Division weekend

Course:-Advanced Management theoris Assigment

Name:-Sisay Sime Demo GS/EX0182/15

Submitted :- To Nafyad Tola (Ass.Pro

Table of Content page

1.overview of structure -------------------------------------------------------------1

2. Types of network organizational structure--------------------------2

 3. Management of network structure differs----------------------------------3

4. The advantages of a network organizational structure----------------6

5. The disadvantages of a network organizational structure------------6

6. Theoretical Concepts----------------------------------------------------------------8

7. Network Organizational Structure?--------------------------------------------11

8. Boundaryless Organization-------------------------------------------------------13

9. Characteristics of a boundaryless organization-----------------------------14

10. Types of Boundaryless Organizations-----------------------------------------16

11. Advantages and dis advantage of boundaryless organization --------18

12.Virtual organization?---------------------------------------------------------------19

13. The characteristics of virtual organization ---------------------------------21

14. Advantages and disadvantage of virtual organization-------------------23

1. Network structure
Overview of the Network Structure

An organization can be structured in various ways that determine how it operates and performs.
The network structure is a newer type of organizational structure often viewed as less
hierarchical (i.e., more flat), more decentralized, and more flexible than other structures. In this
structure, managers coordinate and control relations that are both internal and external to the
firm.
The concept underlying the network structure is the social network—a social structure of
interactions. At the organizational level, social networks can include intra-organizational or
inter-organizational ties representing either formal or informal relationships. At the industry
level, complex networks can include technological and innovation networks that may span
several geographic areas and organizations. From a management perspective, the network
structure is unique among other organizational structures that focus on the internal dynamics
within the firm.

A network organization sounds complex, but it is at its core a simple concept. Take, for example,
a T-shirt design company. Because the company leaders are mainly interested in design, they
may not want to get too heavily involved in either manufacturing or retail; however, both aspects
of the business are necessary to complete their operations. To maintain control of their product,
they may rent retail space through their network and purchase production capabilities from a
variety of partner organizations that have their own manufacturing facilities. While the core
company focuses mainly on designing products and tracking finances, this network of
partnerships enables it to be much more than just a design operation.

Like other organizational structures, the network structure has its advantages and its
disadvantages.

Development of network organizational structure

The network structure is formed by combining the resources of cooperating independent

companies, working on a joint venture for achieving greater benefits than working in a
traditional way. The basis for development of an efficient network structure is computerization
and efficient flow of information. It is an alternative to the basic structures, which are
increasingly unable to meet the demands faced by a company in a highly competitive and
dynamic environment. It can function as a joint management venture, strategic alliance,
distribution services, merging smaller units in the new corporation.

The emergence of this type of structure is not a revolution, but an evolutionary step
towards creating new intellectual values, better information exchange, smooth
communication. Increased level of cooperation with external partners from other
countries or areas allows to build direct contacts between stakeholders, which allows to
achieve various synergies. The network consist of self-managed, cooperating units
concentrated on various steps in value creating processes.

Types of network organizational structure

Immediate environment consists of stakeholders associated not only with the organization
but also the inter-connected network of relations. There are four types of the network
between organizations:
Integrated network: This type of network structure consists of different units or
branches that are legally and formally a part of the same organization or parent company.
These units may be located in different geographical locations and may have different
functions, but they all operate under the same organizational structure and share
resources and information. Examples of integrated network include a retail chain with
different store locations, or a manufacturing company with different factories.

Correlated network: This type of network structure consists of different units or

organizations that are aware of common needs and goals and collaborate to achieve them.
These units may be competitors, but they have a shared interest in certain aspects of the
business, such as supply chain management or research and development. Examples of
correlated network include a group of companies in the same industry, such as car
manufacturers, who collaborate to develop new technologies.

Contract network: This type of network structure consists of independent partners who
enter into agreements, such as franchises, concessions or contracts, to work together.
These partners may have different ownership, management and control structures, but
they collaborate based on the specific terms of the agreement. Examples of contract
network include a fast food chain that operates through franchise agreements, or a hotel
chain that manages properties through management contracts.

Direct relations network: This type of network structure consists of direct relationships
between individuals or groups, such as in the field of politics or religion. These networks
are often informal and may be based on personal or social connections. Examples
of direct relations network include a political party with different branches
or a religious organization with different congregations.

