Christine Raneri March 13, 1999
Over the years, corporations have realized that its people are its greatest asset in surviving the competition, but recently technology has gained a close second as the strategic asset of the new century. The successful combination of people and technology is bringing business to a new and more powerful level of �anytime, anywhere, in real space or cyberspace� (Cascio, 1999). This new type of work ethic is thought to be found in what the information-age has coined the �virtual� organization. Virtual organizations are not just another fad, but are gaining momentum and excitement that is being compared to that seen during the industrial revolution. A virtual organization represents a dramatic change in how people work. Traditionally, workers operate within specific departments, assigned specific roles, communicating via paper and post-office or face-to-face methods. Today�s increasing use of technology, especially the Internet, allows workers in virtual organizations to work across boundaries of time, space, culture and organization. These dramatic changes present challenges for both employees and managers that raise feelings of excitement and fear. Although virtual organizations are infiltrating society and the phrase is becoming corporate jargon, there is no singular definition of what this organization is. The multiple definitions being used do agree on common characteristics specific to this type of organization. For example, it is agreed that virtual organizations are composed of a network of people, capitol and technology, which come together to form flexible organizations. They are project-focused organizations driven by necessity of globalization and knowledge based competition that is free from space and time. They are staffed by �people with specialist knowledge, relevant professional expertise and enterprising and innovative qualities� (Sparrow, 1999). These knowledge workers are brought together for specific projects. When the projects are completed they leave to assemble with new people for a new project (DeSanctis, 1999). This definition can be conceptualized as a company without walls, where a diverse network of people regardless of physical proximity and ownership, work to complete a project. To further distinguish the virtual organization from the traditional form there are two key factors that set one apart from the other. The first factor is that the virtual organization lacks physical proximity, and second, it lacks ownership (Alexander, 1997). A virtual organization lacking physical proximity is an organization that provides its members with the right equipment in order to work across space (multisite), time (dynamic) and organizational boundaries (multi-organizational) (Snow, 1999). Multisite refers to organizations offering a product or service through electronic channels: Internet, TV shopping, Market choice box and dedicated databases. Multisite also refers to the organization that combines geographically dispersed people using technology such as Groupware, video conferencing, and E-mail. Organizations that provide such high technology to meet both customer needs and employee challenges increase employee flexibility in regards to lifestyle, by offering such work arrangements as telecommuting and virtual teams. Virtual organizations are characterized by working across organizational boundaries, creating multiorganizations. Virtual organizations are known to focus on a few core competencies and, with the help of technology, out-source to those known to have knowledge and expertise in the non-core competencies, which can now be found anywhere around the world. Lastly, lacking physical proximity allows virtual organizations to be dynamic as to allow them to perform quicker, change partners frequently and use time as a strategic resource (Snow, 1999).
The traditional forms of organization believe that building a corporate cathedral with strong walls will protect them from competitors and make them stronger. Today many companies are leaning away from this hierarchical belief that doing it all oneself would give it the competitive edge and leaning more towards producing a few core competencies, outsourcing and forming partnerships for the rest. A partnership with suppliers, customers and other companies to create a new type of corporate cathedral is seen as doing business with more effectiveness, efficiency and speed. Virtual organizations are also seen as having very low levels of direct ownership. The main purpose of the virtual corporation is to �get things done� (Alexander, 1997).
The belief is that by removing the barrier of physical proximity and the burden of full ownership, organizations benefit: they have a more defined focus and have greater access to information which creates more flexibility. The advantage to being focused is in the ability to dedicate more time, attention and resources to being really good at a few core competencies rather then all tasks, which inevitably would leave many tasks undernourished. By focusing direct ownership on few core tasks, virtual organizations reduce levels of management (and their tasks), lessen resource constraints and increase their ability to maintain an advantage in those specific activities. Virtual organizations also gain access to expert providers whose performance and quality of specific tasks out weigh the costs that in-housing brings (training, recruiting, managing, resources and quality). The biggest advantage seen in a virtual organization is its ability to be flexible. This concept put virtual organizations ahead of their competitors by being able to move and adapt more quickly to the rapidly changing environment brought about by consumer demands (Alexander, 1997). With the heart of a corporation�s survival in mind (gaining consumer investment thru meeting their needs promptly), virtual organizations are thought to be leading society�s corporations into a new paradigm. It is not the virtual organization that is directly leading this new business but, rather, two main forces: people (internal) and technology (external) work together to foster the emergence of this new virtual way of corporate organizing.
