis events Table 2 Organizations with Crisis Management Teams Existence of team Number of responses Percentage Yes No Did not respond Total listed in the survey (70.3%) were significantly more concerned about those events at the 0.05 level than businesses that had not experienced those events. Of the 19 events where significant differences occurred, 15 events showed differences in concern levels even at the p = 0.01 level. These findings confirm Hypothesis b, that small businesses that have experienced crises are more concerned for those crises than small businesses that have not experienced crises. Finally, to investigate the concern relationship between the existence of a crisis management team and the occurrence of a crisis, an ANOVA was performed. The test was conducted using the occurrence of a crisis event and the existence of a crisis management team as independent variables and the degree of concern regarding a potential event as the dependent variable. This procedure was performed to determine which factor is more critical regarding concern in small businesses: the existence of a crisis management team or the occurrence of a given crisis event. Table 5 illustrates the results of the ANOVA. For 16 of the 27 crisis events (59%), the occurrence of the event significantly affected the level of concern for the event at the 0.05 level. Of the 16 events where concern was significantly impacted, eight events were significant at the 0.01 level. The presence of a crisis management team did not significantly affect concern for any of the 27 crisis events. Further, no significant interaction was found among the independent and dependent variables. As a consequence, these findings strongly support Hypothesis c, that the degree of concern for a crisis event is dependent more on the actual occurrence of the crisis event than on the formation of a crisis management team. Discussion The findings in this study reveal that small businesses place little emphasis on crisis planning. The only impetus for concern regarding crises appears to be the actual occurrence of a crisis, and the few businesses surveyed with crisis management teams in place had no greater concern for potential crises than those with no teams. This indifference is puzzling in light of the volume of literature stressing the importance of crisis planning and the strong probability that small businesses, unprepared for crises, will likely experience significant hardship and possible dissolution when faced with significant adversity. The first hypothesis states that there is a higher degree of concern for crisis events in businesses with crisis management teams compared to those businesses with no teams. This hypothesis was not strongly supported by the findings of the study. From the 27 crisis events listed on the survey, only product recall generated significantly more concern among businesses with crisis management teams. This result might be attributed to increasing empha- European Management Journal Vol. 21, No. 3, pp , June

7 Table 3 Comparison of Mean Concern Scores: Organizations With and Without Crisis Management Teams Concern for Crises management team? t p (mean) Yes (n = 17) No (n = 138) Product recall Consumer lawsuit Earthquake Loss of records fire Flood Computer system breakdown Employee lawsuit Corporate espionage Major product/service malfunction Asset misappropriation Death of key executive Negative media coverage Hurricane Tornado Employee violence at workplace Snowstorm Breakdown of production/service equipment Loss of records computer Employee embezzlement Major industrial accident Product sabotage Computer system invaded by hacker Theft of company property Management corruption Boycott consumers or public Government investigation Theft/disappearance of records sis on continuous improvement in recent years. Even small businesses, especially those supplying products used by very large manufacturers, utilize continuous improvement teams to ensure that their products meet the high quality standards required of their customers. If their customers are large manufacturers, the small businesses often must meet stringent ISO criteria to become authorized suppliers. If substandard products are recalled or rejected, the small business may lose authorized supplier status, creating for them a true crisis. Thus, the relationship between crisis management teams and product recall might be that for product recall, the continuous improvement team actually is perceived as a crisis management team. The second hypothesis states that small businesses that have experienced crises are more concerned for those crises than those businesses that have not experienced the crises. This hypothesis was supported by the study results. Concern regarding 19 of the 27 crisis events (70%) studied was significantly higher for businesses that had experienced that event as compared to businesses that had not experienced the event. Conversely, small businesses have little concern for potential crises that they have not actually experienced. It follows that if businesses have no concern regarding a potential crisis, they will do little to plan for potential occurrences of that event. This lack of planning, as previously shown, can have disastrous implications on the future viability of businesses faced with crisis events. Chastang (2000) notes that many businesses do not begin serious crisis planning until after the occurrence of a catastrophe; by that point, it may be too late. Chastang s (2000) examples of the Los Angeles riots of 1992, the Oklahoma City bombing of 1994, and the New York brownout in 1999 vividly illustrate the consequences of ill preparedness. These crises cost small businesses millions of dollars in lost revenue and for some, the impact was so devastating that the businesses were unable to reopen. Obviously, generating concern regarding potential crises is a critical prerequisite to crisis planning. The final hypothesis states that the degree of concern for a crisis event is dependent more on the actual occurrence of the crisis event than on the formation of a crisis management team. The results of this study support this hypothesis. For 16 of the 27 crisis events (59%), the prior occurrence of the event significantly affected the level of concern; however, the presence of a crisis management team did not impact concern for any of the 27 crisis events. These results suggest that the formation of a crisis management team does 404 European Management Journal Vol. 21, No. 3, pp , June 2003

