the virtual organisation

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In his article “Some 'Real' Problems of 'Virtual' Organisation” Hughes et al (1999) state “The concepts virtual and networked organisations are intended to denote organisational forms which, it is claimed, address major transformations in the social, economic and technological environment in which organisations currently operate and will increasingly have to operate in the near future”. The preceding was a forward looking vision based upon the developments in and preceding 1999 that predicted the direction in which a new age of corporate direction would be headed for.

This study shall seek to examine those “... major transformations ...”, delving into how they have come about, as well as look at what role that the networked organisation has in these transformations, and its relationship to virtual organisations. These two facets have been selected as they are interlinked and thus changes, and or provide how new approaches in one area will influence, and or impact the other as well as the process working in the reverse. Coincident with the preceding are the developments that may influence this process.

The rationale for electing to examine the preceding is contained in the statement of Hughes et al (1999), in discussing “Some 'Real' Problems of 'Virtual' Organisation” that states “...'virtual' organisational arrangements consist of networks of workers and organisational units, linked by information and communication technologies (ICT), which will flexibly co-ordinate their activities, combine their skills and resources in order to achieve common goals but without very much by way of traditional hierarchical modes of central direction or supervision”.

Background Understandings

In equating Hughes et al (1999) statement concerning the virtual organisation and networking, some definitions are necessary in order to set the content for the examination. Mowshowitz (1997) tells us that the virtual organisation, in essence, is represented by its “... systematic ability to switch satisfiers in a decision environment of bounded rationality”. He further elaborates on what a virtual organisation is by stating that it has four basic activities of management that are dependent on the separation of requirements from satisfiers (Mowshowitz, 1997). The preceding four facets are 1. the formulation of abstract requirements, 2. the analysis as well as tracking of concrete satisfiers, 3. assigning abstract requirements to concrete satisfiers utilising criteria that is explicit, and 4. and the analysis as well as exploration of the assignment criteria (Mowshowitz, 1997). He adds to the foregoing by advising that the principle entails the use of the logical distinction that represents task requirements, and the means via which they can be met (Mowshowitz, 1997). The preceding is termed as 'satisfiers' (Mowshowitz, 1997). In further explaining the term 'satisfiers' Mowshowiz (2002, pp. 24-25 ) in his book “Virtual Organization: Toward a Theory of Societal Transformation Stimulated by Information Technology” tells us that through the “... logical separation of requirements from satisfiers ...” management thus has the ability “... to switch the assignment of satisfiers to requirements ...” whereby the preceding is optimises “... on the basis of explicit criteria”.

Chutchian-Ferranti (1999, p. 37) offers a more concise definition of a virtual organisation as one that consists of business partners along with teams working together across geographical and or organisational boundaries through the use of information technology. The three most common types of the foregoing, virtual organisations, as represented by a composition of individuals who work in via a remote manner, using telephone, the Internet, videoconferencing and other means from distance and or different office locales (Chutchian-Ferranti, 1999, pp. 39-41). Virtual organisations can also represent a combination of companies partnered in a manner whereby their specialised functions result in the output of a finished product and or service, such as marketing, and or manufacturing are accomplished over distances (Chutchian-Ferranti, 1999, pp. 39-41). The last example is represented by a large company that uses outsourcing for part of its operations via technology to transmit information as well as receive it from partnered companies, thus permitting it to focus on its core operations (Chutchian-Ferranti, 1999, pp. 39-41). The other form of the virtual organisation is represented by telecommuting, which Bailey and Kurland (2002, pp. 383-400) advise represents workers from a company who conduct their tasks at home as opposed to the office, as represented by either a full time, or part time mode.

