What Lies Beneath? The Role of Informal and Hidden Networks in the Management of Crises

• Date: 01 August 2014
• DOI: http://doi.org/10.1111/faam.12038
• Author: Denis Fischbacher‐Smith,Moira Fischbacher‐Smith
• Published date: 01 August 2014

Financial Accountability & Management, 30(3), August 2014, 0267-4424

What Lies Beneath? The Role

of Informal and Hidden Networks

in the Management of Crises

DENIS FISCHBACHER-SMITH AND MOIRA FISCHBACHER-SMITH∗

Abstract: Crisis management research traditionally focuses on the role of formal

communication networks in the escalation and management of organisational crises.

Here, we consider instead informal and unobservable networks. The paper explores

how hidden informal exchanges can impact upon organisational decision-making

and performance, particularly around inter-agency working, as knowledge distributed

across organisations and shared between organisations is often shared through informal

means and not captured effectively through the formal decision-making processes.

Early warnings and weak signals about potential risks and crises are therefore often

missed. We consider the implications of these dynamics in terms of crisis avoidance

and crisis management.

Keywords: risk, crisis, informal networks, control, organisational performance

INTRODUCTION

A striking characteristic of organizational life is that there is a lot of talk about

decisions, decisions that have been made, are to be made, will be made, should be

made, will never be made; talk about who makes decisions, when, how, why and with

what results. Organization members interpret a significant part of activities around

them in terms of decisions (Laroche, 1995, p. 67).

The processes of decision-making are central to accountability and control within

organisations. It is well known, however, that organisations tend to manage

what they can measure and that behaviours and reporting alter accordingly,

∗The first author is research Professor of Risk and Resilience in the Adam Smith Business

School at the University of Glasgow. The second author is Dean of Learning and Teaching

in the College of Social Sciences and Senior Lecturer in the Adam Smith Business School

at the University of Glasgow. This paper is based on research funded by the EPSRC (Grant

EP/G004889/1) and by the Glasgow Centre for Population Health.

Address for corresspondence: Denis Fischbacher-Smith, University of Glasgow Business

School, Gilbert Scott Building, Glasgow G12 8QQ.

e-mail: denis.fischbacher-smith@glasgow.ac.uk

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260 FISCHBACHER-SMITH AND FISCHBACHER-SMITH

often to the neglect of important but un-measurable information and activity

(Seidl, 2007; and Smith, 2005a). The focus on measurement encourages decision-

making that attends primarily to those activities that are known, visible and that

can be made explicit. Decision making in relation to risk and risk assessment

in particular, has become increasingly prominent in organisations due in part

to the reputational damage that can ensue following a crisis and from which

organisations have great difficulty recovering (Sipika and Smith, 1993; and

Smith and Irwin, 2006). Such assessment relies primarily on calculations of

probabilities and the consequences of particular hazards, and this process

becomes contextualised within information sharing about organisational risks.

This process often relies on experts and senior staff within the organisation

to calculate the nature of the risk. These groups draw mainly on hard data or

information that is known within the organisation around failure modes and

their effects. This information is then shared amongst decision makers. There

are, however, several problems with this approach.

Firstly, the process is more effective when the probabilities of failure are

known and the consequences are well understood. The approach has problems

when it is applied to low probability, high consequence events where the

frequency of occurrence is so low or the process is so new that there is uncertainty

around the statistical judgements of occurrence (Fischbacher-Smith, 2010).

Secondly, there are potential issues around the role that technical expertise

can play in the process as powerful interests can serve to distort the assessment

of risk under certain conditions (Collingridge, 1992; Collingridge and Reeve,

1986; and Smith, 1990). Thirdly, even where information is available about a

particular hazard, the decision-making process can also be shaped by judgement

of that risk which is based on informal or more qualitative information. We argue

here, that despite the use of such information and expertise, the distribution of

knowledge across and between organisations presents significant challenges to

organisations in the context of decision-making and risk management because

many of the early warnings of crises are shared through informal networks

that are both unobserved and potentially unobservable. It is for this reason

that organisations often only discover that many of these indications existed

about the potential for a crisis after the event. These warnings were either

undiscovered until after the event or had been discovered in advance but

were not fully understood or prioritised because they did not fit with the

decision making paradigm of the organisation (Fischbacher-Smith, 2012). As

many of these early warnings exist within intra- and inter-organisational

networks, the challenge for management is that of identifying and managing

this otherwise hidden information amongst often unobserved and unobservable

networks and it is the nature of this challenge that forms the core of the

paper.

How information and knowledge informs the decisions that managers make,

is something which has been the subject of considerable research interest

(Argyris, 1990; Boisot, 1995; Collingridge, 1992; Collingridge and Reeve, 1986;

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