8 Table 4 Comparison of Mean Concern Scores: Organizations That Have Had and Have Not Had a Crisis Concern for Has crisis occurred? t p Yes No n Mean n Mean Breakdown of production/service equipment Major industrial accident Computer system breakdown Flood Corporate espionage Loss of records computer Theft of company property Product recall Major product/service malfunction Snowstorm Computer system invaded by hacker Management corruption Theft/disappearance of records Consumer lawsuit Government investigation Employee violence at workplace Negative media coverage Employee lawsuit Product sabotage Employee embezzlement Hurricane Asset misappropriation Death of key executive Earthquake Boycott by consumers or public Loss of records fire Tornado little to generate concern, and that a crisis must occur before concern is generated. With the many challenges facing small businesses, it seems unlikely that managers would focus scarce resources toward addressing potential events for which they have no concern. Much management literature indicates that organizations are naturally reactive concerning potential future crisis, perhaps because they believe crises are unlikely to happen to them (Mitroff et al., 1989; Pearson and Mitroff, 1993; Penrose, 2000; Shrivastava, 1993). However, crises do occur, despite small businesses belief that they are somehow immune. All 27 crisis events from Exhibit 1 actually occurred to some of the small businesses surveyed. Although only three businesses each (2%) indicated they had experienced earthquakes or boycotts by consumers, 94 businesses surveyed (58%) had experienced computer system breakdowns. Clearly, all businesses are susceptible to crises, and clearly, adverse consequences of crises can be minimized with proper planning. However, planning efforts will not commence unless concern is present, and concern generated by experiencing a crisis might come too late, or at too high a cost. Ideally, mechanisms other than actual crises could generate concern among small businesses without inflicting the emotional, financial, or physical turmoil that typically accompany crises. Education often is considered one such mechanism to instill knowledge while protecting from the accompanying hard knocks of actual experience. Hough (2002) notes that as far back as World War II, social scientists have attempted to use educational interventions to increase awareness and to persuade. Although Hovland et al. (1965), and other communication experts in the years since, found that education is effective in increasing factual knowledge or awareness, it is ineffective in attempts to change orientation, or to persuade. So, while it is likely that educating small business owners regarding crises could raise their awareness, it is not reasonable to expect that an educational intervention would be effective in persuading small businesses to initiate crisis-planning activities. Although education cannot be viewed as a vehicle to generate concern for crisis events not yet experienced by businesses, one area warranting further investigation is the effect by proxy of September 11, 2001, on attitudes toward potential crises. While it may be theorized that the businesses involved in this study, none of which are located in major metropolitan centers, might continue the denial tactic of it can t happen here, there is some indication that the horrific losses of September 11 may have far-reaching consequences for crisis planning. The Disaster Recovery European Management Journal Vol. 21, No. 3, pp , June

9 Table 5 Analysis of Variance. Independent Variables: (1) Existence of Crisis Management Team, (2) Occurrence of Crisis Event; Dependent Variable: Mean Concern Score Regarding a Crisis Event Concern for Crisis occurrence (A) Crisis team (B) A B interaction F p F p F p Management corruption Major industrial accident Theft of company property Employee violence at workplace Major product/service malfunction Computer system invaded by hacker Theft/disappearance of records Product recall Asset misappropriation Flood Death of key executive Corporate espionage Tornado Negative media coverage Breakdown of production/service equipment Loss of records fire Government investigation Product sabotage Consumer lawsuit Loss of records computer Hurricane Employee embezzlement Snowstorm Employee lawsuit Computer system breakdown Earthquake Journal conducts weekly on-line surveys regarding current disaster recovery issues. The on-line survey ending September 30, 2001, found that 1650 participants (75%) responded yes to the question, Have the September 11 events made you alter any parts of your current DR (disaster recovery) plans? Further, 2996 participants (90%) responded positively to the follow-up question ending October 21, 2001, Have the events of 9/11 increased the exposure DR/BC (disaster recovery/business continuity) are now receiving? (Disaster Recovery Journal, 2002). These results point to evidence that the events of September 11 may have generated concern regarding crisis events even in businesses not directly impacted by the tragedy. Conclusion No business is immune to the potential devastation of crises, and small businesses with their limited resources are especially vulnerable to the catastrophic consequences of crisis events. This study examined the perceived importance of crisis planning in small businesses, whether the experience of an actual crisis event by a business generates concern for future crises, and if concern is generated from experienced crisis events, or from the existence of crisis management teams. The results of this study indicate that small businesses have little concern for crises they have not previously experienced, and those businesses with crisis management teams had no greater concern for crises than businesses without teams. Concern for crises was generated from the past experience of those crises, not from the existence of a crisis management team. Future research in this area might concentrate on determining ways to generate concern for crises in small businesses before businesses actually experience the crisis events. References Barton, L. (1993) Crisis in Organizations: Managing and Communicating in the Heat of Chaos. South-Western Publishing Co., Cincinnati. Caponigro, J. (1998) The Crisis Counselor: The Executive s Guide to Avoiding Managing, and Thriving on Crises that Occur in All Businesses. Barker Business Books, Inc., Southfield, MI. Caponigro, J.R. (2000) The Crisis Counselor: A Step-by-Step Guide to Managing a Business Crisis. Contemporary Books, Chicago. Chanen, J. (2002) After the fall: Small firms struggle to survive in a post 9-11 world. ABA Journal (February), Chastang, C. (2000) Regrouping, rebuilding, remaining: disaster recovery from a small business perspective. Contingency Planning & Management 5(1), Crandall, W., McCartney, M. and Ziemnowicz, C. (1999) Internal auditors and their perceptions of crisis events. Internal Auditing 14(1), Disaster Recovery Journal, Weekly Poll (2002) (On-line). Available from 406 European Management Journal Vol. 21, No. 3, pp , June 2003

