by Steven Crimando
Basic Concepts
In 1908, psychologists Robert Yerkes and J.D. Dodson developed a model of understanding the affects of fear and stress on performance. The “Yerkes-Dodson Law” dictates that to a degree fear and stress can motivate and drive performance, but that a tipping point is reached where performance greatly diminishes. This concept is widely used in sports psychology to help elite athletes find and stay in their “zone” of peak performance. Most of us have experienced this on some level and have a sense of where our own point of diminishing returns is set.
A far more eloquent and useful model to help us understand the type of fear generated by the current financial crisis is “crisis decision theory.” Crisis decision theory helps us predict the responses people will choose to negative circumstances. Since a negative life event is largely subjective and shaped by our individual perception, crisis theory can be applied to a wide range of adverse events, from losing your wallet to losing your home. Crisis theory sets out to address two questions that may be helpful in anticipating the emotional and behavioral responses to the current crisis:
*What are the decision processes people use when faced with a negative event
*What are the factors that predict their response choices
Although the current discussion is limited to the financial crisis, crisis decision theory can also be applied to disaster scenarios, such as the factors involved in choices about evacuation, personal and family disaster preparedness and reporting to or remaining at work during a crisis or disaster. Business continuity planners and emergency management professionals should consider incorporating some of the important concepts of crisis decision theory into their response and recovery models.
Crisis Decision Theory
Let’s explore a few of the central concepts in crisis decision theory. There are three stages of crisis decision-making delineated in crisis decision theory. These include:
1.Assessing the severity of a negative event
2.Determining response options
3.Evaluating response options
Applied to the financial crisis, individuals, families and businesses are still trying to assess the impact of recent events. One individual may know with certainty that they have lost their job, another may be sure that they have suffered serious financial loses in their investment portfolio, college savings plan or retirement account, but as the market undulates from 700 points up to 700 points down in a single day, they maybe unclear about how much of a loss the have truly suffered. For the small- or medium-size business owner, having their line of credit curtailed may mean trouble meeting this week’s payroll and perhaps losing employee confidence or perhaps losing the employee who can not afford to come to work if pay day is not a sure thing. This phase of a crisis event can be chaotic and ambiguous, so as straight forward as this initial stage of crisis decision theory may seem, assessment often can not begin until the smoke clears.
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Since there are so many unknowns in the current financial environment, employers should enhance efforts to communicate with key stakeholders, including employees, about the company’s financial position and provide reasonable warning if any difficulty is foreseen. Transparency about such issues can improve employee loyalty and mitigate rumors that can impact safety and performance.
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From a crisis decision theory perspective, the financial crisis holds some unique challenges, specifically that when a threat (physical, emotional, financial or otherwise) is so extreme, it may overwhelm people and paralyze their progress though later stages. The authors of crisis decision theory (primarily Kate Sweeney at the University of Florida), depict this potential in an inverted “U.” If a crisis is not sufficiently scary, people may not be motivated to act in any way, and conversely, if the situation is extremely frightening, it can immobilize people and impede any meaningful action.
There are several other factors that help shape people’s perception about how bad a crisis really is. These include:
* Cause: Who’s to blame? If people see themselves to blame (“I should have…before this happened” or “If only I had…”) they tend to perceive the crisis as more severe.
* Comparisons: With their idea of how things should be; how they used to be; how the crisis affects others around them.
* Consequences: Their fears of negative consequences yet to come.
* Public Image: Events that damage a person’s image in their company, their social circles or neighborhoods, are also experienced as more severe.
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There will be great variation in how individuals respond to the financial crisis. Although it may appear that two employees have sustained similar loses, their reactiona may be very different. Reaction to loss is influenced by dozens of factors, including temperament and culture.
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Weighing Response Options
After sizing up the problem, the next question is usually, “What can I do about it?” The two critical determinants in choosing a response option are the individual’s perception of control over the crisis and the resources available to them to tackle the problem. Someone faced with a diagnosis of cancer may be presented a whole range of treatment options from doing nothing to a radical or high-tech treatment. If this person does not have sufficient financial resources and/or insurances, many, if not all of the options may be off the table. Another person may have great financial resources, but the nature of their illness is such that there are no viable treatments, perhaps in a late stage of a disease. All of the money in the world would not be helpful in such a bind. So, options and resources are closely linked.
This all boils down to controllability. People are more successful in dealing with crises that they feel they have some control over and when they believe they have the necessary resources. Unfortunately, in the case of the financial crisis, the activity of the markets and world governments is well outside most people’s control and the loses experienced in the market melt-down can reduce the resources people might otherwise use to deal with a challenge.
Making a Choice
In a disaster planning scenario, employers may ask what factors help determine if workers will stay at their posts or come in to work during a crisis; who will perform the best and what can we do to encourage people to stick to the roles and responsibilities assigned to them in the organization’s disaster plan? Crisis decision theory helps clarify how people weigh the pros and cons of their potential response. This theory suggests that three broad considerations are involved such decisions. They are:
1. The resources (money, time, physical effort, etc.) required;
2. The direct consequences of a response (i.e.-”I might get hurt trying to get to work.” or “I might get fired if I don’t go in.”)
3. The indirect consequences of a response (i.e.-”My family will be upset if I leave them for work during a storm.” or “My co-workers will never look at me the same if I don’t show up and pitch in.”
Summary
Crisis decision theory is one of the models that helps us predict how people will behave in disasters, emergencies and other crisis events. Such a theory can also help us improve how people respond, therefore improving safety, performance and continuity of operations. In our recent white paper, “From Bourbon Street to Wall Street,” we apply disaster psychology principles to help us understand the human factor in this unpredictable climate. As we move forward through the financial crisis, XBRM will continue to offer insight and guidance in predicting and preparing for the emotional and behavioral challenges to come.
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Steven M. Crimando, MA, BCETS, is a noted author, consultant and trainer to governmental agencies, NGOs and multinational corporations. He is the Managing Director of Extreme Behavioral Risk Management (“XBRM”), a consultancy focused on the human factor in disaster recovery, business continuity and homeland security. XBRM is a division of ALLSector Technology Group, Inc., a New York based full service technology consulting company offering systems integration, managed services and applications development and implementation. ALLSector Technology Group, Inc. is a subsidiary of the F∙E∙G∙S Health and Human Services System, one of the nation’s largest and most diversified not for profit organizations.