The main external force leading corporations to a new way of doing business is technology, especially the Internet. Without information and knowledge, virtual organizations would not exist. Electronic communication media is ruling when and how we communicate: emails, cell phones, laptops without modems, hand held organizers, video conferencing in real time, and interactive pagers are shaping the way business deals are being contracted, processed and delivered. Not only is this technology helping to create a seamless structure: providing mobility between home, office and car, it is also creating an endless one, by allowing 24-hour communication and service. The internal force spurring the emergence of virtual organizations is its diverse membership, but it is still with the help of technology that this internal force is so prevalent. For the first time employees located in different parts of the world can be recruited and can communicate with one another in a timely and cost-effective manner (no face-to-face meeting is required). A second internal force is the nature of the type of work being done. It is more dependent on knowledge and services provided. Corporations do not choose whom they will partner with based on physical proximity but rather on expertise and reputation. In the past, companies were limited to out-sourcing to those who were local, but with the access to the Internet, companies can increase their geographic parameters to reach globally (Werther, 1999). With the Internet documents such as invoices and placing orders are done more quickly and efficiently and there is an immediate record of the transaction because of this. Corporations would shut down due to the time and funds required in meeting face-to-face with their many partners who are now located around the world. Other forces seen as spurring the rise of virtual organizations are cost, pace, personalization and globalization. The cost of entering into business has decreased over the years. Information services and technologically based start-ups especially, have an easy time entering into the market successfully due to the large demand for the next best toy. This low entry cost creates increased competition for the already existing corporations that now need to stay a step ahead. This leads into the forces of time that drive corporations into becoming virtual. Businesses need to run at warp speed in order to stay competitive. They promise anytime, anywhere service otherwise the customer will take his business elsewhere. Corporations are no longer surviving because they are the fittest, but because they are the fastest. Corporations are doing this by out-sourcing and creating alliances with organizations that can produce with quality and speed what one organization could not do itself without added cost (loosing quality, hiring more staff). Customers, which is the third force, expect the product yesterday and know that they can demand such high standards because of all the competition and technology out there. Due to this high demand corporations have gone from product cycles of a few years to a few months. If organizations are unable to keep up with this pace they will loose millions of possible consumer investment to its faster competitor who no longer is seen as the corporation next door but the corporation around the world.
With the ability of organizations to form global partnerships, work designs are being reevaluated and restructured in order for employees and corporate alliances, separated by distance, to communicate. With the Internet and other trends in technology two main types of work arrangements are being seen in the virtual organization: teams and telecommuting. With the vast array of communication options and with research pointing to teams as one of the keys to an organizations success (organizing corporations so that they become more flexible and cost effective), virtual teams have been created. Virtual teams are defined as a group of individuals who use an array of electronic devices to perform work across organizational and geographic boundaries (Cascio, 1999). With the recent technology, team members no longer must be housed in one location in order to work together, but can use technology to communicate across time zones and organizational boundaries. Virtual teams differ from traditional teams, not only in the fact that individuals usually never meet, but also in that they are temporary and disassemble once their project is complete (Lipnack, 1999). These teams are formed to solve a specific task which when finished, members disban to their normal duties or other projects. Members on virtual teams are given free reign in regard to making decisions on how a project will be handled and the task completed as long as they get the requested task done in a timely and quality manner (Cascio, 1999). Virtual teams also differ from their traditional counterpart in terms of authority and social interaction. Members of teams working in-house have specific roles and are run by a member designated as the team�s leader. Leadership roles in virtual teams shift between members depending on the task and project (Lipnack, 1999).