Management of network structure differs

Management of network structure requires a change of policy, new activities
and methods, change in the staff, Managers face new tasks that are
determined by four factors:
Specificity of the requirements for skilled workers: Managing a network
structure requires a different set of skills than traditional hierarchical
structures. Skilled workers who are able to work independently, collaborate
effectively with others, and adapt to changing circumstances are essential for
the success of this type of structure. Managers must be able to identify the
specific skills needed for their organization and ensure that their staff have
the necessary training and development to meet those needs.
Untraditional incentive system: Traditional incentive systems, such as those
based on hierarchical structures and promotions, may not be effective in a
network structure. Managers must develop new incentive systems that reward
collaboration, innovation and adaptability. This may include performance-
based incentives, team-based rewards, or other non-traditional methods of
motivation.
Leadership as a management style: In a network structure, leadership is
essential to maintaining collaboration and coordination among different units
and individuals. Managers must be able to lead by example, inspire and
motivate others, and provide guidance and direction when needed. This often
requires a different management style, focusing on coaching, mentoring and
empowering employees.
Increased requirements for new organizational culture: A network structure
requires a different organizational culture than traditional hierarchies. This
culture should be based on open communication, collaboration, flexibility
and adaptability. Managers must create an environment that encourages
experimentation and innovation, and that fosters a sense of community and
shared purpose among employees. This will require changes in the way the
organization operates, including in decision-making, communication and the
way resources are shared.
When to use network structure?
A network structure may be an appropriate organizational structure to use in
certain situations, such as:
Decentralized organizations: A network structure is well-suited for
organizations that operate in a decentralized manner, where individuals or
teams work independently on specific projects or tasks, but still collaborate
and share resources with others within the organization.
Businesses with changing and complex environment: The network
structure allows for more flexibility and adaptability, which is important in a
rapidly changing and complex business environment.
Companies with multiple locations: A network structure allows for the
sharing of resources and information among different units or locations,
which can be beneficial for companies with multiple branches or subsidiaries.
Companies with multiple functions or services: A network structure allows
for collaboration and coordination among different functions or services
within an organization, which can be beneficial for companies with diverse
operations.
Companies with a high degree of interdependence: Network structures allows
for different units to work together to meet common goals, which can be
beneficial for companies with a high degree of interdependence between
different functions or services.
It's important to note that not all companies or situations will benefit from
this structure, it depends on the nature of the business, the culture, the market,
and the strategy of the organization.

The advantages of a network organizational structure:

Increased flexibility: Network structures allow for quick adaptation to
changes in the market or environment.
Greater access to resources and expertise: Organizations can tap into the
resources and expertise of other companies or individuals in the network.
Reduced costs: Network structures can lead to lower costs through shared
resources and increased efficiency.
Enhanced innovation: The diverse perspectives and experiences of network
members can lead to greater creativity and innovation.
Increased competitiveness: Network structures can make companies more
competitive by allowing them to respond more quickly to market changes and
take advantage of new opportunities.
Improved coordination and communication: The network structure can
facilitate better coordination and communication among members, which can
lead to more effective decision-making and problem-solving.

The disadvantages of a network organizational structure:

Lack of control: Network structures can make it difficult for an organization
to maintain control over its operations and resources.
Dependence on other organizations: Companies that rely on networks may
become dependent on other organizations for resources or expertise, which
can create vulnerabilities.
Conflicting goals: The goals of different organizations in a network may not
always align, which can lead to conflicts and inefficiencies.

Complex decision-making: The decentralized nature of network structures can

make decision-making more complex and time-consuming.

Difficulty in maintaining long-term relationships: Maintaining long-term

relationships with other organizations in a network can be challenging, especially
if the network is constantly changing.

Potential for information leaks: Network structure can lead to information leaks
as the information shared among the participants may be sensitive and not intended
for all parties.

Difficulties in maintaining the quality standards: As the network members may

come from diverse backgrounds, it can be challenging to maintain the same level
of quality throughout the network.

Other organizational structures

Some other common organizational structures include:
Hierarchical structure: This structure is characterized by a clear chain of
command, with a clear division of labor and a clear division of responsibilities.
This structure is often used in large, bureaucratic organizations.