Preston brings forth another aspect of the virtual organisation that he advises has four key process characteristics. The first aspect of the preceding is represented by relationships that are developed with a broad array of possible and potential partners whereby each has competency in either a particular area that compliments others within the organisational sphere (Preston, 1999). As the virtual organisation tends to be far flung, the second and baseline characteristic is the responsiveness as well as mobility and reliability of the network being utilised to minimise and basically eliminate distance as a problem (Preston, 1999). The third factor is timing, as represented by the partners, individuals and relationships utilising and having the availability as well as responsiveness to make decisions between alternative courses of action (Preston, 1999). The fourth and last characteristic is represented by trust (Preston, 1999). Trust, meaning that since immediate personal contact is missing, and follow up is subject to time and distance, the participants must have trust in each other in order to function as a unit (Preston, 1999; Handy, 1995, pp. 43-44).

As a result of the broad range of areas that the virtual organisation covers, this study will seek to look at its application in the larger company context, although the virtual organisation can apply to any size firm. The foregoing brings forth issues of size, internal construct, which includes the social interaction of its members and individuals, technology as the linking mechanics that enables the virtual organisation to work, and of course the economics, or cost variable, the underlying facet upon which most business decisions are based. All of these aspects entails doing things in a different manner than has been traditional, and or customary in the development of the modern organisation, thus representing transformational facets on each of these levels, as well as within their respective spheres

The Virtual Organisation and Technology

The virtual and networked organisation began with the growth of flexible working arrangements that began back in 1983 (Ramsower, 1983). Within the foregoing, telecommuting is the most commonly used from of what is termed as distributed work, whereby employees perform their jobs in settings that are remote from the business' central physical location (Belanger and Collins, 1998, p.139). Bailey and Kurland (2002, pp. 383-400) in discussing telecommuting, define it as not necessarily implying full time work from home, as fewer than 10 percent of employees involved in this process represent a full time status, as part time represents the prevailing arrangement. Telecommuting represents only a part of the virtual organisation, as other methods have and are having greater impact. Telecommuting, as stated by Bailey and Kurland (2002, pp. 383-400) in general is not a full time away from the office occurrence, thus providing the sense of social and hierarchical connection. The internal social transformation represented by telecommuting is generally reserved for the more efficient and productive workers whereby their physical presence is not necessary in order to generate the same output (Gajendran and Harrison, 2007, p. 1525). Some of the transformational facets of the virtual organisation, includes telecommuting, but also apply to positions in remote teams, companies and locations that still maintain in office working environments, is the higher degree of autonomy some workers have in organising the manner in which they will proceed with their tasks (Gajendran and Harrison, 2007, p. 1525). As the output is production, and the quantity of work is assigned, workers have the ability to organise the manner in which they will attack their responsibilities, thus representing a form of psychological control (Spector, 1986, pp. 1007-1008).

Underpinning this change has been the development and progression of the Internet in this process (Jackson and Van Der Wielen, 1998, pp. 9, 22). Electronic media represents the means via which telecommuting is accomplished, either through a dedicated VPN network, and or secure Internet connection (Bailey and Kurland (2002, pp. 383-400). The rapid advances in IT frameworks, applications, working and management processes, competitive challenges, cost reductions, and the next for the retention of key personnel as well as increased productivity are driving factors behind the transformations impacting the way things are done. Distance, in terms of electronic communications is limited only by individual availability, as opposed to space and time. The capabilities of the virtual organisation as thus only limited by the range of applications, participants and creativity of the organisation(s) in utilising the framework (Ariss et al, 2002).

Social Facets of the Virtual Organisation

The benefits of a virtual organisation also have its distinct drawbacks. The transformation of working processes means the centralised office location for the entire organisation is basically a thing of the past for many companies. With the participants spread out in remote locations, the interaction synergy that occurs from contact on a daily basis is missing, thus inhibiting the strengthening of interpersonal understandings, as well as spontaneous interactions that can generate ideas, solutions, and a more harmonious working environment (Holton, 2001, pp. 39-41). There are instances whereby the virtual organisation can impact employee morale in a negative manner. Remote locations, and the assigning of large amounts of work to intranet and extranet activities means that employers are and have increased their monitoring of staffers, which has a negative effect (Stanton and Weiss, 2000, pp. 426-431). The preceding represents a change in the social environment whereby employer trust has been recorded to negatively impact employee morale as well as their productivity.

