Different from traditional mergers and acquisitions the partner in the virtual organization share costs, skills and access to international markets. Each partner contributes to the virtual organization what it is best at – its core capabilities. Briefly summarized here are the key attributes of the virtual organization:
- Technology: Informational networks will help far flung companies and entrepreneurs link up and work together from start to finish. The partnerships will be based on electronic contracts to keep the lawyers away and speed the linkups.
- Opportunism: Partnership will be less permanent, less formal and more opportunistic. Companies will band together to meet all specific market opportunities and more often than not, fall apart once the need evaporates.
- No borders: This new organizational model redefines the traditional boundaries of the company. More cooperation among competitors, suppliers, and customers makes it harder to determine where one company ends and another begins.
- Trust: These relationships make companies far more reliant on each other and require far more trust than ever before. They share a sense of co-destiny, meaning that the fate of each partner is dependent on the other.
- Excellence; because each partner brings its core competence to the effort it may be possible to create a best of everything in the organization. Every function and process could be world class – something that no single company could achieve.
Importantly virtual organizations can help competitiveness in the global economy. The alliances and partnerships with other organizations can extend worldwide, the spatial and temporal interdependence easily transcend boundaries, and the flexibility allows easy reassignment and reallocation to take quick advantage of shifting opportunities in global markets. To avoid disintegration and attain effective needed focus, the lead virtual organization must have a shared vision, a strong brand, and most important, a high trust culture.
Examples of virtual organizations include those already mentioned as well-known network organizations – Ford, Harley Davidson, and ABB and also on a smaller scale, firms such as Clark Equipment a manufacturer of forklifts and other industrial equipment, Semco, a Brazilian firm producing pumps, valves and other industrial products, Sweden’s Insurance Group (with 91,000 partners worldwide) and the Australian firm Technical and Computer Graphics (TCG). Other well known examples include Nike and Reebok, who do very little of their own production but shift it to Asian firms. In the information technology industry, Sun Microsystems views itself as an intellectual holding company that designs computers and does all other functions (product ordering, manufacturing, distribution, marketing and customer service) through contractual arrangement with partners located throughout the world, and Intel uses virtual teams with members from Ireland, Israel, England, France and Asia working on a wide variety of projects. As with the network organization, it is not really possible to show a virtual organization, depicts graphically how TCG would look as a virtual organization. Because networks and virtual organizations both represent such radically different ways to structure firms, there are many challenges ahead, especially on the human side of these contemporary structural forms.
When people join an organization they bring with them the values and beliefs they have been taught. Quite often, however, these values and beliefs are insufficient for helping the individual succeed in the organization. The person needs to learn how the particular enterprise does things. A good example is the US Marine Corps. During boot camp, drill instructors teach recruits the Marine way. The training attempts to psychologically strip down the new recruits and then restructure their way of thinking and their values. They are taught to think and act like Marines. Anyone who has been in the Marines or knows someone who has will verify that the Corps generally accomplishes its objective. In a less dramatic way, today’s organization do the same thing. For example, as discussed in knowledge management (KM), the key challenge for contemporary organizations is to instil and sustain a corporate wide culture that encourages knowledge sharing. As the partner in charge of Ernst & Young’s knowledge based business solution practice notes, if you’re going to have a knowledge sharing culture, that can’t just be a veneer on top of the business operation. You have to have people who can make sense out of it and apply it.
In other words organizational culture is quite complex. Although there are a number of problems and disagreements associated with the conceptualization of organizational culture most definitions including the preceding recognize the importance of shared norms and values that guide organizational participants’ behaviour. In fact, there is research evidence that not only are these cultural values taught to newcomers but newcomers seek out and want to learn about their organization’s culture.
Organizational culture has a number of important characteristics. Some of the most readily agreed upon are the following:
- Observed behavioural regularities: When organizational participants interact with one another, they use common language, terminology, and rituals related to deference and demeanour.
- Norms: Standards of behaviour exist, including guidelines on how much work to do, which in many organizations come down to not to do too much or do not do too little.
- Dominant values: There are major values that the organization advocates and expects the participants to share. Typical examples are high product quality low absenteeism and high efficiency.