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3 - A Network View of Tone at the Top and the Role of Opinion Leaders

from Part I - Risk Culture Conceptual Underpinnings

Published online by Cambridge University Press:  22 May 2020

By
Michelle Tuveson  and
Daniel Ralph
Edited by
Michelle Tuveson ,
Daniel Ralph  and
Kern Alexander
Michelle Tuveson
Affiliation:
Judge Business School, Cambridge
Daniel Ralph
Affiliation:
Judge Business School, Cambridge
Kern Alexander
Affiliation:
Universität Zürich
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Summary

How does “Tone at the top” travel from the board room to the rest of the organisation? While the qualitative description of tone at the top provides a noble and virtuous vision for guiding or changing risk culture, the mechanisms for actualisation are less clear. There has been a revival and emphasis of tone at the top after the Global Financial Crisis as it became widely espoused as both an explanation and a solution for the crisis. Tone at the top continues to symbolise risk culture maintenance and improvement for firms and their regulators. However, the processes and structures that are relevant to transmitting and propagating culture and values espoused by the leadership of the firm have been less explored.

We study the impact of charisma and strength of connections on transmission and persistence of culture in a given social network structure. Specifically, we analyse the effort to change culture in a firm by looking at communication effectiveness of opinion leaders throughout the firm; while influential, they are secondary to the board but act as “repeater stations” in transmitting the tone set by the board. This is a refinement of the classical approach to culture (Schein, 1990) which tends to focus more on messages from senior leaders, consistent with tone from the top, but without accounting for the social network of the firm’s staff.

We present a risk culture model using an agent-based algorithm which considers how the structural patterning of risk culture varies with the influence levels of opinion leaders given the social network in the organisation. To complement the hypothesis, we highlight the indicative relationship between the charisma and strength of connections of opinion leaders versus the survivability of risk culture in an organisation.

Type
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Information
Beyond Bad Apples
Risk Culture in Business
 , pp. 73 - 102
Publisher: Cambridge University Press
Print publication year: 2020

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