Virtual Organizations

Virtual organizations are composed of employees spread across different locations who perform different jobs and may also have different cultural identities. These dispersed and diverse employees are joined together by communication technologies such as the telephone, fax, e-mail, Internet, and instant messaging. Some employees of virtual organizations may work alone, functioning essentially as telecommuters. Others, however, may work clustered together in traditional offices. In either case, the virtual organization is spread out over multiple geographic locations.

There are two important characteristics of virtual organizations: (a) They depend on teams, and (b) they have a very fluid structure. Virtual organizations use teams to conduct most of their work. This means that employees must depend on each other to complete their work. Additionally, teams form and disperse frequently and easily. Thus, the organizational structure changes often as teams reorganize to meet the organization’s needs.

Although the concept of a virtual organization in which employees never interact face-to-face is intriguing, such purely virtual organizations are very rare. Instead, many organizations have degrees of virtuality, that is, some aspects of the organization are traditional but others are considered virtual. Virtuality can vary along four dimensions:

  1. Space: The physical location of the employees—are they colocated or dispersed in different places?
  2. Time: The time zone in which the employees work— are they working the same business hours or are they dispersed across time zones?
  3. Culture: The employees’ culture—are employees from the same culture or country or from different ones?
  4. Boundary: The organizational dispersion of work— do the organizational processes stay with the organization or are they outsourced?

Organizations vary in their virtuality. At one end of the continuum are organizations such as Although is a very successful retail organization, there are no stores in which customers can buy books. Instead, customers buy books, music, and many other items through the Internet.’s employees rarely interact with the customers. They do, however, interact with each other face-to-face and through technology at several offices around the United States and the world.

At the other end of the continuum are traditional organizations with a worldwide presence. For example, IBM has offices across the world. It also has a significant number of telecommuters and employees located in customers’ offices. Employees work together as teams, which may interact completely face-to-face, completely through technology, or through some combination of the two. The teams may be located in the same time zone or spread around the world. Thus, IBM and other large multinational organizations may have components that are very much like traditional organizations and other components that are very much like virtual organizations.

Electronic Communication

One of the most important features of all virtual organizations is that they depend on communication through technology. Although research on virtual organizations is in the developmental stage, we do have a great deal of knowledge about communication through technology and its effects on organizations and their employees.

An Efficient but Cold Medium

Technological communication, particularly electronic communication such as e-mail, differs significantly from face-to-face communication. First, it is considered a colder medium that filters out nonverbal cues such as facial expressions, tone of voice, and physical movements such as nodding one’s head in agreement. As a result, electronic communications can be misinterpreted, and a message sent through electronic communication may be perceived as less friendly than the same message delivered in face-to-face communication.

However, electronic communication can also reduce communication bias and improve understanding in certain instances. For example, saved e-mail messages contain an exact history of the communication. Research and experience also suggest that electronic communication can be very efficient and precise with factual information. Additionally, once communication partners have established a relationship and a history of communication, it can also be used for more complicated and social communication with less fear of misinterpretation.

One issue, though, is that it takes longer for communication partners to establish a relationship with each other through electronic communication than through face-to-face communication. Because fewer communication cues travel in the electronic messages, communication partners must exchange more messages over a longer period of time to gather enough information about each other to establish a reliable impression.

Problems with Working Virtually

Some tasks are more easily performed face-to-face than through electronic communication. For example, decision making that requires consensus building is much more efficiently accomplished through face-to-face communication. Electronic communication, on the other hand, is very good for dispersing information and can take the place of some information-sharing meetings.

Traditional organizations have the ability to decide whether they can conduct a task face-to-face or through technology, whereas virtual organizations may have no choice but to rely on communication through technology. This can make the timely and successful completion of these tasks more challenging.

Flatter Structure with More Communication Partners

Communication through technology tends to flatten organizational structure, making it more horizontal than vertical. One reason is that it is so easy for people at all levels of the organization to communicate with each other. Although this is often considered good for power distribution in the organization, it can drastically increase the number of pieces of communication to which employees have to respond. For example, when everyone can e-mail everyone else, the volume of e-mail may become overwhelming.

Norms of Technology Use

To be effective, groups must develop norms for using electronic communication. Sometimes, these norms are as basic as simple “netiquette,” which includes such rules as not typing in all capitals (to avoid the appearance of shouting) and refraining from “flaming” (using e-mail to send inappropriately severe and harsh comments that would not be shared face-to-face). The norms may also include more organizationally specific norms, such as whether and when to include one’s manager in the correspondence, how to effectively use the subject line to identify the topic of the communication, whether to acknowledge receipt of a job request through e-mail, and how formal grammar should be (e.g., using salutations and closings) in communications. As these norms develop within specific groups and organizations, they form a communication culture in which communication becomes quicker and deviations from the norms take on meanings of their own.

Challenges to Virtual Organization

As organizations develop their virtuality, managers and researchers are identifying important challenges to their effectiveness and success.

Building Trust

One of the most important concerns in virtual organizations is the development and maintenance of trust between employees. Trust is an essential ingredient for teams to be effective. Team members must trust each other to perform work that is completed on time and of high quality. The same issue applies to managers of virtual employees. Trust is most effectively developed when employees have a history of working with each other, work that traditionally has taken place face-to-face. However, virtual organizations tend to form and disperse teams frequently, and team members may not have worked with each other before.

Therefore, virtual organizations may rely on swift trust. Swift trust is the willingness to suspend doubt about whether the “strangers” on the team can be counted on to do the job and to believe that the end result will benefit everyone. Swift trust develops and is maintained by high responsiveness and activity, often through electronic communication. Examples include returning voice mail and e-mail messages, performing tasks on time, and responding to the content and tone of communications.

Additionally, virtual organizations can increase trust by establishing positive and strong norms of communication through technology, strong business ethics, and a culture of trustworthiness.

Maintaining Cohesion, Identity, and Commitment to the Virtual Organization

Another critical concern for virtual organizations is ensuring that virtual employees develop attachment and commitment to the organization. Employees in virtual organizations may feel more isolated and decrease their social relationships with their coworkers, managers, and team members. These isolated employees may lose their cohesion, identity, attachment with, and commitment to the virtual organization. This is a concern for organizations because a great deal of research shows the importance of employees’ organizational commitment and organizational identification to the effectiveness of the organization. Early research indicates that having at least some regular face-to-face interaction between employees is important and helps employees feel that their cowork-ers and managers support them and their work.

Managing Human Resources

Finally, virtual organizations present a particular set of challenges for human resources. Some employees may not be suited to virtual employment and thus have poor person-virtual organization fit. One current model proposes that in order to be successful, virtual employees must highly value autonomy, flexibility, and diversity. They must be trustworthy and willing to trust others. Additionally, they must be able to govern themselves in both time management and the ability to work on their own.

Productivity may vary among virtual employees. Some research suggests that virtual employees’ evaluations of their own self-efficacy are very important to their ability to work well. These evaluations are particularly important in regard to their previous virtual work experience and training, the best practices they have seen modeled by their managers, and their own technology fears and capabilities.

Purely virtual organizations are quite rare. Nonetheless, as communication technologies develop, more organizations will increase their virtuality. Benefits and challenges will continue to evolve as organizations take advantage of the capabilities of their technological communication.


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