Matrix structure: This structure combines elements of a hierarchical structure

with elements of a network structure. It involves cross-functional teams that work
on specific projects, with team members reporting to both a functional manager
and a project manager.

Flat structure: This structure is characterized by a minimal hierarchy and a

decentralized decision-making process. It is often used in small organizations or
startups, and is designed to be more flexible and responsive to change.

Functional structure: This structure is based on the division of labor, with each
department or function of the organization reporting to a single manager. It is often
used in manufacturing or service-based companies, where the focus is on efficiency and
economies of scale.

Divisional structure: This structure is based on the division of the organization into
separate business units or divisions, each with its own management team and resources. It
is often used in large, diversified companies.

Hybrid structure: This structure combines elements of different organizational

structures, such as functional and divisional or matrix and flat, in order to achieve
specific goals or respond to specific challenges.

Theoretical Concepts
In social sciences, network theory includes two popular concepts: the strength of
weak ties, which

can be considered to be within the framework of labor market theory, and

structural holes, which

are included in the sphere of competition theory. Within these two concepts, it is
crucial to clarify

the relationship between network structure and performance based on the position
of the nodes in
the network. According to Mark Granovetter, within an American job search
context, the stronger

the ties are between a couple of people in a given community, the greater the
chances are of

weaker ties with third parties (bridging ties) as a potential source of new
information and knowledge.

In turn, the term structural holes refers to a pattern of relationships in at least

two unrelated social
networks, where an actor is associated with many other networks that have no
connection with
each other. Such structural properties of the network give an actor the chance
to receive
nonredundant information, which favors innovation. These theoretical
constructs aim to capture the
network’s structural features and study their impact on network participants,
patterns of network
creation, and change.
Network Organizational Structure?

A network organizational structure is one in which organizations group certain types of

employees together based around a common specialization. These employees then form
partnerships with other specialists from throughout the organization to take on new
projects and work toward a common goal. For instance, a company may have a product
development team and a marketing team, each operating as different divisions. However,
when new projects arise, members of those teams can pair up to tackle projects together.

Compared with other businesses, networked organizations do not have a hierarchical

organizational chart where the chain of command runs through a cascading line of middle
managers. Instead, networked organizations tend to feature clusters made up of different
departments, business units, or local offices, and these clusters work together on an ad-
hoc basis. The company eschews strict templates for workflows and reporting
relationships. Instead they focus on using the full resources of an organization to meet
customer needs.

The executive team in such organizations tends to be fairly lean. They handle overall
organizational design and big picture decision-making. However, day-to-day operations
and problem solving usually fall upon the individual pods of the company’s
organizational network.

Network organizations function via the following principles.

A fairly non-hierarchical structure: Even large organizations that use a network model
do not lean on hierarchical organization charts. Most org charts are project-specific,
where pods of workers report to a project manager or division head, who then reports
back to executive management.

An affinity for outsourcing: Network organization structures lend themselves quite

naturally to outsourcing. If a team needs a specific skill—whether that’s customer
service, PR, or mechanical engineering—the organization may choose to outsource the
work to contractors rather than to full-time employees.

Concentration on specialization: A networked organization often features silos divided

by specialty or by geographic locations. These silos include different departments (like
product development or human resources), different regional offices, or different business
units.

Empowered project managers: Most of the daily work and decision-making of a

networked organization takes place when team members join together based on need.
They make use of each other’s competencies to take on projects. The project managers
and team leaders report back to the organization's central leadership.

Lean central leadership: The executive team of a networked organization tends to be

fairly lean. Executives handle overall organizational design and big picture decision-
making. However, day-to-day operations and problem solving usually fall upon the
individual pods of the company’s organizational network.

Overlap with divisional organizational structure: The network organizational structure

shares a lot in common with the divisional organizational structure that breaks companies
into divisions based on product lines. Network organizations break their workforce into
silos, but these silos tend to be based on specific competencies rather than product lines.
As such, employees in a network organization get more opportunities to collaborate with
people from other departments, which happens when they’re paired together on new
projects.

Network Structure
The network structure is a newer type of organizational structure often viewed as less
hierarchical (i.e., more flat), more decentralized, and more flexible than other structures.

