Virtual Organization

Virtual Organization

James J. Lee, Ben B. Kim
DOI: 10.4018/978-1-60566-026-4.ch638
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Virtual organization has been well documented as both a tool for organizations to seek further profitability through the removal of traditional barriers, as well as a method to extend the provision of services to clientele in a manner previously achievable by only large, multinational corporations (Markus 2000). The widespread implementation of information technology and its many applications in modern business has moved the act of management towards a virtual focus, where managers are able to complete tasks through the use of teams in varying physical locations, with members that may or may not be employees of that firm, sharing a wide variety of data and information. With so many companies now employing virtual organization techniques, referring to a company as “virtual” or to its components as possessing “virtuality” lacks the clarity and specificity needed when using these firms as examples for others. The variety of methods through which a firm can achieve virtuality represents a span nearly as wide as the business community itself.
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The earliest definitions of a virtual organization appeared when the concept of virtuality was applied to studies of management, before information technology existed in a refined state to support the theory. Giuliano (1982) saw that with the addition of telecommunications and networking technology, there was little need for work teams to assemble at the same time or even at a contiguous location. A structured concept of virtual organization was formed by Mowshowitz (1994, 2002), who defined virtual organization in previous work as a group of employees communicating and being managed electronically through metamanagement. This concept defines the way in which a virtual task is managed and further categorizes a virtual organization as a series of virtual tasks, completed by virtual teams in strategic global locations. As each team has a certain commitment to the parent organization, the similarity in purpose and communication style allows for clear distribution of work across multiple groups of organizational members.

As with Net-enabled organizations, the concept of virtual organizations has gained prominence among researchers and practitioners. As shown by the recent work of Schultze and Orlikowski (2001), virtuality can be understood through the perception of time and space. This article extends the scope of the virtual organization in terms of ‘virtual space’, a metaphor used in time and space (beyond the constraints of the actual location we belong to) dimensions (Allcorn, 1997). As opposed to the virtual organization, time and space dimensions are constrained in traditional or ‘real’ organizations. Time constraints occur in real organizations due to the operational time dimension of such organizations, while space dimension occurs due to constraints of location.

It is true that a virtual organization inherits the attributes of virtual dimensions—a newly defined concept of time and space. In other words, a virtual organization does not exist in our time and space, but rather exists only in virtual space (the perceptual world), which is only a metaphor of our consciousness and not reality. A virtual organization, in this sense, is the metaphor of our designed and structured consciousnesses that exists in virtual space to perform the intended actions of interest. However, the most important thing in a virtual organization is to identify the role of human actors who get involved in both the physical and the perceptual world (Orlikowski, 2002). I attempt to explain the relationships between the human actors, the real and virtual organizations, and our perceptions of these concepts.

Key Terms in this Chapter

Functional or Cultural Diversity: The nature of global diversity and the ability to locate organizational functions across the globe creates a diverse environment for the entire organization. Since members are all in different locations and charged with different tasks, diversity exists that is only found in the very largest multinational corporations.

Electronic Communication: A vital concept to the virtual organization is the ability to communicate through purely electronic means, eliminating the need for physical contact and allowing the geographical dispersion of organization members. Online collaboration via e-mail, discussion boards, chat, and other methods, as well as telephone and facsimile communications, are primary contributors to the removal of time and space in this new organizational concept.

Open Communication: The foundation of a virtual organization is its set of communications components that exist in absence of face-to-face exchanges. A virtual organization can only survive if its members communicate freely through the provided channels between them, be they based on the Internet or more traditional telephone technologies. The organization cannot continue to function unless it is aware of what all its members are currently completing, and often times, when communication is more closed, work that is being completed in tandem by more than one member can be hindered or brought to a halt.

Switching: The switching principle is a fundamental advantage that a virtual organization has over a traditional one. Because the links between organizational functions are largely electronic and non-physical, it is easy to replace a weak component with a stronger one. Where this activity could be considerably expensive if the item in question was a physical supply chain, it may only be a change of suppliers for the virtual organization and can be made with a phone call and database edit, as opposed to a building project.

Sharing of Knowledge: Members of a virtual organization collaborate to share their knowledge gained from individual activities performed. Since collaboration is facilitated through the communications channels that are afforded through the virtual organization, it is common to find “knowledge bases” or other database systems that contain information and documents pertaining to past experience.

Vague/Fluid/Permeable Boundaries: As a continuation of flexibility, the virtual organization is characterized by vague boundaries as to the extent of its use and purpose. Since small tweaks can easily and largely affect the overall organization, it is quite possible to extend the boundaries of an organization so that they encompass new purpose, people, or control.

Explicit Goals: Similar to meta-management, each member of the organization is charged with an explicit task to complete as it relates to the overall function of the organization. Often times, after this single goal is completed, the link between the organization and the entity is dissolved until a further need for it is realized. At this point, the link is reestablished.

Flexibility: Virtual organizations are, by their nature, flexible. Traditional organizational structures are rooted in the physical world and rely on structures, unalterable networks, and specific locations to function properly. Because of this, when it becomes necessary to introduce change into a specific organization, a barrier is reached where further alteration requires physical, costly modifications. A virtual organization is unhindered by these problems. These structures are designed so that they can operate regardless of time or place, independent of existing physical realities.

Trust: The lack of physical interaction places a higher regard on the trust that exists between each entity involved in the organization. Since fewer “checks and balances” can be placed on appropriate departments, management and other entities trust that they will complete the appropriate work on time or be straightforward about delays or problems. If two entities working on a project together separated by thousands of miles are unwilling to trust each other, the work slows and suffers to a critical point.

Information technology (IT): The crucial component of a modern virtual organization. Without advances in technology, many of the realities of today’s virtual companies would be merely science fiction. These components include the Internet, LAN and WAN networks for business, e-mail and online chat/bulletin boards, and real-time videoconferencing. These technologies allow smaller workgroups as part of a larger company to operate independently of each other, across a room or the globe.

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