Crisis is an unexpected, non-recurring, unplanned, and dramatic problematic situation.
- Organizations have to operate in remote and operating environment. The environment is dynamic which sometimes unfolds to catastrophic & turbulent situations for the organizations, that we call crisis. Crisis is the undesirable and negative situations in the environment that have very much strong impact on the survival, growth and excellence of the organization.
- More specifically, crisis may be caused by changes in technological, socio-cultural, demographic, political-legal, natural, and industry environment in the national and international level.
- Crisis handling strategies should be prepared by the management.
Crisis handling
Followings are the strategies recommended in crisis handling.
- Crisis situation should be solved as soon as possible by the management showing judgment.
- Early warning signals of crisis should be developed, if that is possible. These signals should be continuously monitored to detect the early signals so that they can be handled before they become disastrous. But all crises do not occur with forewarning.
- Adequate authority should be delegated to the lowest level of management in case crisis situation emanates.
- Training to handle crisis situation should be imparted to all levels of management.
- Contingency planning should be formulated to deal with crisis situation. Contingency planning involves developing alternative courses of actions beforehand to deal with crisis situation. Such practices should be rehearsed time and again. It is preparing for the prevention.
- Damage minimization: If crisis becomes unavoidable, attempts should be made to minimize the damage aftermath the crisis.
- Fast recovery aftermath crisis: Managers should help organizations recover the aftermath of crisis as quickly as possible.
- Organizational learning: Once crisis is over, the organization should learn from the crisis, i.e. learning from the past mistakes.
- Crisis team may be built beforehand to deal with crisis situation. Such team should include experts experienced in crisis handling.
External experts may be approached for their help in crisis handling.
Quantitative Tools for Decision Making
Operations Research Tool
They are used to solve problems that already exist. They aim to optimize by allocating scare resources in the most profitable way. They take system-wide approach and quantify all the variables of the problem. These techniques are suitable for programmed decisions.
- Queuing Models : They are used to control various sorts of waiting lines.
- Game theory: It predicts how rational people will behave in competitive situations.
- Inventory Model: It helps to determine how much inventory to maintain. The model analyzes the various consequences and selects the optimal size of inventory.
- Transportation Model: It helps to determine where various quantities of products must go and the most cost-efficient way to get them there.
- Payoff Matrix
It is a statistical technique. It depicts the probable value of outcomes of each of the decision alternatives. A probability is the degree of likelihood that a particular event will occur.
The expected value of an alternative course of action is computed. It is the sum of the values of all the predicted outcomes of the alternatives multiplied by their respective probabilities.
- Decision Tree
It is a graphical representation of the sequence of decisions required in determining the expected values of alternatives in a payoff matrix.
- Simulation
It is abstraction of reality. It is useful when several uncertain variables affect outcomes. Computers are used to stimulate what will happen to an operation over a time if certain variables are changed.
- Accounting Tools
Breakeven Analysis: It identifies break-even point of neither profit nor loss.
Ratio Analysis: They show relationships between figures for evaluating financial performance. They are used for making efficiency and profitability decisions.
Budgetary Control: It compares actual expenditure with budgeted expenditure. Decisions are made to correct budget variance.
Standard Costing: It is used for making decisions concerning control of unit cost. Standard cost is set for each unit.