Crisis Management Strategy And Organization Performance: A Case Study Of Nestle Nigeria Plc

Crisis Management Strategy And Organization Performance: A Case Study Of Nestle Nigeria Plc

Abstract

Crisis is a natural phenomenon in most organizations as long as human relationships are involved. As such the existence of crisis has become an issue of concern in Nestle Nigeria Plc as a result of employees’ welfare. The resulting effect has not only affected the employees but also the organization as a whole. This study examined the Crisis management strategy and organization performance of Nestle Nigeria Plc. The study adopts survey design and is cross sectional in nature. The population of the study consists of 112 staff of Nestle Nigeria Plc. Multiple regression was utilized in analyzing the data. The study found that collaboration strategy and avoidance strategy have positive significant effect on the performance of Nestle Nigeria Plc, while compromise strategy has a negative significant effect on the performance of the organization. The study concluded that there is no one best strategy in managing crisis as the management of crisis depends on the behavioural intentions of the parties to crisis, the time frame and the situation the organization finds itself. It therefore recommended that management of Nestle Nigeria Plc should emphasize the adoption of collaboration and avoidance strategies in order to improve the performance of the organization.

Table of Contents

Chapter One:

Introduction

• 1.1 Background to the Study
• 1.2 Statement of the Research Problem
• 1.3 Research Questions
• 1.4 Research Objectives
• 1.5 Research Hypotheses
• 1.6 Significance of the Study
• 1.7 Scope of the Study
• 1.8 Limitations of the Study

Chapter Two:

Literature Review and Theoretical Framework

• 2.1 Introduction
• 2.2 Concept of Crisis
• 2.2.1 Transition in Crisis Thought
• 2.2.2 Signs of Crisis
• 2.2.3 Causes of Crisis
• 2.2.4 Effects of Organizational Crisis
• 2.3 Concept of Crisis management
• 2.3.1 Strategies for Crisis management
• 2.3.1.1 Collaboration Strategy
• 2.3.1.2 Compromise Strategy
• 2.3.1.3 Avoidance Strategy
• 2.3.2 Criteria for Crisis management
• 2.4 Concept of Organizational Performance
• 2.5 Crisis management and Organizational Performance
• 2.6 Review of Previous Studies
• 2.7 Theoretical Framework

Chapter Three:

Methodology

• 3.1 Introduction
• 3.2 Research Design
• 3.3 Population of the Study
• 3.4 Sampling Technique
• 3.5 Source and Method of Data Collection
• 3.6 Techniques of Data Analysis
• 3.7 Measurement of Variables
• 3.8 Validity and Reliability of Data
• 3.9 Model Specification

Chapter Four:

Data Presentation and Analysis

• 4.1 Introduction
• 4.2 Responses
• 4.3 Data Presentation
• 4.3.1 Descriptive Statistics of the Variables
• 4.3.2 Correlation Matrix
• 4.3.3 Normality Test
• 4.3.4 Multicollinearity
• 4.4 Test of Hypotheses
• 4.5 Findings and Discussion.

Chapter Five:

Summary, Conclusion and Recommendations

• 5.1 Summary of Findings
• 5.2 Conclusion
• 5.3 Recommendations
• 5.4 Suggestion for Further Studies
• References
• Appendices

Chapter One

Introduction

1.1 Background to the Study

In every aspect of human society and endeavor, crisis is seen as a natural phenomenon that is, inevitable as long as human relationships are involved. It is a process that begins when one party perceives that another party has negatively affected or is about to negatively affect something that the first party cares about (Robbins, Judge & Vohra, 2012). At home and at work,crisis is very common and in some cases unavoidable (Mughal & Khan, 2013). As a result of people interacting with each other, friction, disagreements or arguments may arise resulting from actual or perceived differences or incompatibilities, thereby escalating to crisis. Thus, crisis in organizations can take many forms such as interpersonal crisis, task crisis and process crisis which give rise to diverse approaches to crisis management (Budd & colvin, 2013).

Nigerian Government over the years however has set up various techniques that will guide organizations in the management of crisis. Some of these management techniques are available in the provision of Labour/Employment Act, 1971; Workmen’s Compensation Act, 2010, Trade Dispute Amendment Decree, 1988, No 39 and Trade Dispute Act 18, 2004 which provided five steps for legal management of crisis in organizations in the country (Akinwale, 2011). According to Akinwale, 2011, these policies are voluntary settlements of crisis with the use of internal machinery of grievance procedures and also with the use of external machinery comprising of mediator, conciliator, and reference of disputes to industrial arbitration panel, national industrial court and the constitution of a board of enquiry. In the resolution of crisis, the judgment of the national industrial court is final and binding on the employers and employees from the date of the judgment in the country. Longe (2015) identified that the Trade Union Act, 2005 is also used for managing union-management crisis in organizations and has been adopted by some multinational firms in the country.