The concept underlying the network structure is the social network—a social structure of
interactions.

From a management perspective, the network structure is unique among other

organizational structures that focus on the internal dynamics within the firm.

Like other organizational structures, the network structure has its advantages and its
disadvantages.

Proponents argue that the network structure is more agile compared to other structures
(such as functional areas, divisions, or even some teams).

Network Structure

A firm using a network structure may outsource certain tasks to external service
providers and managers to coordinate external relations.

Companies that outsource their help desk functions to call centers in foreign countries are
creating a network structure through its contract.

Organizational structure affects organizational action in two big ways.

An example of a modern structure is network structure .

In essence, managers in network structures spend most of their time coordinating and
controlling external relations, usually by electronic means.

Boundaryless Organization
1. What is a boundaryless organization ?
A boundaryless organization is an organization that actively removes boundaries to
innovation, meaning it has less hierarchy and functional separation and is more
integrated. This allows for a free flow of information, ideas, and innovations.

A boundaryless organization has four dimensions. Reducing boundaries for each

dimension is one of the key characteristics of a boundaryless organization.

Vertical. This is the traditional, hierarchical structure. Reducing management layers

allows ideas to travel freely through the organization, and new initiatives can be
implemented without managers stifling potential innovation. The aim here is to create a
“healthy hierarchy”.

Horizontal. This is the functional separation, including departments and other silos. By
removing horizontal boundaries, ideas can easily be shared and implemented cross-
functionally.

External. This is separation within the value chain. By working closely with customers
and suppliers, implementing innovations will be more effective.

Geographical. This refers to the separation between countries or geographies and is a

specific form of horizontal separation. By integrating different geographies, innovations
will spread more easily and can be implemented faster.

Boundaryless organizations reducing four types of boundaries

Note here that boundaries are not eliminated. Rather, they are made porous. There is a
clear separation between the own organization and a supplier, but by making the
boundary porous, ideas can easily flow through.

2. Boundaryless organization example?

Jack Welch, CEO of General Electric, pioneered the boundaryless organization in the
1990s. According to Welch, a successful organization is one in which the best ideas are
discovered and exploited. Boundaries - whether between hierarchical levels, functions,
geographies, or external boundaries - stifle this innovation.

According to GE’s 1994 annual report, “Boundaryless behavior has become the ‘right’
behavior at GE, and aligned with this behavior is a rewards system that recognizes the
adapter or implementer of an idea as much as its originator. Creating this open, sharing
climate magnifies the enormous and unique advantage of a multibusiness GE, as our wide
diversity of service and industrial businesses exchange an endless stream of new ideas
and best practices”.
Jack Welch believed that rigid, hierarchical organizations did not have the right structure
to foster innovation in a fast-moving and ever-changing world. To achieve this, Welch
launched Work-Out, a program aimed at removing boundaries at the company.

3. Characteristics of a boundaryless organization

One of the most interesting things about boundaryless companies is that there is very
little face to face communication between employees. Such an organization relies heavily
on technology. Employees mainly communicate using technology, such as via text,
email, social media, and various other virtual methods of communication. This makes it
possible for them to communicate with each other from wherever they without having to
physically be in the same vicinity.

Employees also frequently telecommute in a boundaryless organization, which is to say

that they don’t actually have to turn up at work. They could use video conferencing and
virtual collaboration software to communicate with each other and collaborate on
projects. They, therefore, do not have to deal with geographically imposed barriers to
working together.

In such companies, since employees do not have to come to the office all the time, there
are usually flexible working schedules which allow employees to work at the time that is
most convenient for them, especially when they’re working from a different country in an
entirely different time zone. This makes it easier for the employees to achieve work-life
balance.

Another characteristic of such companies is that the authority to make decisions is put
squarely in the hands of employees. They can make decisions and have complete
responsibility for the tasks and projects that are handed to them. This makes the company
much more efficient than a traditional one since it can change more quickly and adapt to
changing external factors.

4. The Roles of the Employees in Such an Organization?

In boundaryless companies, employees, even though they do not have to be in the same
room together, do not work in isolation. They are usually part of a large team that works
on one of many projects.

