The Virtual Organization – New Forms of Organizations

by Maximilian Claessens
2.9k views 2 minutes read
The Virtual Organization – New Forms of Organizations

While traditional organizations remain the norm, a relatively new phenomenon, the virtual organization, has arisen as an additional form of doing business. What is meant by the term virtual organization and how does this new form differ from traditional organizations?

Definition: Virtual Organization

A virtual organization can be defined as a new organizational form characterized by a temporary or permanent collection of geographically dispersed individuals, groups or organization departments not belonging to the same organization. Alternatively, the term virtual organization may refer to entire organizations that are dependent on electronic communication for carrying out their operations.

Characteristics of Virtual Organizations

Clearly, virtual organizations differ from traditional organizations in several key aspects. The distinctive characteristics of this organizational form can be recognized when reconsidering the definition given above.

The first part of the definition usually refers to what is commonly known as outsourcing. This means that, for example, a small core operating company engages a network of other companies in providing services that the core requires, e.g. recruitment and selection of staff or data processing.

The second part of the definition usually encompasses electronic forms such as virtual banking where all activity between customer and organization is completed online in real time. Time and distance no longer represent barriers in the delivery of the product or service.

As you may have recognized already, virtual organizations are in many cases service companies. “Virtuality” in the form of technology and front-line employee access to the required information offers the potential for flattening the organization which in turn facilitates the delivery of a fast responsive service. Therefore, the virtual organization form offers many benefits for service companies.

Implications of Virtual Organizations

What may be the implications of this new organizational form on firms and consumers? Much may be made in future of the benefits and drawbacks accruing to customers engaged in virtual exchange and consumption. Will the reliability and perfection of technology raise customer expectations to an unduly high level? Furthermore, what is to be the fate of the ‘real’ customer in face of the onslaught of the ‘virtual’ affectionately known as ‘the customer in the machine’?

For employees, virtual organizations may mean transparency and loss of privacy in the first place. This is commonly referred to as the virtual office concern, which involves the matter of trust and the rise of electronic monitoring.

Equally, where flexibility and sharing information are positive features of networking, the lack of social interaction and control over outsourced suppliers is perceived as an area requiring particular attention.

So, is the virtual organization the organizational form of the future? Clearly, with advances in technology, every company is likely to become more virtual. However, virtuality offers little to organizational analysis and the problems that typically and persistently preoccupy managers do not simply disappear with the move towards the virtual organization.

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