Nestle Nigeria Plc is a multinational organization involved in the production of vegetable oil and sale of poultry feeds for export. The organization is often faced with the issue of employees‟ welfare. Employee welfare is an important source of motivation to employees and the lack of it has led to employees having grievances against management which has most times resulted into crisis between both parties and the resulting effect has affected not only the performance of the employees but the organization. Managing the organizational crisis became necessary so as to improve its performance.

Crisis management involves doing things to limit the negative aspects of crisis and to increase the positive aspects of crisis with the aim of enhancing learning and group outcomes, including effectiveness or performance in organizational settings (Rahim, 2011). Crisis management is something that managers need to deal with as crisis significantly affects employee morale and turnover, which affects the prosperity of an organization, either constructively or destructively. Therefore, the effectiveness or otherwise of the management of crisis is largely dependent on how well the causes of the crisis have been understood.

When crisis is well managed, it can bring enormous benefits to people and organizations as crisis management is often one of the biggest drivers of change in any organizational set up. If properly handled, it can create stronger bonds, help people to be more innovative, build effective teams, establish strong working relationship and eventually improve individual as well as organizational performance. The key is to openly face an issue and negotiate a win-win outcome from those parties involved (Garcia, 2013).

Robbins, Judge, Millett and Waters-Marsh (2008); Robbins, Judge, and Vohra (2012) identified five major strategies for managing crisis in organizations based on assertiveness and cooperativeness which, according to Adeyemi & Ademilua as cited in Lazarus (2014), are the internal mechanisms used by the various authorities in resolving crisis. Assertiveness means the degree to which one party attempts to satisfy his or her own concerns while cooperativeness means the degree to which one party attempts to satisfy the other party’s concerns. They include: collaboration, compromise, accommodation, competition/domination and avoidance. In the context of this work, collaboration, compromise and avoidance strategies will be considered. This is because the three crisis management strategies provide a satisfactory balance for both parties involved in crisis in terms of assertiveness and cooperativeness. The accommodation and domination strategies will not be considered in the study because they do not provide satisfactory balance to the parties involved in crisis. This is because it leads to one party benefiting at the expense of the other.

Collaboration strategy refers to assertiveness and cooperativeness as it allows both parties‟ goals to be completely achieved by putting the concerns of both parties into consideration. Mughal and Khan (2013) assumed that collaboration strategy enables people take time to listen to others in order to find the best solution to handle the crisis. Compromise strategy refers to mid-range assertiveness and mid-range cooperativeness as it requires parties to crisis to give up something in order to settle the crisising problem, as such there is no clear winner or loser. This usually happens when employees get a sense of fear to lose any relationship with their colleagues or with their managers. Avoidance strategyrefers to unassertiveness and uncooperativeness and occurs when parties to crisisrecognize that crisis exists and want to withdraw from it or suppress it by trying to ignore it.Each of the above techniques is unique in its own way and will be considered with a view to ascertaining the performance level of the organization.

Organizational performance is seen as the result of an activity which has been achieved by an organization related to its authority and responsibility in achieving the goal legally, not against the law, and conformingto the morale and ethics of the organization (Almajali, Alamro & AlSoub, 2012). Organizational performance can either be measured financially (earnings per share, return on equity, return on asset) or non-financially (market share, customer satisfaction, employee morale). The appropriate measure selected to assess organizational performance (financial or non-financial) is considered to depend on the type of organization to be evaluated, and the objectives to be achieved through that evaluation. However, improved organizational performance is dependent on the appropriate crisis management strategy (s) such as, collaboration strategy, compromise strategy and avoidance strategy adopted by the organization in managing crisis. Applying the appropriate strategy will improve employees‟ performance resulting to an improved organizational performance. On the other hand, the inability of the organization to apply the appropriate crisis management strategy(s) will lead to a decline in employees‟ performance which in turn will result in a decline in organizational performance.

1.2 Statement of the Research Problem

Managers spend approximately twenty percent of their time dealing with crisis situations due to the growing complexity of organizations, use of teams and group decision making, and globalization (Mullins, 2005). This proved the fact that crisis cannot be totally eliminated within an organization because wherever you find human beings interacting at whatever levels, there is bound to be crisis. What is however important is the way crisis are managed to forestall future occurrence.

