Virtual Organizations Characteristics And Management


According to Techtarget (2010), virtual organizations are those whose members operate from different regions towards a common goal without necessarily having a physical location. They network by use of information technology such as groupware and emails and this allows for a harmonious and organized working relationship similar to conventional organizations. Virtual teams who operate remotely support their daily operations.

Characteristics of virtual organizations

According to Ahuja et al. (1998), informal communication is a major characteristic of a virtual organization. This is because the members are not interacting on a one on one basis. They use electronic media like emails, telephones and other groupware to pass information. These organizations lack formal rules and this necessitates the use of informal communication that is extensive and which makes their communication more personal and interactive. They do not subscribe to structured meetings and reports, which are common with conventional organizations.

Sharing of resources and competences is another feature of virtual organizations. The members bring in their key competences and complement each other while they work together and assert their knowledge in the field to ensure that they stay afloat as the market comes with changing demands and they have to bring in their expertise to meet the market needs. The core business is preserved and this guarantees great results. Virtual organizations have connections with business giants in the field and this makes them very resourceful and reliable. One such example is the, which specializes in the sale of different products.

Taking the case of books, they do not necessarily have a shelf to their name but they sell huge volumes as they are linked to leading publishers. This sharing of competences and resources is ideal for businesses today and to this end flexibility is synonymous with virtual organizations. The business environment keeps changing and this situation calls for prompt actions. Virtual organizations offer this flexibility to ensure that the demand is met and this happens through interdependence between multiple specialists to counter the need for mass customization (Jagers et al. 1998).

Sharing of costs is another characteristic of virtual organizations according to Thomas (2010); the members often split costs among themselves since all are equal partners gearing at providing the best services or products to the global market. Permeable boundaries define virtual organizations as well and the primary goal of virtual organizations is to meet specific needs in the market.

They also capitalize on opportunities available in the market and Permeability occurs when the partners feel the need to break away after exploiting the opportunity and this moves them to other more lucrative opportunities. Virtual organizations are technologically enhanced as they work from different geographical regions and this limits face-to-face meetings and Information technology thus takes centre stage in an effort to link them.

Some of the technology that they adopt includes videoconferencing, intranet systems, and groupware (Thomas 2010), which ensures that information reaches all parties for effective business transactions. Another characteristic of virtual organizations is interdependence; Most of the time, virtual organisations act as brokers or middlemen as they link the industries or service providers with the client. This way, no one can survive without the other and interdependent relationships are thus formed to ensure that the link remains strong. This involves a lot of collaborations which at times makes it an open organization and thus Agreements are signed between the different parties and this blurs the organisation’s boundaries.

Increased market share is another key characteristic of virtual organizations. These organizations cross borders to deliver services and products and this broadens their market base both locally and internationally. These organizations prevent loss of competition as they become a one stop shop for almost everything and this increases the trade margins as they end up signing many contracts with different clients. Also they happen to have a better understanding of the market needs and step in to fill the deficit. This enhances integration between both suppliers and vendors. (E-articles 2005)

Virtual organizations’ opportunities and challenges

Virtual organizations have the opportunity to perform highly and due to interdependence, these organizations are bound to provide the best of services according to Yassin (2008). They are composed of experts in different fields and this becomes a melting pot of core competences as high performance translates into high revenue.

This makes them very profitable and the client in the long run gets the best and the fact that it breaks geographical boundaries is a plus which gives these organizations the required exposure in the business world. They also promote interglobal interactions of professionals from different fields and this reduces the organizations overhead costs. This diverts the profits to more productive use in upgrading their systems in an effort to provide even better services to their clients. A common memory in a virtual organization is well organized and managed.

The use of networked computers creates a solid base for information and knowledge sharing. Partners are able to access and share the same information and this saves on time and revenue (Yassin 2008). It also ensures that the organizations information is on the finger tips of everyone involved as they have access to it and this enhances a smooth flow of operations. Virtual organizations give their partners the opportunity to ‘own’ big companies as they get linked to global movers and this is great exposure necessary for business.