Modern methods are applied in such companies such as better supply chain management,
just in time methods, and quality management at every step.
In order to be a successful employee in a boundaryless company, you should be able to
feel comfortable and at home in an environment that is ridden with chaos. Such
workplaces are quite free-form and have very little in the way of stiff rules and policies.
Usually, decisions are guided by a common vision and a strong sense of ethics.

You should also be an easy going person who can work with many people from different
backgrounds. There will be an enormous amount of networking and coordination
involved so you should be able to handle it.

Another characteristic of the employees that flourish in such organizations is that they are
highly independent thinkers and are self-motivated to set and achieve their own goals.
One of the defining characteristics of a traditional organization is that there are a lot of
hierarchies. Supervisors, managers, senior managers, directors, and so on. At every level,
you have someone telling you what to do and how to do it and your ability to make your
own decisions is limited and only gets less limited as you go further up the hierarchy.

In a boundaryless organization, however, there is very little supervision with very few
people to tell you what to do. Usually, the organizations allow enough free flow of
information that all the employees know what the large-scale and long-term goals of the
organization are. They are then briefed on what projects they are taking part in and what
is expected of them in those projects. That means they get full responsibility for figuring
out how best to achieve the results that are expected of them using their own methods, so
long as they align with the vision, ethics, and values of the company.

In such companies, the employees get to be managers of themselves and coordinators of

their own projects. This makes them prouder of their work and gives them confidence in
their abilities to adapt to the demands of a situation. It also develops a very strong work
ethic in them.

5. Types of Boundaryless Organizations

There are multiple ways to set up a boundaryless organization, and it’s common to mix
different strategies. Here are four types of organizations in which the structure works
well:

1.Learning organization

2.Modular organization

3.Network organization

4.Virtual organization
1. Learning organizations: This type of organizational structure places a high emphasis
on using new data and information to positively change a company’s existing approach.
As employees in a learning organization discover what works best alongside the pain
points in any given process, they inform other members about their findings. This differs
from waiting for management to implement these sorts of changes from the top down.
These discoveries then improve the function of the entire learning organization.

2. Modular organizations: If a company outsources all the different parts of its business
aside from the most essential ones, odds are it’s aiming to be a modular organization.
Modular organizations preserve the most essential aspects of a business while throwing
the doors open to forge partnerships with other companies, rather than trying to keep
everything internal.

3. Network organizations: Network organizations break down both internal and external
barriers by subverting traditional task assignments and making strategic alliances with
outside companies. These sorts of companies aim to assign tasks to the most suitable
candidate, regardless of where they rank in a company’s hierarchy. As far as allying with
outside companies, some network organizations even go so far as outsourcing their
human resources or accounting teams.

4. Virtual organizations: This style of organizational design relies on virtual

collaboration. Teams use communication software to work together across various
geographical boundaries. Virtual organizations often encompass multiple different
companies, all of which share relevant and useful information with each other
organically.

Tips for Building a Boundaryless Organization

Building a boundaryless organization empowers employees and increases innovation.

Keep these five tips in mind if you hope to build one of your own:

Aim for maximum flexibility. Since boundaryless organizations eschew rigid structure
for a constant state of flux, adaptability and flexibility are paramount for success. Be
open-minded to ways you and your cohorts can improve and change your workflow.
Allow employees to work when and how they want, so long as they remain responsible
for completing their tasks in a timely manner and assisting their coworkers when
necessary.

Coalesce around a strong vision. The free flow of information becomes far more useful
when it centers around a cohesive goal. When you bring multiple employees or even
entire companies together, set out a strong vision to inform everyone’s work. Senior
managers can still raise awareness for the organizational mission, but there’s a greater
need for all employees to step up to the plate in boundaryless organizations than in more
traditional ones.

Embrace new technologies. With each passing year, technological innovations make it
easier and easier to work across previously unbreachable boundaries than ever before in
history. Use video conferencing in place of face-to-face communication to facilitate team
communication from disparate parts of the globe. Messaging apps built for company use
specifically can also prove helpful.

Grant employees plenty of freedom. Cross-functional teams make boundaryless

organizations possible, so invest in every employee’s empowerment and education.
Everyone should be able to contribute to decision-making in these types of companies, as
well as to do so on their own terms. This requires employers to grant their workers
freedom and employees to use that freedom responsibly. In other words, a flexible
working schedule still needs to translate into a productive one.