10 Fink, S. (1986) Crisis Management: Planning for the Inevitable. AMACOM, New York. Fitzhenry, R. ed. (1993) The Harper Book of Quotations (third ed.). HarperCollins, New York. Gorski, T. (1998) A blueprint for crisis management. Association Management 50(1), Hartley, R. (1993) Business Ethics: Violations of the Public Trust. John Wiley & Sons, New York. Hickman, J. and Crandall, W. (1997) Before disaster hits: A multifaceted approach to crisis management. Business Horizons 40(2), Hough, M. (2002) Evaluating and Enhancing Senior Citizen Awareness of the Effect of Technology on Privacy. Unpublished doctoral dissertation, Robert Morris University, Pittsburgh, PA. Hovland, C., Lumsdaine, A. and Sheffield, F. (1965) Experiments in Mass Communication. Science Editions, New York. Kruse, C. (1993) Disaster plans stand the test of hurricane. Personnel Journal 72(6), McCartney, M., Crandall, W. and Ziemnowicz, C. (1999) Why plan for something bad if it may not happen? (Or is crisis management stuff just another fad?). Internal Auditing 14(1), Mitroff, I. (1989) Programming for crisis control. Security Management (October), Mitroff, I., Pauchant, T. and Shrivastava, P. (1989) Crisis, disaster, catastrophe: Are you ready? Security Management (February), Nunnally, J.C. (1994) Psychometric Theory. McGraw Hill, New York. Offer, J. (1998) Pessimist s charter. Accountancy 121(4), Pauchant, T., Mitroff, I. and Ventolo, G. (1992) The dial tone does not come from God! How a crisis can challenge dangerous strategic assumptions made about high technologies: The case of the Hinsdale telecommunication outrage. Academy of Management Executive 6(3), Pearson, C. and Mitroff, I. (1993) From crisis prone to crisis prepared: A framework for crisis management. Academy of Management Executive 71, Pearson, C. and Clair, J. (1998) Reframing crisis management. Academy of Management 23(1), Pedone, R. (1997) Disaster recovery are you prepared for business disruption? Long Island Business News (November 3), Penrose, J. (2000) The role of perception in crisis planning. Public Relations Review 26(2), 155. Shrivastava, P. (1993) Crisis theory/practice: Towards sustainable development. Industrial & Environmental Quarterly 7(1), Simbo, A.K. (1993) Catastrophe planning and crisis management. Risk Management 40(2), United States Small Business Administration, Spokane Washington District Office (2003) Disaster: Weakest Link or Survivor Which One Are You? (On-line). Available from Warwick, M. (1993) Disaster recovery: Come hell or high water. Communication International 20(10), Whitman, M. and Mattord, H. (2003) Principles of Information Security. Course Technology, Massachusetts. Wilderoter, D. (1987) Crisis management:a new plan is necessary. National Underwriter(Property/Casualty/Employee Benefits) 91(33), and John Spillan, Penn State Michelle Hough, Penn University - Du Bois, Col- State University - McKeeslege Place, Du Bois, port, 4000 University Drive, Pennsylvania 15801, USA. McKeesport, Pennsylvania , USA. John Spillan is Assistant Professor of Business Michelle Hough is Assistant Administration, Penn State Professor of Business at University DuBois cam- Penn State University pus. His research interests McKeesport. She holds a center on crisis manage- Doctorate of Science in ment, marketing, entrepreneurship and international Information Systems and Communications from Robert business, specifically in Latin America and Eastern Morris University, Pittsburgh. Europe. European Management Journal Vol. 21, No. 3, pp , June

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