Thus, while there are benefits from the utilisation of virtual networking that permits increased interaction between workers in differing locales as well as more autonomy in how the work gets done, there are also more restrictions in terms of freedom to circulate, monitoring, productivity targets and a perceived loss of freedoms (Oz et al, 1999, pp. 171-172). The other issues in the utilisation of a virtual working environment stem from a perceived loss of peer as well as supervisory social support, and the fear of job loss resulting from not having a gauge on the effectiveness and value of work in relationship to others (Oz et al, 1999, pp. 171-172). Featherweather (1999, pp. 41-42) comments on the loss of intra firm social connectedness that makes employees feel more like cogs in a virtual machine, as opposed to members of an organisation. A illustrative example of the preceding is offered by a quote Featherweather gleaned from his study that had a respondent state that working in an electronic environment made them feel like they were “...“working as a slave and being whipped, not in our bodies but in our minds” (Featherweather, 1999, p. 44). Nussbaum (1992, p. 21) adds to the preceding by his comments from an employee who worked in the data processing segment of a company, and received periodic messages on her computer screen advising her that she was “... not working as fast as the person next to you”. The preceding is an extreme example, but nevertheless presents a general view of employees who work in virtual type environments, whereby they understand they are being monitored, and see this as an intrusion on their privacy that is not welcome, as well as seeing this as a mark of distrust on the part of the organisation (Handy, 1995, pp. 42-43).

The rapid advancement of the virtual organisation has yielded benefits in terms of the ability to respond to change as well as faster adaptation through the plug in capabilities of the process, however, as cited by Larsen and McInerney (2000, pp. 445-456) this comes at an organisational cost in terms of middle managers. That layer of the corporate hierarchy has occupied the role of translating top management decisions and policies into the day-to-day operations, representing a two way communication and feedback process (Larsen and McInerney, 2000, pp. 445-456). The preceding has companies seeking to find ways by which to take this middle manager knowledge, “... codify it, store it, and make it available to all employees (Larsen and McInerney, 2000).

Economic Considerations and Transformations

The preceding point to transformations in the structure of organisations, which most importantly the impact upon the social facets, along with its technological areas creating the means via which to conduct virtual operations are part of the facets being equated in this examination. From the economic standpoint, organisations are basically being forced to adapt and transform themselves into leaner, fast response information knowledge centres as a result of the pressure of heightened global competition and the fast moving changes that such brings (Christie and Levary, 1998, pp. 8-10). Bleecker (1994, p. 7) advises that in this competitive environment the structure and design of the virtual organization has been indicated as being the means capable of being able to meet the aforementioned competitive situation. Virtual organisations can be permanent as well as temporary, and as such, they are organisational forms that are consistently in transformation as a result of processes, the integration of personnel, new partners, technology, applications and other inputs (Christie and Levary, 1998, p. 9). The preceding is representative of the economic consideration in the virtual organisation and transformation process, as it seeks to build, develop and or maintain its competitive positioning and or strength.

In consort with the foregoing, the virtual organisation permits the streamlining of operations to take higher cost areas, and thus implement measures to reduce expenditures through telecommuting, outsourcing, and the use of IT networks to reduce costs. The foregoing are accomplished through the use of network structures that represent the architecture by which the virtual organisation functions (Skyrme, 1999). The economic gains that are achieved by the following, however, subject the corporation to higher degrees of trust and the direct control inherent under the one roof hierarchy structure as factors are not totally under control (Uzzi, 1997, pp. 38-39).

