Risk perception is influenced by conscious, subconscious, and affective factors. Conscious factors are associated with familiarity of situation, proximity, severity of impact, group dynamics, and organizational culture.
On the other hand, subconscious factors are based on cognitive and heuristic bias. Nonetheless, affective factors are based on emotional situations and factors. The conscious factor in the projects that involves outsourcing includes familiarity, manageability, and severity of impact.
The organization may have been familiar with the previous high cost of production. This may be the reason for the company to outsource its production. Furthermore, it would be easier to manage outsourced employees other than those who report directly to the management of the company (Boone, 2012). The severity of impact as conscious factors may have led to the decision of outsourcing. With outsourcing, the company would be able to spread its risks and improve the effectiveness of risk management. Next, the subconscious factor in the project includes the precautionary principle.
This is an approach to cope with possible risks in a situation that scientific understanding is not yet complete. In this case, the organization might have the seen the possible risks associated with production such as machine breakdown. Outsourcing is a strategy that would deal with the possible production risks in the future. I think the affective factor that would have contributed to the outsourcing decision is fear. The fear of the risks that may affect the production process led to the outsourcing decision. This is an effective strategy of coping with the dynamic and volatile business environment. It may difficult to address the employees on the outsourcing decision. I think it is important to consider compensation when making the announcement to the employees.
It is an ultimate fact that some employees will be relieved from their duties. Therefore, the employees should be addressed in a manner that will show that the management is concerned on their fate. There may be organizational resistance, and there is need to use an inclusive approach in addressing the issues (Boone, 2012). A participative approach in addressing the issues would reduce the overall resistance on the project.
Boone, L. &. (2012). Contemporary Business (14th Ed.). Hoboken, NJ: John Wiley& Sons.
Question from Professor::
I would like to hear/read your perspective on the topicdo you think there is risk or a perception of risk when outsourcing? Explain why or why not.