Business Firms' Responses to the Crises of 2009

Business Firms' Responses to the Crises of 2009

Sean M. Murphy (Department of Health Policy and Administration, Washington State University, Spokane, WA, USA), Daniel L. Friesner (College of Pharmacy, Nursing and Allied Sciences, North Dakota State University, Fargo, ND, USA) and Robert Rosenman (School of Economic Sciences, Washington State University, Pullman, WA, USA)
DOI: 10.4018/ijsesd.2014010107
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Abstract

In 2009 firms faced both economic uncertainty and influenza outbreaks. Both crises posed large costs for firms; however, the manner in which they were perceived by management to affect the organization potentially differed. Using generalized maximum entropy (GME) the authors analyzed a business outlook survey of Seattle, Washington area businesses. Overall, firms were more proactive in responding to the economic crisis than to the influenza pandemic, even though the potential costs associated with both were quite large. Among the authors' conclusions is that business managers responded to the economic crisis more because it was more familiar and something over which they thought they had more control.
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Introduction

During the first half of 2009, firms were simultaneously facing two very different crises. First, the economy was still reeling from a recession. During this time, the national unemployment rate was hovering around 9% (it was 10.2% in Washington State in January 2009), the number of “underemployed” was continually increasing, and consumer confidence was beginning to rise, but remained very low relative to years past (Federal Reserve Bank of St. Louis, n.d.; United States Department of Labor, n.d; Washington State Employment Security Department, n.d.). Secondly, the world was in the midst of the H1N1 “pandemic” (Chan, 2009).

One potential difference between these two crises is how they are perceived by a firm’s management to impact the well-being of the organization. The former impacts firms directly through lost sales, decreased production and reduced firm participation in labor markets; variables which are directly and readily observed by the firm’s upper management. The latter is more subtle, as it impacts firms indirectly through lost worker productivity and increased human resource and occupational safety efforts. The fact that both of these crises occurred simultaneously in 2009 presents an interesting natural experiment: did firms’ upper management give equal consideration to (and take appropriate action to address) both crises, or did a typical firm’s upper management view one crises as “more important” than the other?

Normally, businesses respond to worsening economic conditions by attempting to develop new product lines, devoting greater efforts towards marketing new or existing product lines, by reducing costs, or some combination of the above (Shama, 1993; Kamber, 2002; Srinivasan, Rangaswamy, & Lilien, 2005). Firm responses to significant environmental and/or public health events (i.e., floods and/or communicable disease outbreaks) are generally handled through the development of business continuity plans. Business continuity plans are logistical plans used by firms to overcome significant interruptions in day-to-day operations. According to the Federal Emergency Management Agency (n.d.), there are four steps required to develop a business continuity plan:

  • 1.

    Perform a business impact analysis to identify functions that are vital to the firm’s operation and must be addressed in a timely manner.

  • 2.

    Develop documentation on the resources required to support the functions identified in the impact analysis, gaps between the required resources and those that the firm currently possesses, and implementation of the firm’s recovery strategy.

  • 3.

    Create the business continuity plan and assemble the team that would be in charge of its implementation.

  • 4.

    Train the business continuity team, test the plan, and revise it if necessary.

These four steps are generally operationalized in a manner consistent with strategic planning (Hill & Jones, 2001, pp. 2-29). The plan must have well-stated objectives, and clear strategies and tactics to achieve those objectives. It must have well-defined intended strategies, but also be sufficiently flexible to accommodate emergent (or unplanned) strategies when the intended strategies fail to address important (and unforeseen) outcomes. Perhaps most importantly, the business continuity plan is a two-way communication device. It provides guidance to employees within an organization about their roles and responsibilities when environmental or public health emergencies take place. But the plan also facilitates feedback from employees to ensure that the plan works efficiently and effectively when put into practice.

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