Set achievable goals. Boundaryless organizations rely on flexible schedules and spread-
out teams, so set concrete short-term and long-term goals for all stakeholders.
Communicate constantly across multiple channels to ensure everyone remains in the loop
about how to best move forward.

6. Advantages and dis advantage of boundaryless organization

6.1 Advantage of boundaryless organization

 Increase creativity ,quality and flexibility

 sharing of resources is more open, accurate and timely,

 strong leadership by shared vision, collaboration and commitment.

 organizational systems & processes capable of rapid response to changing

conditions

 integration and effective utilization of diverse cultures, people, and talents;

6.2 Disadvantages of boundaryless organization

 Results in more complex organizational structure;

 Problems of co-ordination;
  IN Political and authority problems;

 Difficult to define boundaries resulting in security risks to the firm;

 Dissolution of organizational culture and sense of community;

 Reduce commitment and motivation levels;

 Loss of accountability

Virtual organization?

A virtual organization is an operation where all members of the company work in

different geographic locations while appearing as a single unit. It uses computers,
software, phones and other technology to work together and converse in real-time,
despite any physical distance. It's important for virtual organizations to establish detailed
procedures that ensure consistency in employee performance and provide employees with
the ample resources and support they need to conduct their responsibilities in a remote
work environment.

Components of a virtual organization

Each virtual organization is unique, although they often include many of the same
components for optimal operations, like a remote workforce and company-specific
technology networks. Other components of a virtual organization may include:

 A flat organization structure with less middle management

 Virtual teams

 Loose organizational structure

 Boundaries and expectations

 Power flexibility

 Informal communication

Benefits of Virtual Organizations

Some benefits of Virtual organization include in the following:

 Save time, such as time to market and Reducing development process.

 Spreading costs and risks with partners.

  Improving quality factors such as performance and flexibility, exchange and share
knowledge, and marketing in high scale (global networks).

 Matching VOs with dynamic changes in marketing.

 Access to new technology and new customers.

 Access to new markets through partnership.

 Improving access to financial resources. In most cases a mixture of these will be

the driver for operating and doing business in networks.

2.4 Virtual Organization Properties

According to definitions of VOs, some basic characteristics of the virtual organization are
often referred to [3] and described in the following:

1. Delocalization: Delocalization is one of the most important developments in the

globalization process. It is potentially space dependence. Therefore, enterprises become
independent off space and capacity. It eliminates the need for a particular space.

2. Temporalization: This property refers to the inter-organizational relations and to the

internal process organization, in the sense of the modular and fractal organization. The
interdependence is described in the life cycle stages of an VO as a circular process of
creation, operation, evaluation, and dissolution.

3. Dematerialization: Dematerialization has the virtual forms in products,

communities, services, and so on along the development of the virtualization. With
increasing virtualization products become potential immaterial. It means that all object
areas are immaterial. Existing mutual confidence for members, absence of physical
attributes and administrator can affect system performance and flexibility.

4. Individualization: The main reason for this property is increasing consumer

demands. One of ways for capturing market is to attend to mass production along with
personal needs. Mass customization is one approach for manufacturers to fulfill
customer demands and capture new markets.

5. Non-Institutionalization: Because operations are performed in a virtual environment

without physical attributes, institutionalization of inter-organizational relationships in
such environments can be waived. 6. Asynchronization: This attribute causes members
to asynchronously communicate and interact with each other via the ICT in the context of
innovations with the release of time. Some companies globally schedule their works in
three shifts between dispersed locations.

7. Integrative Atomization: This property refers to integrate all atomized core

competencies of the participants for satisfying customer.

Virtual organization

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

linking to complete the process of production. It can be of permanent or temporary nature
and can include groups, individuals dispersed at various locations, the entire organization
or even an organizational unit. In simple terms, a virtual organization is referred to a
company with an electronic presence and one who does not have a physical existence.

It is formed informally as an alliance between two or more legal entities of independent

nature. The legal definition of a company does not bound virtual organizations.

