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Sensemaking and sensegiving as predicting organizational crisis

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Abstract

The current study examined crisis management and the signals that indicate its appearance. Based on cognitive and social psychology theories, we explored how senior and non-senior employees engage in sensemaking and sensegiving activities prior to and during crisis. Based on natural language processing, we analyzed a database of 86,643 emails sent by Enron employees before Enron declared bankruptcy and after the bankruptcy event. Our findings showed that employees could sense the impending crisis and applied informal scanning methods in an attempt at sensemaking of their unstable reality. In parallel, managers used sensegiving by deploying more positive confidence words in their emails. This tendency escalated after the crisis broke out. We explain this increase as the need to resolve feelings of cognitive dissonance related to their identity and reality. Our findings suggest both theoretical and practical contributions for the survival of organizations.

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Notes

  1. On December 3, 1984, more than 40 tons of methyl isocyanate gas leaked from a pesticide plant in Bhopal, India, killing at least 3800 people and causing significant morbidity and premature death for many thousands more (Budescu et al. 1988). The Bhopal tragedy is a classic case of organizational catastrophe, up with the Challenger disaster.

  2. Welch F(12,7605.814) = 12.192 p < 0.01.

    Brown-Forsythe F(12, 34759.619) = 16.231 p < 0.01.

  3. Welch F(12,7708.012) = 22.262 p < 0.01.

    Brown-Forsythe F(12, 43836.950) = 20.004 p < 0.01.

  4. We excluded the last period (Q3.02), since negligible correspondence was sent and received during this period, as the firm had already declared bankruptcy.

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Authors and Affiliations

  1. Department of Economics and Business Administration, Ariel University, 40700, Ariel, Israel

    Galit Klein & Eyal Eckhaus

Authors
  1. Galit Klein
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  2. Eyal Eckhaus
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Corresponding author

Correspondence to Galit Klein.

Appendix 1: set of confidence expressions

Appendix 1: set of confidence expressions

Positive

Neutral

Negative

Good chance

Fair chance

Almost impossible

Very possible

Some chance

Very poor chance

Very likely

Quite likely

Improbable

Almost certain

Quite probable

Unlikely

Possible

Quite possible

Poor chance

Very good chance

Toss-up

Doubtful

 

Toss up*

Somewhat unlikely

 

Even odds

Very unlikely

 

Likely

 
 

Somewhat likely

 
 

Probable

 
  1. *We added ‘Toss up’ without the hyphen, since in email an expression is more likely to appear in its shorter form

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Klein, G., Eckhaus, E. Sensemaking and sensegiving as predicting organizational crisis. Risk Manag 19, 225–244 (2017). https://doi.org/10.1057/s41283-017-0019-7

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