Virtual organization refers to a form of organization where resources such as people, department or groups of people belonging to the same or different organization carry out their functions in a manner that complement each others areas of specialization (Bekkers, 2003). This form of organization is built and dependent on communication systems to carry out its functions. The emergence of virtual organizations meant that organizations can be broken into smaller groups where people can work from a remote location and accomplish a task that they would have otherwise done if they were to be located in the same place(Bekkers, 2003).
One of the known successful virtual companies is Monorail, a company formed by former key personnel of Compaq and FedEx. The retail party called CompUSA takes the orders for the company for personal computers. The orders collected by CompUSA are communicated to the contracted personal computers manufacturers through FedEx (Heathrow, 1997). The contracted manufacturer assembles the computer according to the specification and ships it to where the order was taken from (Comp USA) through FedEx. Meanwhile, the shipping company sends invoices electronically to Morail’s bank in Atlanta ((Heathrow, 1997).
The work of collection of debt is subcontracted to SunTrust who pays Monorail a discounted value of the invoiced personal computers. The bankers of SunTrust bear the risk of collecting the money for the orders collected by CompUSA. The customer care is handled by Sykes Enterprises a company based in Florida. In case a customer would like upgrade his/her PCs, he calls a toll free number where details are relayed to FedEx company who picks the computer the following day, delivers to an upgrade centre and later returns it to the customer within four days (Heathrow,1997). But what does it require to manage such kind of an organization, what are the challenges that will be encountered and what are the opportunities you will reap? This is the main discussion of this study.
Management issues in virtual organizations
First you ought to have competence in exploiting of partnerships. This kind of business model is all about integration with the parties to the business. For Monorails is the partnership they hold with Sun Trust and FedEx but such and integration can only be based on faster communications trust and business knowledge.
Virtual organizations are dependent on various factors to be in a position of exploiting the potential of the market. The first aspect is availability; it is assumed that every party to the virtual organization will be available at all times to chip-in in area that call for his specialization. For example Open Frontiers system used by American and British airlines for reservation and ticketing is expected to be running at all time so that all the airlines that are supported by it shall not go down at any time(Davenport et al, 1997).
The performance of the party ought to be optimum and in case of increase in demand for its service it ought to look into means of handling the increase. This includes even upgards they ought to be performed concurrently with the functions of the party.
The other factor that is considered is the element of trust; at times a party to virtual, organization may be linked to its competitor, for example Open Frontiers provides ticketing services to various airlines (Yassin, 2008). Any confidential information availed to such partner in the course of transaction should by no means get to his competitor; a bleach of such trust will be a major drawback to the performance of the organization (Cascio, 1999).
The other major factor of the organization is accessibility; a party to the virtual organization should be easily accessed at all times (Bekkers, 2003). Some organization will offer dedicated channel of communication to some the clients while other will form channel of communication under agreements that they do not fail.
An analysis of virtual organization indicates that the organizations which tend to take such kind of structure are expecting to gain from the synergy arising from each party performing what he considers as an area of specialization.
This goes along way in reducing the cost associated with laying of infrastructure and other issues related to the infrastructure for example land. However, this arrangement can result in formation of a ‘collaboration of losers’ where companies that have merged result in even lower profits or even losses (Bekkers, 2003). Therefore how the organization will be managed and who which party will take the initiative of management is another factor that is paramount to the success of the organization. The party which takes up the management ought to perceive the opportunities and handle challenges required to exploit the market at it exposure (Kearney, 2006).
To be in a position to exploit the market the following issues ought to be ensured;
The connectivity will be available at all times. The model of business of the organization is dependent on the availability of transfer of data and voice, to people in a stationary place or motion.
To achieve this, the company will have to invest in; Wired networks that provide high speed to allow exchange of large files (Davenport et al, 1997), connect to channels that provide high speed data connections like DSL or cable, ensure that other people can access the resources from remote area using Wi-Fi and Invest in phone that can allow the people involved update or perform some of their functions through their mobile phones.
The organization ought to invest in software that allow for collaborative working. For example the virtual organizations should be capable of holding ad hoc meetings via web conferencing. The software should also allow for instant messaging capabilities (Davenport et al, 1997).
The organization also invests in specialized software such as space reservation which provides space for an employee when he/she arrives. This system tracks the employee over time and eventually when he arrives the space he wanted is already availed (Cascio, 1999).