Although different from traditional teams, virtual teams have been shown to be effective. They save time (which keeps them competitive), money (travel, retail space renting) and increase one�s access to the experts in specific fields. The downside to virtual teams is rarely talked about due to the excitement inspired by the assumption that virtuality is the �right� path on which to lead the business industry. It is harder to build trust with virtual teams. Without face-to-face interactions, team members miss the underlying meaning of someone�s words that body language portray and it is harder to build trust (Snow, 1999). Another downside with virtual teams is in the fact that it allows for anonymity. This is good for members who would not voice an opposing opinion in face-to-face settings, due to headstrong members, to feel more comfortable to now voice their opinions, but this creates a longer time in coming up with a consensus (Ramer, 1996).
Pros and cons are not only found in virtual teams, but also in telecommuting, which is another type of virtual work arrangement. Telecommuting is defined as work that is being processed and completed outside of the home office where workers have less contact with co-workers so they communicate via the Internet (Warner, 1997). Teleworkers have increased 35% since 1995, increasing the number of workers telecommuting in the US to over 11 million (Cascio, 1997).
The most common form of telecommuting is home based, but can also be seen in three other forms: hoteling, hotdesking and telework centers (Cascio, 1999). The Ernst and Young Corporation have had such success with hoteling they are expanding this work arrangement to nine other states. Employers such as E &Y reserve suites within hotels which come equipped with work stations, meeting rooms and the necessary supplies and requested files. This type of arrangement has been shown to decrease ones focus on the home office and more on the customer. 20,000 IBM workers, and others in the business of sales and service, are using what is called hotdesking. This is an arrangement where multiple workers share desks and office space depending on where they are stationed at the time. The last type of arrangement is called telework centers. These are miniature versions of the corporate office but are located in residential neighborhoods. This arrangement saves the employee travel time and supplies more technological equipment then would be provided if one worked directly from his/her home. This type of arrangement decreases commute time, increases satisfaction, which increases productivity (Cascio, 1999).
Besides increased satisfaction and decreased commute time, and increased productivity, telecommuters face an increase in role conflict (Warner, 1997). Since they work at home, they have a harder time differentiating their roles at home from their roles at work. As workers spend more time working at home, they start to feel that they can work anywhere at anytime and may feel that there is no escape (Warner, 1997). Telecommuters may also feel lonely and isolated (Cohen, 1997). There are no longer the water cooler chats that help to create a social outlet, or that provide spur-of-the-moment business meetings. Telecommuters may also miss promotions (telecommuters may have the misperception: out of site out of mind) (Sparrow, 1999).
These two types of work arrangements would not exist if it were not for technology, but technology only provides the platform, where people are ultimately responsible for making collaboration work (DeSanctis, 1999). The importance of people should not be taken for granted especially in virtual environments. The fundamental reason virtuality remains today is due to trust. One researcher wrote that �Virtuality requires trust to make it work: technology on its own is not enough� (Handy, 1995). Trust needs to occur between many different relationships (DeSanctis, 1999). Managers must trust that their employees are working even though they cannot be seen. There must be trust between employees who come from different cultures, disciplines and backgrounds, and organizations must trust each other with their core trade secrets. In order to form trusting relationships and sustain an effective working environment, virtual organizations need to be properly managed (Minella, 1999).
As new organizational forms change, manager�s roles must also change. Because it is essentially a horizontal organization rather than a vertical one, effective operations within this organization are highly dependent on management�s ability to collaborate internally amongst its members and across organizational boundaries. In order for a manager to gain trust between the multiple relationships occurring in a virtual organization he must first assess and create an environment that spurs beneficial communication. Managers need to be aware that emails may not be sufficient in the ability to create a personal touch, and that other forms of communication need to be practiced such as audio meeting, voice-mail conferencing and face-to-face communication (Minella, 1999). Managers may also need to train employees. Dale Caregie Training developed a training agenda for managers of virtual corporations. They believe that training should include teaching of: how to use the software, how to manage the anonymous environment, and how to provide anonymous participation and feedback within the environment (Cascio, 1999). It is also important for managers to teach common cultural values in order for these global organizations to respect each others diverse background, norms and values so to become a �seamless� organization (Minella, 1999).
