Virtual Organization

Definition:

A virtual organization is referred to a company with an electronic presence and one

who does not have a physical existence.

For instance Wal-Mart, Nike and Dell have grown using this strategy.

A virtual organization is defined as an organization that is dependent on electronic

linking to complete tasks. It can be of permanent or temporary nature and can
include groups, individuals dispersed at various locations.

Virtual can be defined as "not physically existing as such but made by ICT to appear
to do so”, in other words "unreal but looking real" virtual organizations are
centered on technology and position physical presence in the background. Virtual
organizations possess limited physical resources.
What is virtual organization?

A virtual organization is referred to as a flexible network of entities that are linked

by computing technologies to share knowledge and skills. It is often considered a
boundary-less organization as the electronic network goes beyond organizational
and geographical boundaries.

It takes the help of information and communication technologies to reach common

or shared interest. In a virtual organization, members use internet, phone, and e-
mails, video-conferencing etc. to undertake their work. These types of
organizations exist through information technology tools as they do not have a
base or geographical location.

In a virtual organization, the vast majority of the employees work entirely online
from dispersed geographical locations. It uses informatics tool to sustain, maintain
and enable the sharing of resources in distributed work environments.
In today’s modern and competitive world, you will find more than enough new
start-ups that are operating as virtual organizations. Even established companies
are integrating them into their organizational design and also in hiring processes.
As per a recent survey, virtual organizations are some of the biggest drivers of
transformation, and there are considerable benefits in its formation.

Alternatively speaking, the virtual organization is a social network in which all the horizontal
and vertical boundaries are removed. In this sense, it is a boundary less organization. It consists
of individual’s working out of physically dispersed work places, or even individuals working
from mobile devices and not tied to any particular workspace. The ICT is the backbone of virtual
organization.
It is the ICT that coordinates the activities, combines the workers’ skills and resources with an
objective to achieve the common goal set by a virtual organization. Managers in these
organizations coordinate and control external relations with the help of computer network links.
The virtual form of organization is increasing in India also. Nike, Reebok, Puma, Dell
Computers etc., are the prominent companies working virtually

The characteristics of virtual organization are as follows-

 Dynamic in nature
 Flat organization
 Vague organizational boundaries
 Virtual teams
 Knowledgeable workers
 Sharing of information
 Customer orientation
 Flexibility
 Goal orientation
 Absence of apparent structure

Features of Virtual organizations:

1. E-mail integration: An important notable feature of virtual organisation is

the integration of SMS or Short Message Service into the e-mail. This is
already an existing infrastructure that enables a company to take advantage
of SMS products.

2. Technology: Times are changing and we are seeing tremendous

advancements in the field of science and technology. This has transformed
the traditional ways in which business entities used to operate and has
replaced it with a new range of possibilities. The computing industry, along
with the telecommunication sector, has been the driving force behind the
growth and development of virtual organisations. The CTI or Computer
Telephony Integration is the reason for the new revolution.

3. Voice mail alert: When the SMS technology is added to the voice mail
system it creates a way to receive voice mail alerts

4. Office system integration: The SMS or Short Message Service technology

can enhance the new office systems or the existing systems.

5. Mobile data: Another salient feature of the virtual organization is that it is

now possible to retrieve any information anywhere in the world with the
help of a mobile device network. The laptop can be easily linked with mobile
devices so that the user can remain connected to a virtual organization from
any place. Thus mobile data connections have revolutionized the way
organizations are now operating.
Higher employee satisfaction

The traditional employee used to work from a physical set-up office space. They
were happy to do a nine-to-five job and leave the office work behind afterwards.
The new concept of the modern world is quite different. Employees do not want to
be bound in the constraints of time. They are happy working from home with
adjusted timings so that they can complete other urgent work in the meantime.

Some have small children that need to be dropped at school, some have elderly
parents that need supervision, some are working housewives that cannot leave
their home and this is why they choose work-from-home instead of the typical
workplace.

A significant benefit of virtual organization is that it gives its employees the option
of working from home. This has resulted in a happy workforce that has reported
lower levels of anxiety and stress. Moreover, there are very few absentees because
they are working from home and can make adjustments in their routine.

This is the reason why employee morale and ultimately, employee satisfaction is
considerably higher.

Boost in employee efficiency

An essential advantage of virtual organization is an increase in employee efficiency.

It has been proved through surveys that the amount of work done in a virtual
organization is considerably more than what one could accomplish in a physical
organization at the same time.

Thus a virtual organization helps in increasing the efficiency levels of an employee

Broader talent pool

Virtual organization does not need its employees to come and work to a specific
address. This proves beneficial for such companies as they can hire employees from
any part of the world very quickly without worrying about simple facts like how to
raise visa or how to manage transportation to reach the office on time.
Hiring employees remotely gives a virtual organization access to a larger pool of
talent that can belong to any demographic. This way the firms can expand their
potential labor market. This helps them to hire as well as retain the
best people from any part of the world

Overhead costs are low

Physical organizations are costly as it needs lots of cash to set them up. Rent of
office space, hiring innumerable employees to handle the work in the physical
store, costs of maintenance, expenses like lighting, furniture, cleaning, stationery,
etc. are some of the costs that are an integral part of a physical organization.

The benefit of creating a virtual organization is that it is possible to minimize the

operating costs to a great extent. It has been proved that these companies can save
a considerable amount that they later can use for various other business purposes.

Hiring remote workers and working without a physical space will undoubtedly
lower the overhead costs.

Improved scalability

Physical office space needs overhead costs, but a virtual organization does not
require any such expenses. The company has enough free capital to improve its
growth potential and scalability. It is a proven fact that virtual organization teams
are more agile and willing to work for more hours than the employees in a typical
traditional workplace

Improved employee retention

The employees working in a virtual organization experience greater job satisfaction

and thus are likely to stick around for a more extended period. Their salaries are
competitive and they have the advantage of working from home. This is the reason
why a virtual organization shows a better rate of employee retention than a
physical outlet
Savings

Virtual organization helps to save time and travel expenses because there is simply
no need to reach the workplace. The money that is saved is savings for the
employee

Easy availability of experts

Business entities might some time or other need the help of an expert for a specific
work. In a physical workplace, there is a process to hire an expert and it is no doubt
a lengthy process as well as an expensive venture. In a virtual organization, the
expenses can be cut down smoothly as you can save on logging, travelling and
downtime

Multitasking

It is not easy to multitask in a physical organization until an employee is equipped

to handle the responsibility because of his expertise and he is comfortable to move
from one place to another for the project. In a virtual organization, it is easy and
straightforward to assign employees to concurrent and multiple teams.
Lack of solidarity

In a physical space you will feel the team bonding that nudges employees to work
harder for the team. This type of warmth and bonding is absent in employees
working for a virtual organization.

The workforce includes members who rarely speak face-to-face with other
employees. There are video chats and use of Skype no doubt but it is not enough
to create a bond that will motivate and stimulate members to build a sense of trust
that is an integral part of work culture.

Fewer opportunities for interactions is the reason why people do not know each
other on a personal basis. There is no effort on the part of a virtual organization to
a team or various teams together that will boost solidarity amongst the members

Compliance and security issues

A virtual organization means passing information remotely. Some data are

confidential and very important. There is always a chance of breach or cyber hack,
and it could result in loss of the data to a third party who could misuse it for his
gain. In some sectors like finance and health, it is too risky to opt for passing data
back and forth through online mediums. This is why a virtual organization is
considered a red zone for compliance and security issues.