Opportunities availed by Virtual organizations
The implementation of virtual organization has brought about opportunities that every organization using such kind of business model looks to exploit. Examples of these opportunities include;
All time provision service, British Airways for example employed a system called ESS this system allows over eighty percent of workers to perform their work on-line. This method allows workers to be assigned duties at any time whether day or night. This allows the company to exploit emerging market where people may demand services when UK in dark (Grenier, 1995)
The performance of back office operation such as accounting or even call centre can now be formed without affecting an organization. A Banking industry in UK for example allows members of staff affiliated to back office transactions such as accounting and call centre to operate their duties from home( Daily, 2006). For example an employee can easily handle a customer from home, communicate to the company and later provide the customer with the feed back. This saves on space and eliminates traffic calls. The company can then use the resources such as calling to aid the core business function (Grenier, 1995).
The operation of virtual organization has enabled organizations to outsource some of the non-core business area to operate from another location. For example consultancy firms in US will outsource development of application to their client to small firm in India (Grenier, 1995). The operation of virtual organization allows the programmers from India to implement the systems from India as well as perform test and make upgrades from that remote location. This makes the consultancy firms have the chance to operate on their functions that define their business such as redefining of the work flow models and the work flow engines of their client operations (Yassin, 2008).
Enable firms to be global partners; Recently Nike Company purchased a UK footwear company called Umbro. The operations did not have to be shifted to US but management of Nike is in a position to evaluate performance of Umbro from United States of America an propose changes( Daily, 2006).
Teleworking ;The operation of most companies just demands sound and the content being delivered. British Airways for example expects the workers to perform their work from home an communicate the results only (Lipnack et al,1997).
Challenges in managing virtual organizations
However the management of such organizations is also faced with challenges that include;
One of the challenges is that the company will be on the verge of failure in case of a slack by any party to the deal. This is because if a particular party withdraws or is unavailable will a big let down to the whole company. It therefore requires the management to anticipate issues and challenges that would cause its collapse and deal with it appropriately (Lipnack et al, 1997).
The company also relies highly on communications. The employees and people involved must keep their colleagues informed of what is going on (Bjorn & Ngwenyama, 2009). This calls for a very good infrastructure that should not be susceptible to changes or recurring failures. To handle this most companies transfer this risk to a third party known as a net broker. This party links the various firms. He initiates the communication on the web plant form and maintains the relationship between the parties in seamless way (Lipnack et al, 1997).
The performance of these organizations also highly relies on virtual teams. These teams are formed by people who are not limited by location (Bjorn & Ngwenyama, 2009). The virtual team may be executive group for management, technical virtual groups for solving the problems facing these companies or even marketing virtual groups that are responsible for formation of networks for sale of their produce (Yassin, 2008). The management of knowledge within these groups is of vital importance to the organization. Therefore the organizations will rely on the outmost sincerity of the employees and the ability to combine their efforts for the good of the company
The main argument has been whether virtual organization will live long taking into account that the different organizations will grow at different rates, take different roles and benefit in different ways from the participation in the business (Daily, 2006). This may not be known as for now but the benefits associated with the virtual organization are many and even if they change it is only the current models that will change but the performance and method of business will persist.
List of References
Bekkers, V (2003). ‘E-government and the emergence of virtual organizations in the public sector’ Information Policy, vol. 8.
Bjorn, P, & Ngwenyama, O. (2009). ‘Virtual team collaboration: Building shared meaning, resolving breakdowns and creating translucence.’ Information Systems Journal, 19.
Cascio, W. F. (1999). ‘Virtual workplaces: Implications for organizational behavior. In C. L. Cooper & D. M. Rousseau (Eds.)’ Trends in organizational behavior, Vol. 6: The virtual organization. New York, NY US: John Wiley & Sons Ltd.
Daily, W. W, (2006). Seven habits of successful virtual teams. Web.
Davenport, T. and Laurence P. (1997). Information Ecology: Mastering the Information and Knowledge Environment. London: Oxford University Press.
Grenier, R. and George M. (1995). Going Virtual: Moving Your Organization into the 21st Century. London: Prentice Hall Computer Books.
Heath Row, (1997) This ‘Virtual’ Company Is for Real. Fast Company. Web.
Kearney, P. (2006). “Trust and security in virtual organizations, Security Research Centre in BT Group CTO.” BT Technology JournalVol. 24.
Lipnack, J. & Jeffrey, S. (1997). Virtual teams: Reaching across space, time and organizations with technology. Ney York: John Wiley.
Yassin, A. T. (2008). Challenges and Success Achievement Factor for Virtual Organization Concept. Web.