The existence of crisis is an issue of concern in Nestle Nigeria Plc.The organization is confronted with the issue of negotiation of staff bonuses, usually at the end of the year. The lingering issue results into crisis between management and employees of the organization which manifested in form of employees nursing grievances against management, change of attitude or behaviuor, decrease in effort towards work, physical confrontation between both parties and stoppage of production activities as employees refuse to work. This affected the effectiveness and performance of the individual employees and the organization as a whole. Attempt by management to resolve the crisis has only led to crisis suppression. This is because management made use of domination strategy which is of benefit to them at the expense of the employees. As a result, there is a need for Nestle Nigeria Plc to devise an effective means of resolving the organizational crisis.

Several studies have been carried out on crisis management; however, most of these studies are qualitative in nature (Fatile & Adejuwon, 2011; Garcia, 2013; Kazimoto, 2013; Nwosu & Makinde, 2014; Ebhote & Monday, 2015). They cannot be generalised in all aspects of organizations, because crisis management has to do with human intentions. While some empirical studies in this area were carried out using some or all the major crisis management strategies on other dependent variables such as job stress, organizational effectiveness and turnover intention (El Dahshan & Keshk, 2014; Kanani & Farahani, 2014; Lazarus, 2014; Sima,

Gbolamabbas, & Saeed, 2012); others were on organizational performance (Ongori, 2009;Hotepo, Asokere, Abdulazeez, &Ajemunigbohun, 2010; Obasan, 2011; Mughal & Khan, 2013; Ajike, Akinlabi, Magaji & Sonubi, 2015; Awan & Saeed, 2015 and Longe, 2015). Studies conducted by Ongori (2009), Hotepo, et al. (2010), Obasan, (2011) and Mughal and Khan (2013)only identified the crisis management strategies used by the organizations understudied but the studies did not measure the effect of the strategies on organizational performance.
Ajike et al.(2015) made use of simple linear regression which does not give room for outlining the proxies of the crisis management strategies such as collaboration, compromise and avoidance strategies employed for the study.Awan and Saeed (2015) identified compromise and avoidance strategies as techniques for managing organizational crisis but the significant effect of these strategies on organizational performance was not conducted.

Also, Longe (2015) employed some of the major crisis management strategies such as compromise and avoidance strategies (compromise, accommodation, competition, and avoidance) on organizational performance, but the study did not measure collaboration strategy on organizational performance. However, a detailed study using the crisis management strategies such as collaboration, compromise and avoidance strategies on organizational performance is yet to be achieved, thus the extent of this effect has not also been ascertained. This study contributes towards filling this gap.

Since crisis is inevitable in an organization, its management will determine whether it will generate positive or negative effect on organizational performance (Uchendu, Anijaobi & Odigwe, 2013). Therefore, this study seeks to examine the effect of crisis management using collaboration strategy, compromise strategy and avoidance strategy on the performance of Nestle Nigeria Plc.

1.3 Research Questions.

The specific research questions to be addressed in this study include:

1. To what extent does collaboration strategy affect the performance of Nestle Nigeria Plc?
2. To what extent does compromise strategy affect the performance of Nestle Nigeria Plc?
3. To what extent does avoidance strategy affect the performance of Nestle Nigeria Plc?

1.4 Objectives of the Study

The main objective of this study is to examine the crisis management strategy and organization performance of Nestle Nigeria Plc.

The specific objectives are to:

1. Examine the effect of collaboration strategy on the performance of Nestle Nigeria Plc.
2. Ascertain the effect of compromise strategy on the performance of Nestle Nigeria Plc.
3. Determine the effect of avoidance strategy on the performance of Nestle Nigeria Plc.

1.5 Statement of Hypotheses.

In line with the research objectives of the study, the following hypotheses are formulated.

• H01: Collaboration strategy has no significant effect on the performance of Nestle Nigeria Plc.
• H02: Compromise strategy has no significant effect on the performance of Nestle Nigeria Plc.
• H03: Avoidance strategy has no significant effect on the performance of Nestle Nigeria Plc.

1.6 Significance of the Study

The study is of great benefit to the management of Nestle Nigeria Plc, other researchers, general public and lastly, it contributes to the existing body of knowledge on crisis management.

