A virtual organization
The term virtual organization is used to describe a network of independent firms that join together, often temporarily, to produce a service or product. Virtual organization is often associated with such terms as virtual office, virtual teams, and virtual leadership. The ultimate goal of the virtual organization is to provide innovative, high-quality products or services instantaneously in response to customer demands (Camarinha-Matos, 2005).
A virtual office is an intangible office that exists in cyberspace. It makes it possible to work form any location in the world. Technology as Internet and cell phones is often used. Having no physical office can save money compared to traditional office space. Meeting can be held by conferencing, which creates flexibility and saves a lot of time.
A virtual team is a group of people who interact through interdependent tasks guided by a common purpose (Lipnack, 1997). A virtual team is connected by interactive communication technologies. A virtual team has no organizational boundaries and is not affected by space and time. Virtual teams can make it possible to make a team with different stakeholders who are working together on a common goal. Mostly virtual teams work together for only the period of the project and then go on to the next project with a different team.
In a virtual organization there is a need for new leadership skills. You need the skills to manage a network of interdependent firm. Furthermore, it is important to manage virtual relationships with external and internal elements. At a traditional organization it is different to keep the teams focused then with a virtual organization, so there is a need for different skills.
Traditional organizations have a vertical structure with strong hierarchy. The top-down pyramid gives almost all the decision making power to the top management. This hierarchical structure was intended to manage complex processes like big assembly factories. This structure lacked agility and it was not possible to spread information quickly throughout the company.
Because of new demands there was a need of different organizational forms. Many companies in flattened the structure of the company by shifting the authority down.
Because of the flattened structure employees tend to be more spread geographically and organizationally. To solve the problem of employees being more spread unnecessary processes are removed, so the focus is more on the core values.
Grenier and Meters (1995) further explain that these alliances are virtual because products and services are not produced in a single corporation whose purpose is longevity. Rather, these new virtual organizations consist of a hybrid of groups and individuals from different companies that might include customers, competitors, and suppliers who have a focused purpose of bringing a high-quality product or service to market as rapidly as possible. These alliances may be temporary with short concept-to-delivery cycles.
A virtual organisation can quickly get rid of one of it’s businesses and move into a completely different business by making alliances with other companies that do have the knowledge that its is missing. This is possible anywhere on the globe.
Advantages of virtual organizations
Virtual organizations mostly have flat structures with almost no level of hierarchy.
This translates in a decreased need for supervisors and middle management. By cutting out these layers an organization can financially benefit sincerely.
Because a virtual organization has less layers then a traditional it processes information much faster. This eventually results in saving an enormous amount of time that can be used for more important elements of the organization. Because the information is spreading so fast along the organization, it’s also possible to make decisions faster.
Joint ventures and strategic alliances are often made in a virtual organization. This increases knowledge, flexibility and innovation sincere. The combination of forces helps an organization to grow faster and be more successful.
The organization of a virtual team is possible even if team members are not close to each other of even if they are in different countries. So, employees can move from one project to another project.
On human resource level there is a big advantage for virtual organizations because employees can be hired from everywhere in the world. The best people can work for the organisation regardless their physical location.
In general a virtual company has much lower overhead costs then a traditional company. You don’t need to buy an office, furniture, equipment, utilities etc.
Less costs normally means less risk and more profit, depending of the business you’re in.
Traditional organisations normally have to move to a bigger office if their amount of employees keeps growing. For virtual organizations this is not necessary so they have a higher scalability. With a virtual team you can scale up your team of employees without moving to a bigger office.
Employees have a desire for flexible working hours, which can be offered by a virtual organization. These flexible hours help employees to more successfully plan their time. For a mother who is raising children a might be very important to pick up here children from school, which will raise here quality of live. If an employee is happy this will be reflected on the company.
Since there could be people working in different time zones in a virtual organization, the company could be ‘running’ night and day. This shortens the response time as well as the development time, which will reduce the time to market.