As has been mentioned repeatedly throughout this study, the remoteness felt and or perceived by workers represents the considerable downside to the virtual organisation as face to face encounters as well as telephone voice communications between other organisational members is minimised (Gajendran and Harrison, 2007, p. 1525). Dore (1983, pp. 463-465) brings up the preceding points as well, stressing that the trade off of reduced transaction costs means an increased reliance on trust as opposed to the contractual facets, as it becomes a individual component that resides not in the organisation, but in individuals, thus regardless of the form of networked operation, trust is outside of direct control.

The Networked Organisation

The virtual organisation is a specific example of the networked organisation, which is defined by Lipnack and Stamps (1993, p. 78) as the place “... where independent people and groups act as independent nodes ... (that are linked)... across boundaries ...” the preceding is accomplished for the purpose of them working “... together for a common purpose ... (utilising) ... multiple leaders ... (as well as) ... lots of voluntary links ... (along with) ... interacting levels”. The networked organisation has transformed corporate operations in that it consists of new means via which to gain authority as a result of individual skills and knowledge, as opposed to the hierarchical structure (Podolny and Page, 1998). It also links people, along with teams crossing traditional and conventional boundaries such as geographies and departments, and through such processes it explores ways in which to work more effectively as opposed to processes that are pre-defined (Podolny and Page, 1998). It provides flexibility to adjust as well as disband the process, and or parts of the process whenever needed, and provides a means for people as well as structures to adapt as conditions change (Podolny and Page, 1998). The preceding provides illustrations of the transformation facet of the virtual, or networked organisation, in that flexibility and adaptability are its hallmarks.

As was explained in the Introduction of this study, the interlinks of the virtual organisation and networked organisation are interlinked, thus their synergy is connected. As the networked organisation is broken down into responsive units, it provides segmentation that permits faster reaction and response to changing situations, a business aspects that is a requirement in today's globally fast paced environment. Kanter (1991, pp. 67-68) advises that the adaptability of the virtual organisation offers a high degree of adaptability as component parts are interchangeable with newer processes, technologies and knowledge information that can be plugged into the overall system. The foregoing represents a higher degree of communication that provides the foundation for greater coordination when change and or changes are called for, as the modular structure adjusts at a faster rate than a hierarchical one Sorenson (1997).


The manner in which globalisation has impacted upon the need for companies to react to fast changing conditions, threats, innovations, and marketing inroads by competitors, has seen the shift toward lean, knowledge based operations that are segmented into functional units that have the ability to respond to this new environment. In equating the manner in which the major transformations that Hughes et al ((1999) refers to in his statement, the networked organisation is the form of virtual organisation commonly utilised in larger organisation, which have been showcased herein. The move towards utilising the preceding is an outgrowth of heightened global competition has caused companies to seek means to be more responsive and cost effective. The foregoing has resulted in staff downsizing, leaner operations, outsourcing through networked operations, and the use of telecommuting to save on space costs.

The preceding entails the social, economy and technology facets as discussed herein. As pointed out, the benefits of the virtual organisation, in terms of the aforementioned cost facets and competitive consideration represent driving forces that have caused companies to transform their operations to incorporate its usage. The downsides, represent primarily staff feels of isolation, trust, monitoring, disconnection form the company, and a robotic mentality attached to the increasing emphasis on technological systems absent interpersonal interaction (Preston, 1999). Thus the virtual organisation, in its stress on the economy and technological side, tends to sacrifice the human side of the equation in response to competitive pressures. The hard fact of the equation is that companies need to increase their productivity as well as be responsive to customers, clients, and the demands of competitiveness. The preceding thus places the human element below the needs of the objectives of the company, as the aforementioned social facets, as represented by trust, isolation, robotic tendencies, remote working, outsourcing, leaner operations and downsizing are economic and production considerations that all affect bottom line performance, as well as positioning.

The virtual organisation is transforming the manner in which companies work, are organised, and interact with their human resource, a facet that companies will need to address in order to introduce more balance on the human side, in order to stem the distancing that employees see is evolving from this approach.