Besides the role of communication enhancer, managers are seen as having three other roles: designer, co-operator and developer. As designer, managers use their ability to see the future and to partner skills to conceptualize and create multiorganizational networks. Once these networks are in place, managers become co-operators to negotiate and contract skills to create the best alliances to perform specific tasks within a specific time frame. These networks do not remain stable or effective without the manger developing and improving skills within this cast of players, creating a consistently smooth running operation (Snow, 1999).
One of the biggest challenges of a manager is her role as developer, also known as performance management. Under this role, managers must define, facilitate, and encourage performance (Cascio, 1999). These three ingredients of success are familiar to the traditional organization but are seen as crucial to the virtual organization due to the fact that there is a physical distance between the organization�s keys to success (it�s people) that is not an issue in traditional organizations.
Defining performance is the same as communicating to employees what is expected from them, helping them define goals and then assessing whether they performed effectively to meet given goals. Members on virtual teams or telecommuters need to be in agreement not only in a shared vision, but also on each of their responsibilities toward that vision (Cascio, 1999). The challenge for virtual organizations is making sure the vision is understood and agreed upon by various geographic regions (Minella, 1999). To help employees stay on task in regard to their responsibilities, managers help teams and individuals form specific and challenging goals to keep employees from all around the world focused (Cascio, 1999). When regional goals conflict with global goals managers face a challenge (Minella, 1999). In order to keep employees focused, managers assess performance using performance appraisals and providing feedback (Cascio, 1999).
In order for employees to achieve maximum performance, managers need to be committed not only to eliminating obstacles but also to providing the appropriate resources. Some obstacles that can be found within a virtual environment are delays in receiving critical information, the inability to access files and databases from remote locations, and malfunctioning technology (Cascio, 1999). In order for employees to reach goals and manager expectations, they not only need barriers to be taken down, but they also need the proper resources, such as laptops with modems, interactive pagers, hand held organizers and, especially, training. Managers must also provide training to workers within this new technological environment to ensure cooperation. The last aspect of performance affiliation is employee selection. In a virtual environment, managers do not have the luxury of seeing employees everyday to answer questions that employees may have or provide daily feedback. For managers, this means looking for employees who have characteristics that lend themselves to working autonomously, taking risks, and experimenting.
Lastly, managers need to encourage performance by providing employees with rewards that are valued, are given in a timely manner and are seen as fair by the employee. In virtual organizations, timeliness is seen as most important for the telecommuter, who might perceive employees, who are not in the office, as out of site and out of mind (Warner, 1999). Managers alone do not have the sole responsibility of making virtual organizations come to life, but so do its employees. They need to want to learn the new technology out there and need to be open to nourishing globally diverse relationships. Despite the hype, there are few purely virtual organizations that exist but, rather, society is seeing aspects of virtuality being incorporated within large corporations. Many of these large corporations are out-sourcing more, virtual teams are being implemented along side traditional teams and there is an increase in the number of telecommuters and the need for cooperation among employees who are not in physical proximity. Jay Galbraith, the author of �Designing the Innovating organization� (1982), sums up the importance of virtual organizations and their need to stay when he wrote, � Innovative ideas are destructive: they destroy investments in capital equipment and people�s careers.� Organizations that are addicted to size may never realize that the competitor is not the cause of failure, but rather the cause is themselves. Holding onto the outdated saying �whoever has the most toys wins� (control of all competencies) slows down one�s response time to the ever changing environment. Managers along with employees have been thrown to the technological wolf (virtual organizations) and will continued to be watched with eager eyes to see if they can survive.
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