Globalization and Virtual Organizations - Introduction to Virtual Organizations
Intorduction to Virtual Organizations
This hub presents a brief examination of the organizational construct called the virtual organization. As of the early 21st century, virtual organizations emerged around the world due to increased globalization of enterprises and markets. Virtual organizations could be defined as goal-oriented enterprises composed of members from different geographical locations around the globe, brought together for the fulfillment of objectives or tasks, and who use media technologies to communicate and coordinate those objectives or tasks. This hub examines virtual organizations by taking a brief look at some of the common characteristics, advantages and disadvantages, and ingredients observed in effective collaboration within virtual organizations and teams.
Keywords: virtual organization, virtual teams, characteristics of virtual organizations, virtual organization definition.
Understanding Virtual Organizations
This hub presents a brief examination of virtual organizations. This endeavor was undertaken in order that business students and scholars and practitioners of organizational behavior may gain a basic understanding of virtual organizations, the possible advantages and disadvantages of virtual organizations, and some of the ingredients thought to make up effective virtual organizations. This information is pertinent to the understanding of organizations in the 21st century in that virtual organizations and teams continue to emerge as viable organizational models around the world, in such places as India, Asia, the United Kingdom, Western Europe and the United States (Workman, 2005).
Virtual Organization – A Definition
Virtual organizations are business and organizational models made possible by globalization and developments in transportation, information, and communication technologies in the late 20th and early 21st century (Mowschowitz, 2002; Kuruppuarachchi, P. R., 2009; Hortensia, 2008). Indeed, due to the rapid advances in information and communication technologies, virtual organizations are expected to play an increasingly important role in the global economy (Hortensia). If this is the case, what is a virtual organization? And, what are at least some of their common characteristics?
Definition of Virtual Organization
Simply put, a virtual organization can be defined as a goal-oriented enterprise composed of multiple members who reside in geographically dispersed locations and use technology media to communicate and coordinatethe fulfillment of a defined objective or task (Workman, 2005; Mowshowitz, 2002; Stoica & Ghilic-Micu, 2009; Moshowitz, 2002; and Nemiro, Beyerlein, Bradley, & Beyerlein, 2008). First, a virtual organization is an enterprise composed of multiple members. A member of a virtual organization could be defined as any individual, group of individuals, or formally organized enterprise recruited to serve as a satisfier of an input requirement (Mowshowitz, 2002). Second, members of virtual organizations reside in geographically dispersed locations i.e. they do not live within reasonable driving distance of each other and are restricted by location from sharing the same physical workspace (Stoica & Ghilic-Micu; Nemiro et al). Often, members of virtual organizations live in different countries and across multiple time zones. Third, members of virtual organizations communicate and coordinate activities through technology media e.g. email and or Internet applications like Skype, Instant Messenger, and GoToMeeting (Stoica & Ghilic; Nemiro et al).
Characteristics of Virtual Organizations
Rahman and Bhattachryya (2002) observed five overarching characteristics which appear common to virtual organizations:
1. They have a shared vision and goal and/or common protocol of cooperation.
2. They cluster activities around their core competencies.
3. They work jointly in teams of core competence groups; to implement their activities in a holistic approach throughout the value chain.
4. They process and distribute information in real time throughout the entire network, which allows them to make decisions and coordinate actions quickly.
5. They tend to delegate from the bottom up whenever economies of scale can be achieved, new conditions arise, or a specific competence is required for serving the needs of the whole group. (p. 40).
Virtual Organizations – Advantages and Disadvantages
In the literature on virtual organizations, Stoica and Ghilic-Micu (2009), Mowshowitz (2002) and Hortensia (2008) postulated a number of competitive advantages and disadvantages of virtual organizations. Potential advantages and advantages are outlined below and not meant to be exhaustive.
Potential Advantages of Virtual Organizations
Potential advantages identified by Stoica and Ghilic-Micu (2009) and Mowshowitz (2002) included (a) swifter reaction times to new products emerging in global and local markets and (b) the opportunity for switching suppliers or satisfiers of input requirements e.g. materials and human labor as related to the immediate need and dictated by global or local markets. Other potential advantages identified by Hortensia (2008) included:
1. Reduction of expenses involved by the necessity of using working spaces – rent, maintenance, insurances etc.;
2. More efficient usage of office space, in the case when some employees work according to the traditional system, while others prefer a telecommuting system;
3. Diminishing utilities expenses – gas, electricity, water etc.;
4. Reduction of the consumption of consumable materials;
5. Decrease of salary expenses, as the virtual team members are paid for their task and not for their time spent at work;
6. Possibility to have experts located in any part of the globe;
7. Possibility to hire low cost but qualified labor force (recruiting the personnel can be done in geographic areas where the labor force is low cost and well trained);
8. Increase of productivity and performances due to the fact that virtual team members can better focus on the results to be achieved;
