Expert Commentary

Construction Crises: Danger or Opportunity

"When written in Chinese, the word crisis is composed of two characters. One represents danger and the other represents opportunity." This is a quote attributed to John F. Kennedy.


Construction Safety
March 2011

A crisis is an unplanned change, a sudden or evolving unanticipated event that may harm the organization, its stakeholders, or the public in general. Generally it requires immediate and decisive action and usually on less than complete information. On a worksite, this may involve a medical emergency, a natural disaster, a fire, a structural failure, a terrorist act, or any situation that endangers the project or the people on site.

The construction firm may also have a crisis situation involving information or technology breakdowns, economic and market impacts, and relationship or management issues. There may also be a crisis of malevolence, misdeeds, or fraud. These, too, may present threats to the organization's reputation, its bottom line, its people, and ultimately its ability to conduct business. No matter the kind of emergency, a crisis requires action to control and minimize the potential impact of such an event(s).

To effectively deal with such potential eventualities, the organization should have a plan and a process. The organization should try to identify any potential crisis it may face, the resources required to effectively deal with it, and the people best able to deal with such a situation. Categorize the types of crises in order to have predetermined response levels. Establish channels of communication and chains of command to deal with such events. Have a plan, not only to deal with the realities, but also with the perceptions of the crisis. Crises also provide the opportunity to change "standing" means and methods or accepted practices.  "You never let a serious crisis go to waste. And what I mean by that, it's an opportunity to do things you think you could not do before," said Rahm Emanuel.

Obviously, it is best to avoid the crisis situation. The crises that are handled poorly get the greatest attention, cause more harm, and leave a longer-lasting effect. One never hears about crises that do not occur, however gratifying it is to know that one was avoided! One such event is the Y2K crisis that was going to wreak havoc on business, but fizzled out, due to organizations actively taking steps to change that eventuality and/or mitigate its impact.

Not all potential crises are equal. But their effect may be devastating at some level. In construction, there are many events that can have adverse effects on the project that require immediate attention and a plan of how to deal with them. Consider some examples: a key member of the staff quits, a subcontractor fails to deliver as promised, the wrong material is delivered, a key subcontractor goes bankrupt, the surveyor lays out the wrong line, the anchor bolts are out of place, and the list can be added to by anyone who has been in construction for a while. Some of these events may have been avoided by having a process that anticipates such happenings and steps to take to keep them from happening. This process development requires a crisis audit. And, after such an event takes place, there needs to be a contingency plan to respond to the adverse event as well as a recovery plan to get things back to "normal."

Although there are no simple formulas for dealing with crisis, the following six stages of crisis management can make a difference in how successful the project or company is in dealing with such an event. The six stages are:

  1. Define a crisis.
  2. Anticipate the crisis.
  3. Recognize a potential crisis.
  4. Manage the crisis.
  5. Resolve the crisis.
  6. Learn from the crisis.

Having a plan and a process for guidance, as well as making sure that it is implemented properly, may save the company a lot of time and money, as well as bolster its reputation.

"Crisis" Defined

The first step in managing any crisis is to define what the organization considers a crisis. A crisis primarily is an unstable situation with potential negative outcomes for the organization. The situation can interfere with "normal" operations, harm employees or the public, damage the bottom line, and/or adversely affect the public image of the organization.

To characterize a crisis event, it is helpful to have a checklist listing potential disasters. The next step is to make a determination as to the seriousness of such an event. This will determine the type of response required to effectively deal with it. This requires some sort of plan and process. The plan will have procedures to follow in addressing such an event.

Anticipating the Crisis

The way to anticipate a crisis is to assume that there will be one and to try to take steps to either avoid it or to manage it, so that it does not have a detrimental effect on the operation of the organization. Most experienced construction personnel are cognizant of the fact that problems arise in the course of construction and take care to avoid them. But they have to be able to recognize if what's currently happening is actually a crisis. One way to anticipate a crisis is to question some of the basic assumptions. Consider everything that might go wrong: look for long and complex supply chains; identify partners who may fail to deliver on promises; search for weaknesses in some of the people involved and internal and external factors that might influence elements of the operational or strategic plan.

A structured audit process will add a level of rigor to the process and make it more robust. Conducting one helps you find more possibilities and, thus, have a better chance of avoiding them. So, the starting point is integrating crisis management thinking into the organization's operating processes, practices, and procedures. It involves aligning the various functions and departments to communicate and recognize the signs of a potential "crisis in the making" and, should a crisis occur, act in concert so as to avoid and/or mitigate its adverse effect on the organization. It requires taking a disciplined approach to effectively deal with such events.

Recognizing a Crisis

The starting point for recognizing a potential threat to the project or organization is to conduct an audit. The audit looks for things that are not going as planned or that have the potential for going wrong at some future date. Such an audit may include the following steps:

  1. Make crisis management a part of any operational or strategic plan. Planning is a necessary part of any construction operation. Discussing the potential for crises during the planning process will result in a more robust operational plan.
  2. A cross-functional approach is the most effective. To accomplish this, one should solicit input from a number of people who are going to be a part of the project. They may bring a unique perspective to the process.
  3. Perform a strengths, weaknesses, opportunities, and threats (SWOT) analysis. This sort of thinking will ferret out internal and external opportunities where changes have to be made or contingency plans prepared.
  4. Group the crises into the ones that can do the most harm and the ones that are most likely to occur. Prioritize them so that you may address them in an organized fashion.