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. This electronic network goes
beyond organizational and geographical boundaries. It is often considered a boundary-
less organization in which vertical and horizontal barriers are removed.

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

shared interest. In a virtual organization, members accept the help of telecommuting by
using internet, phone, and e-mails 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

The characteristics of virtual organization

  Dynamic in nature

 Flat organization

 Power flexibility

 Informal communication

 Goal orientation

 Vague organizational boundaries

 Virtual teams

 Knowledgeable workers

 Sharing of information

 Customer orientation

The types of virtual organization are as follows-

Virtual Organization is a flexible network of separate entities which forms a collaboration

by connecting companies, institutions or individuals delivering a product or service on
the basis of a common business perception. In virtual organization, there is no need of the
people to come together at same place at a time in order to deliver the product or service.
Branding is the most important factor in the virtual organization in strongly positioning
the site on the internet.

There are various types of approaches in implementing virtual organization which are as
follows:

Mobile Working: this type of virtual organization specifies to the mobile employees
working in an environment in which mobile devices such as cell phones, laptops, e-mail
wireless devices, pagers and laptops are required.

Virtual Teams: virtual teams are usually developed by the employees of the same
organization and may have the employees from external organization. Employees
cooperates through e-mails, groupware, the intranet and video conferencing from
geographically dispersed locations. They perform parallel responsibilities along with their
fundamental responsibilities in the organization.

Telecommuting: employees in this type of organization works from a place other than
the normal workplace, which could either be their home or some other place. For
managing and contacting the head office, telecommuters used the tools such as computers
and telecommunications equipment.

Hot Desking: In these type of virtual organizations, fixed desks assigned to all or few
employees is removed. When they arrives, they are accredited a computer workstation
through which they can access their documents, files, applications and e-mails. This type
of arrangement is suitable for the companies in which members spend a huge amount of
time on the customer workplaces.

Hoteling: This type of organization is similar to the hot desking. Hot desk in this system
is provided by the client or customers to the virtual organization employees.

Telecentres: These type of virtual organizations are placed for the employees generally
not available in the telecommuter’s home. It is mostly placed in the associations outside
of the major cities and provide space and equipment there.

Advantages and disadvantage of virtual organization

There are numerous advantages of a virtual organizational structure. These are as

follows-

1. 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 mean time.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

2. 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 employees

3. Broader talent pool

Virtual organization does not need its employees to come and work from 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 labour
market. This helps them to hire as well as retain the best people from any part of the
world.

. Overhead costs are low

Physical organization 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 organisation is that it is possible to minimise 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.

4. Improved scalability

Physical office space needs overhead costs, but a virtual organisation 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 organisation teams are more agile and
willing to work for more hours than the employees in a typical traditional workplace

5 . Improved employee retention

The employees working in a virtual organisation 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
organisation shows a better rate of employee retention than a physical outlet

6. Access to new markets

Virtual organisations can tap new markets easily because they do not rely on physical
space. These rely on sales teams that operate remotely and can reach out in new horizons
to new customers.

7. Savings –

Virtual organisation 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

8. Organized

Although the employees are in various geographic locations, still the virtual organisation
works in an organised manner. The head of the company is in constant touch with each of
the members and keeps a vigilant eye on their movements

9. Balance in life

A virtual organisation offers the employees a golden chance to accommodate and balance
their professional and personal life

10. Use 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 organisation, the expenses can be cut
down smoothly as you can save on logging, travelling and downtime

The disadvantages of a virtual organisational

1. 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 organisation.

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 camaraderie 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 organisation to a team or
various teams together that will boost solidarity amongst the members

2. Reputational risks

People are still not comfortable in dealing with companies that do not have a physical
presence. They vary from remote employees, and this is why they do not take such
companies seriously. If by any chance the virtual organisation runs poorly then it will
have to face severe consequences in terms of reputational risk

3. Less communication

Virtual organisation has the best possible means to have an open channel that will
facilitate increased communication between all the members. The fact is quite different
from the assumption as the remote teams are simply not interested in passing any
information as they are still unknown for each other.

It is up to the virtual organisation to keep on nudging its members for constant

communication. In most cases, it is the responsibility of the company to provide tools so
that proper communication can take place.

4. 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 organisation is considered a red zone
for compliance and security issues.