9. Reduction of the number of absentees because the virtual team members work at home;
10. Creation of jobs and employment opportunities in rural or disadvantaged areas. (p. 270).
Potential Disadvantages of Virtual Organizations
Besides the potential advantages previously presented, Kuruppuarachchi (2009); Hortensia (2008); Mankin and Cohen (2004); Peters and Manz (2008); and Bjorn and Ngwenyama (2009) identified potential disadvantages to virtual organizations and teams. Some potential disadvantages they identified included:
1. Added complexity due to the participants being distributed to multiple geographical locations and restricted from face-to-face interaction (Bjorn & Ngwenyama; Kuruppuarachchi; Mankin and Cohen);
2. Increased risk of communication breakdowns due to cultural and organizational differences inherent to participants from geographically diverse areas (Bjorn & Ngwenyama);
3. Reduced productivity due to a lack of shared meaning and cohesiveness that shared meaning can produce between members of an organization (Bjorn & Ngwenyama; Peters & Manz, 2008);
4. For those who telecommute i.e. work at home, reduced productivity due to a lack self-discipline and an overabundance of distractions around the home (Hortensia).
Virtual Organization – Key Ingredients for Effective Collaboration
Beyerlein, Nemiro, and Beyerlein, (2008), Harwood (2008); Peters and Manz (2008); Hinrichs, Seiling, and Stavros (2008); Braga (2008); and Francovich, Reina, Reina & Dilts (2008) identified a number of key ingredients pertinent to effective coordination of virtual organizations and teams. The key ingredients could be boiled down to the following four overriding concepts:
The first ingredient to effective coordination of virtual organizations or teams is to select competent managerial leaders who are well-suited for the virtual team environment (Harwood, 2008). Harwood (2008) and Braga (2008) identified key competencies and attributes of leaders recruited to manage virtual teams. Those competencies and attributes included:
1. Visionary of future, exceptional communicator, able to paint a clear picture of the vision and purpose of the team or organization, and what the future will look like upon fulfillment of the vision and purpose (Harwood; Braga);
2. Experienced and credible in business, but flexible, not stuck in old ways of doing things (Harwood);
3. Relationship oriented, a genuine concern for others, emotionally intelligent, sensitive, and encouraging (Harwood; Braga);
4. Accessible and approachable, trustworthy, honest, and open (Braga);
5. Teachable, a curious learner, culturally sensitive, seeks depth of understanding (Harwood; Braga);
6. Decisive, able to translate information into concrete decisions and to implement action plans (Braga).
Clarity of Purpose
A second key ingredient to effective coordination of virtual organizations or teams is clarity of purpose. Hinrichs, Seiling, and Stavros (2008) “understanding and alignment of purpose and outcome is the first step in any conversation or project” (Nemiro et al., 2008, p. 144). Harwood (2008) added “A sense of destiny is important in unleashing discretionary effort; helping people become part of the vision is the essential building block in the design process” (Nemiro et al., p. 66).
Well-defined Processes and Roles
A third ingredient to effective coordination of virtual organizations or teams is well- defined work processes and roles (Harwood, 2008; Workman, 2005). Work processes are mapped out procedures for disseminating tasks and accomplishing goals and objectives (Biehl, 1996). Accordingly, clearly defining work processes helps (a) organize work flows step-by-step to accomplishment and (b) facilitate periodic review of results to identify opportunities for improvement. Once the processes are designed, roles and relevant tasks must be assigned to team members and clearly demarcated, so that each member knows who is responsible for what. Defining roles should include parameters such as whether members are to accomplish the assignments alone or in groups and in what timeframe.
Finally, a ninth ingredient observed in effective coordination of virtual organizations or teams are dynamic relationships characterized by (a) deep sense of connectedness, (b) common language; (c) clear and constant communication; (d) shared meanings, and ultimately, (e) trust. (Hinrich, Seiling, & Stavros, 2008; Peters & Manz, 2008; Francovich, Reina, Reina, & Dilts, 2008; Nemiro, Bradley, Beyerlein, & Beyerlein, 2008). Peters & Manz acknowledge that one of the major obstacles virtual teams and organizations need to overcome is the lack of personal face-to-face interaction, especially as virtual networks expand across time zones and cultures. In order to promote and develop deeper relationships, they suggest (a) providing opportunity for face-to-face meeting; (b) share biographical information electronically; and (c) capitalize on existing relationships.
This hub presented a brief examination of the organizational construct called the virtual organizational. As of the early 21st century, virtual organizations emerged around the world due to increased globalization of enterprises and markets. Virtual organizations could be defined as goal-oriented enterprises composed of members from different geographical locations around the globe, brought together for the fulfillment of objectives or tasks, and who use media technologies to communicate and coordinate those objectives or tasks. This hub examined virtual organizations by taking a brief look at some of the common characteristics, advantages and disadvantages, and ingredients observed in effective collaboration within virtual organizations and teams.
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