Organization: Contemporary Principles and Practice, 2nd Edition

CHAPTER 10

Virtual Organization

WHAT THIS CHAPTER COVERS

Definitions and descriptions of virtual organization vary considerably and this chapter starts by identifying the features that are common to this new organizational form. It then examines the benefits that virtual organization promises to offer. Certain conditions are required for the benefits of virtual organization to be achieved and for it to be viable. The disadvantages and limitations of virtual organization are also considered. The chapter goes on to address three questions arising over the use of virtual organization: when to use it in preference to conventional forms of organization; whether virtual organization has to be managed in a different way; and how virtual organization can be managed when applied to teamwork. The chapter closes by examining the Dell computer company as a pioneer of virtual organization on a global scale.

What is a Virtual Organization?

A virtual organization exists within a space that is not bound by the legal and physical structures that define a conventional organization. As Malcolm Warner and Morgen Witzel put it in their path-breaking book on the subject, virtual organizations “use mental and technological constructs to represent certain aspects of organization that, in more conventional organizations, have a physical existence.”¹

Bo Hedberg and his colleagues describe virtual organizations ...