A TIME OF CRISIS IS A TIME OF OPPORTUNITY FOR ORGANIZATIONS: A STRATEGIC EXAMINATION OF MANAGERIAL RESPONSE AND STAKEHOLDER PERCEPTION

This article helps to bridge the gap between the literatures in crisis management and strategic management. The direct link between managerial response and firm performance has received limited attention in crisis management literature, while the literature surrounding stakeholder theory has emphasized the importance of perception as a key determinant of strategic future action.  What has gone mainly unexamined is the role of the stakeholder in the dawn of an organizational crisis. According to numerous studies in marketing and psychology, researchers repeatedly find that reality is not reality; rather, perception is reality. Thus, while an organization may make a completely appropriate response to a crisis in terms of policy and communication, if that response is not accepted and evaluated positively by stakeholders, the response is as good as a poor response or even no response at all. In bridging the gap in these conversations in crisis management and stakeholder theory, this article provides a holistic framework for understanding the implications of an organizational response to crisis. Organizational crisis is something that all organizations deal with at some point in their history. At times, a major crisis can be the fatal blow to an organization. Other times, crises provide opportunities for organizations to display their gumption, communicate appropriately with their stakeholders, and move forward, potentially with an enhanced reputation and promise of future success. The critical link in the process is the ability to act and communicate with stakeholders, have the stakeholders perceive the response as positive, and allow the positive perception to lead to improved or recovered performance. This article empirically supports a conceptual model of the relationship between an organization’s response to a crisis and stakeholders’ perceptions of that response. Data from three organizations (N=505) were obtained through a survey of stakeholders in the higher education industry. The results render support to the central hypothesis that stakeholder perception of the response strategy is a critical factor in an organization’s legitimacy following a crisis.