The challenges that virtual organizations face include failure and this is occasioned by the fact that these organizations involve a lot of risks. There can be instances where one partner fails to deliver and this defaces the whole company. At the same time, interdependence is not always a good thing as it brings about overeliance and this may slow down the business process.

Yassin (2008) states that virtual organizations may be expensive to manage in the long run as they are more bent towards information technology. This prompts the organization to go out of its way to ensure that all the parties are connected and this can be quite expensive in terms of installation and logistics. Communication breakdown is a major challenge and the information may be misconstrued or even end up in the wrong hands. Management in virtual organizations is a challenge since people are more of their own bosses thus operate independently.

How the opportunities and challenges have impacted on managing virtual teams

According to Gould (1999), virtual teams are the partners or colleagues working under the umbrella of the virtual organizations but are physically separated. Their interaction is limited to information technology making their initial contact electronic through emails, internet or telephone. However, these people are bound to meet face to face at a point during their line of duty.

The key trick in managing virtual teams is ensuring that there is effective sharing of information and communication (McMahan 2010). As indicated among the challenges, ineffective sharing of information and communication can lead to the organizations demise as the information in virtue organizations is open for access to every member. To effectively manage what is being accessed, people have to keep records which will ensure that future audiences get a picture of operations.

Recording of information also reduces the risk of misinformation and since most of the information shared is educative, it has to be included in the strategic plan. This ensures that the knowledge is well managed and that it serves its purpose. When it comes to communication, efficacy is of essence and the communication channels must be clear and result oriented. Since most of it is electronic, the emails must be enthusiastic to provoke motivation in the members. A shared database is essential to ensure that communication reaches all involved members. The management team must embark on providing feedback and seeking the same from the members as this helps in keeping all of them on the same page.

According to Lethbridge (2001), virtual organizations must have well developed structures when it comes to their management. The client is not supposed to sense any kind of disconnect when it comes to delivery of goods or services. They have to maintain a solid ‘virtual’ image and work as one if they are to buy a clients trust. This subject on image has greatly impacted on their management. Planning and organization is a challenge for virtual organization and they have been forced to up their game.

Since there are no well defined structures, the organization can get a bit shaky at times with its members not knowing what to do or when. The chain of command must be well defined to curb all the conflicts that may emerge. Some members may assume superiority over others and this can be detrimental to the organizations operations. For effective management, these members must come up with a system that unifies them under one body even if they are independent entities.


Virtual organisations can rather be seen as a dimension of many organizations today. Those that are not involved directly are resulting to outsourcing which definitely defines virtual organizations. The main link in these organizations is information technology and from this study, virtual organizations are the future. The fact that they are offering a better performance in the market as compared to conventional ones is a surety that they are here to stay. The client, the most important person in every business is satisfied as he gets the best from the experts. Virtual organizations consolidate core businesses and boast of a vast market share and this works positively towards their success.

Virtual organizations are also cost effective in terms of overhead costs and this opens up business opportunities for those without the right capital to set up their own businesses. Since information technology is new, virtual organisations can be termed as the new concept in the market at the moment. They have a higher potential for growth due to the deep rooted networking. Making use of the internet and email creates a data base necessary for product manufacturers, service providers and clients. This is a link that can never be broken as long as demand is present and their flexibility enhances business across the borders. However, they come with limitations which if well handled can be turned around to maintain the high performances.


Ahuja, et al. (1998) Network structure in virtual organizations. College of business, Florida State University.

E-articles. (2005-2010) Advantages of e partnerships and virtual organizations. Web.

Gould, D. (1999-2006) Fifth generation work – virtual organization. Virtual teams journal, vol 23-30.

Jagers et al. (1998) Characteristics of virtual organizations. Netherlands, Breda Lethbridge.

N. (2001) An I-Based taxonomy of virtual organizations and the implications for effective management. Edith Cowan University, Australia. Volume 4, No. 1.

McMahan, K. (2010) 17 pointers for managing virtual teams. Effective communication and information sharing in virtual teams. Web.

Techtarget (2010) Definition of virtual organisations. Web.

Thomas, G. (2010) Virtual organizations. Reference for business. Encyclopaedia of business, Vol 2.

Yassin, A. (2008) Challenges and success achievement factor for virtual organization concept. Web.

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