This study is of importance to the management of Nestle Nigeria Plc in understanding the company’s crisis management strategies which have an important role in determining the success and failure of the organization and also enlighten them on the strategies to adopt in the management of crisis so as to improve the performance of the organization. The research findings and recommendations of this study formed a base to be consulted by other researchers who may wish to make further inquiries into the subject matter. The study is of benefit to the general public as it provides them with adequate information concerning the activities of the organization as it relates to crisis management in the private sector. This study also contributes to the existing body of knowledge on crisis management by examining the effect of crisis managementstrategies on organizational performance.

1.7 Scope of the Study

This study was carried out on the effect of Crisis management on Organizational Performance in Nestle Nigeria Plc. The study was carried out on a cross-sectional basis and focus was on the crisis management strategies that contributed to organizational performance. Crisis management being the independent construct was operationalised by the following dimensions: collaboration strategy, compromise strategy and avoidance strategy; while the dependent variable was organizational performance.

1.8 Limitations of the Study

The study is cross-sectional in nature which captures the effect of crisis management on the organizational performance of Nestle Nigeria Plc at a point in time. Thus, the study cannot prove causal relationship on a longitudinal basis.

This study is limited in the area of sample size which may not give a comprehensive view on the effect of crisis management on organizational performance. Therefore, there is need to conduct a comprehensive study with more sample size to make concrete conclusions on the management
of crisis.

Chapter Five

Summary of Findings, Conclusion and Recommendations

5.1 Summary of Findings

The effective management of crisis through its strategies is required to bring about enormous benefits to employees and organizations as a whole. As a result, knowing the best crisis management strategy(s) to adopt is an important factor that organizations have to take into consideration in order to improve their performance level.The study investigates the effect of crisis management (collaboration, compromise and avoidance strategies) on the performance of Nestle Nigeria Plc.

The findings of the showed that collaboration strategy has significant effect on the performance of Nestle Nigeria Plc. Thus, the higher the adoption of collaboration strategy by management of Nestle Nigeria Plc, the higher the organizational performance. Compromise strategy has negatively significant effect on organizational performance which implies that the adoption of compromise strategy in managing crisis will lead to a decrease in the performance of the organization. Thus, the more Nestle Nigeria Plc adopts compromise strategy the less the performance of the organization. Also, avoidance strategy has significant effect on organizational performance which signifies that the higher the adoption of avoidance strategy by the management of Nestle Nigeria Plc, the higher the organizational performance. Thus, collaboration, compromise and avoidance strategies can be suitable for crisis management depending on parties to crisis, the time frame and the situation the organization finds itself.

5.2 Conclusion

Based on the research hypotheses and the research objectives the conclusion was drawn that collaboration strategy in terms offinding out mutually acceptable solutions to problems ortrying as much as possible to discuss all concerns openly especially during meetings will improve the performance of Nestle Nigeria Plc.

For the purpose of improving the performance of Nestle Nigeria Plc, both management and employees‟ have shown that the adoption of a mid-way approach in deriving solutions to problems by both parties agreeing on the grounds that they both sacrifice a little, that is, give up some of their demands have not improved the performance of the organization. Also, the ability of management and employees to avoid issues that will cause division when the need arises have improved the performance of the organization.

5.3 Recommendations

In line with the above conclusion, the study recommends that the Management of Nestle Nigeria Plc should create an enabling environment where employees can openly communicate and discuss issues affecting them. In doing so, management should try as much as possible to find out mutually acceptable solutions to problems and implement any joint decision taken by putting the organizational goals as well as employees‟ interest into consideration.

Also, given the significant level of avoidance strategy in improving the performance of Nestle Nigeria Plc, management and employees should try as much as possible to avoid any critical issues that will cause division in the organization. Such issues should be left alone to be discussed in the open during meetings. By so doing, it will help to remove tension in the working environment, thereby keeping it peaceful.

In a bid to improve the performance of the organization, management should not emphasise the adoption of compromise strategy on the management of critical issues such as employees welfare, this is because of the negative effect it has on the organization’s performance.

5.8 Suggestion for Future Study

Based on the limitation of the study, this research has suggested the need for further study. It is recommended thata comprehensive study with more sample size should be conducted in order to make concrete conclusions on the management of crisis.

This study concentrates on crisis management strategies (collaboration, compromise and avoidance strategies) that provide satisfactory balance to parties involved in crisis. Further studies should concentrate on a comparative study between crisis management strategies that provides satisfactory balance and those that do not provide satisfactory balance (accommodation and domination strategies) to parties involved in crisis.

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