V IRTUAL O RGANIZATIONS

The purpose of organizations is to enable groups of people to effectively and effi ciently coordinate efforts and resources at their disposal in order to achieve stated organizational goals or objectives. Organizations rely on a structure to achieve

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their goals or objectives. The structure of an organization can be defi ned as the sum total of the different ways in which it divides its labor (people) and other resources (technology, capital equipment, databases, etc.) into distinct tasks (processes) and then achieves coordination among them (Mintzberg, 1979). Traditionally, organizational managers have used a hierarchical structure with well-defi ned lines of command, control, and communication to coordinate the optimal assignment of people and other resources to processes. However, dynamic competitive forces in industry, including global competition, strategic alliances, re-engineering, popular management techniques, such as total quality management, and rightsizing and downsizing, all mandate a more dynamic assignment of available scarce resources to processes. The ability of IT to collapse distance and time provides a wider range of resources from which to draw.

The problem can be formulated as follows: Demand for goods and services (information, travel, automobile) from an organization (Internet service provider, travel agency, car manufacturer) must be satisfi ed through the assignment and coordination of available resources (computer networks, databases, skilled personnel, IT, raw materials, capital equipment) (Mowshowitz, 1997). Assume for a moment that the Internet service provider is a multinational organization with headquar- ters in British Columbia, Canada, but has operations all over the world. Whereas a centralized command, control, and communication structure may be suitable for the Internet service provider to assign and coordinate its resources to meet a service request in western Canada, a decentralized command, control, and communication structure may be suitable to provide the same service in South Africa or Australia. The same could be said of the travel agency or the car manufacturing company. A virtual organization structure can provide an optimal dynamic alloca- tion of resources to meet the demand requirements as long as there is a logical separation of customer demand, resources needed to satisfy that demand, and the decision makers who allocate the resources (Mowshowitz, 1997). A virtual organization structure will provide the Internet service provider with the agility and fl exibility required to meet consumer demand anywhere anytime in the world. It can be said that in the virtual society, organizational structure follows demand and performance requirements.

Organizations competing in volatile technological and business environ- ments must be agile, fl exible, responsive, and boundaryless (Eichinger & Ulrich, 1995), which is possible under a virtual organization model. The organizational theory literature labels agile, fl exible, responsive or dynamic organizational forms as “fuzzy” models that are organic as opposed to crisp or mechanistic structures. Fuzzy structures are appropriate for organizations that need to cope with conditions of uncertainty (Buchanan & Boddy, 1992). The dynamic nature of the technological and business environment in a virtual society favors fuzzy organizational structures. The virtual organizational structures qualify as a fuzzy structure (Donaldson & Preston, 1995).

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According to Mowshowitz, the optimal assignment of resources to processes required in virtual organizations infl uences managerial decision making and management relations with its employees, external organizations, suppliers, and the community. Flexible assignment of resources “favors temporary relationships based on explicit rather than implicit agreements” (Mowshowitz, 1997, p. 37). Propensity toward temporary relationships means that a virtual organization will be charac- terized by high levels of trust, shorter-term contracts with its employees, a greater use of teleworkers, outsourcing to external organizational activities that fall outside the organization’s core competencies, and ability to switch from one supplier to another in order to obtain cost-effectiveness.

These characteristics would cause the local community in which the organization operates to have negative perceptions of the actions of the virtual organization management. However, such feelings and perceptions would abate as we achieve

a critical mass of virtual organizations and move toward a virtual society.

V IRTUAL O RGANIZATIONS