Prompted by the weaknesses of standardized risk-management approaches in the aftermath of the 2008 financial crisis, scholars, regulators, and practitioners alike emphasize the importance of creating a risk-aware culture in organizations. Recent insights highlight the special role of tone from the top as a crucial driver of risk awareness. In this study, we take a systems perspective on control system design to investigate the role of tone from the top in creating risk awareness. In particular, we argue that both the interactive and the diagnostic use of budgets and performance measures interact with tone from the top in managing risk awareness. Our results show that interactive control strengthens the effect of tone from the top on risk awareness, whereas tone from the top and diagnostic control are empirically not interrelated with regard to creating risk awareness. To shed light on the boundary conditions of the proposed interdependencies, we further investigate whether the predicted interdependencies are sensitive to the level of perceived environmental uncertainty. We find that the effect of tone from the top and interactive control becomes significantly stronger in a situation of high perceived environmental uncertainty. Most interestingly, tone from the top and diagnostic control are complements with regard to risk awareness in settings of low perceived environmental uncertainty and substitutes at high levels of perceived environmental uncertainty.

While prior research on performance evaluation bias has mainly focused on the determinants and consequences of rating errors, we investigate how a firm can provide implicit incentives to supervisors to mitigate these errors via its calibration committee. We empirically examine the extent to which a calibration committee incorporates supervisors' evaluation behavior with respect to their subordinates in the performance evaluation outcomes, i.e., performance ratings and promotion decisions, for these supervisors. In our study, we distinguish between lack of skills and opportunism as two important facets of evaluation behavior, which we expect the calibration committee to address differently. Using panel data of a professional service firm, we show that supervisors' opportunistic behavior to strategically inflate subordinates' performance ratings is disciplined through a decrease in the supervisors' own performance rating, while the supervisors' skills to provide less compressed and, thus, more informative performance ratings is rewarded through a higher likelihood of promotion.