The steps listed above will create a systematic way to identify potential crises and a methodology with which to effectively deal with them.

Managing the Crisis

To effectively manage a crisis, the organization must have a plan. A key goal of the plan is to bring about order in the midst of confusion. The purpose of the plan is to designate individuals to participate in managing the situation, assemble modes of communication, effectively coordinate the use of the company's resources to address such an event, and take all necessary actions to return the organization to its pre-crisis state. This basically requires taking charge quickly, making the best determination of the situation, fixing the problem, and effectively telling the story.

The basis for managing a crisis is to have a risk management plan of action. This plan is a document prepared by the organization that contains an analysis of likely risks, with both high and low impacts, as well as mitigation strategies to help the organization or project avoid being adversely affected should such an event arise. Most importantly, the risk management plans must contain a risk strategy, which may contain these four basic risk management elements:

  1. Accept the risk—on the assumption that is will have no or minimal effect.
  2. Avoid the risk—by changing circumstances or strategy in order to prevent its occurrence.
  3. Mitigate the impact of the risk—by intervention strategies to diminishing its impact.
  4. Transfer the risk—by outsourcing it to capable third parties.

The plan ought to have a risk assessment tool to evaluate the probability, likelihood, and seriousness of the impact of such an event. After the crisis occurs, its outcome depends on the people responding to the situation and the decisions they make. So, selecting the "right" people with the appropriate authority level and having the proper infrastructure are critical to the successful handling of any emergency situation. The plan provides a framework and process of how the crisis management team will deal with at-risk situations that arise.

Communication is the linchpin of any successful handling of a critical situation. So, there needs to be a robust communication grid with multiple contacting avenues—a defined hierarchy of control with alternate individuals identified. This plan should not only address internal but external communication channels, contacts, alternates, etc. Crises evolve, circumstances change; accurate or inaccurate information from other sources enters the picture. It is important to have a good grasp of the situation and to stop rumors by continually communicating. An effective communication process could have the following elements:

  1. Identify the communication team and spokespersons—a few senior people with good communication skills. The spokespersons should be familiar with, and have knowledge of, operations and the situation so as to send a clear and credible message.
  2. Scenario planning—nothing breeds confidence like familiarity. Having some guidelines of what to say and how to say it will facilitate responding to questions and rumors with added credibility.
  3. Notification processes and targets—knowing who to communicate with is as important as how to do it.
  4. Assess the situation—the message has to be in line with the situation. Since crises evolve, the message must be on target and consistent with the changed circumstances.

Another important element is resources, especially if the crisis lasts for some time. The people managing the crisis have regular organizational responsibilities that will have to be carried on. There needs to be an assessment of those tasks to identify routine versus critical ones so that there are people to take care of the critical aspects of the day-to-day activities while deferring the nonessential ones to a later time without adversely affecting operations.

Resolving the Crisis

Once the crisis situation has arisen, the crisis management plan must be activated as soon as possible. The crisis management team must assess the situation and collect as much information as quickly as possible and activate the communication grid, evaluate potential options, identify the best approach, and proceed with implementation. By their very nature, such situations require rapid and confident decision-making.

Most crises have an emotional aspect as well, the emotions of the people directly involved—other internal stakeholders, external stakeholders, and the public in general. Fear of the unknown, general confusion, rapidly changing situations, and the need to respond and react quickly all create stress. The power of emotions can paralyze or energize the people involved. The team, as well as its leaders, must have an understanding of this force to be able to use it effectively and to their advantage.

Leadership during a crisis has a particularly important role. Since most crises develop at different rates, have differing impacts, seriousness, severity, and scope, taking charge quickly and setting the crisis management plan in motion can mean the difference between success and failure. Another reason for agile response is the fact that the situation is fluid and evolving. Rapid information gathering, analysis, and response are very vital factors. Besides being vigilant, the team must also be focused on options, priorities, and resources that all have to be handled effectively and efficiently.

Being proactive, flexible, and positive are also important elements. In some situations, few predetermined and realistic options may be available, so the team (as well as the leaders) must be able to generate viable solutions by looking at the situation from different perspectives, getting input from other sources, working cooperatively, etc. In some cases, it may be prudent to step back and reassess the situation, get a more complete understanding, look for opportunities, and avoid getting trapped in the blame game.

Crisis Lessons Learned

After any crisis, a SWOT analysis is in order. This is an opportunity to learn from the experience and see what were the strengths and weaknesses of the crisis management plan, the communication process, decisions made, the quality of the teamwork, and general handling of the situation. Also important is the assessment of the threats and how they were handled, as well as how the opportunities were used and to what advantage.

This will improve the plan and processes as well as better prepare the organization in facing any future event. A constructive way to do this is not to focus on the failures, but to ferret out the information sources and the decisions that were made and how they could have been handled in a different way. After such an analysis, the organization must reflect on and evaluate the facts to ascertain if the crisis could have been avoided or could have been handled differently. Proactive organizations learn from their crises—whether big or small—and use the information to better address any and all potential future events.


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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