SOCIO-CULTURAL IMPLICATIONS OF VIRTUAL ORGANIZING Janusz Wielki Originally presented at ETHICOMP 2002 Abstract The paper deals with human-related barriers connected with implementation of the virtual organization concept. After presentation a VO as a new corporate model strongly supported by ITC, the most important socio-cultural implications of virtual organizing have been identified and discussed. Next, a case study of the company operating in the power industry has been presented along with suggested model of the internet-based VO and analysis of human-related consequences of its implementation. Finally conclusions are provided. 1. Introduction Rapid and significant changes have taken place in companies business environment at the turn of the century. Lowering differentiation of products, splintering mass markets, dropping effectiveness of mass media, shortening product life cycle, rising clients expectations, shifts in their behavior patterns and attitudes, diminishing level of their loyalty and increasing competition accompanied by its rapid globalization are the most important factors. Volume 1 The ETHICOMP E-Journal ISSN 1743-3010
Operating in this highly unpredictable and quickly changing business environment, where all of the competitors possess comparable professional competencies, companies are forced continuously to diminish overall costs, increase effectiveness of all their operations, achieve far greater flexibility as ever before as well as be able to faster response to customers expectations. In this situation enterprises commonly reach for information and communication technology, as a means which allows them to react almost instantaneously to changes in their business and become a "real-time enterprise". Basing on ICT utilization, they try to implement new business models and establish new organizational forms. Such a new business model, claimed by Venkatraman and Henderson as "twenty-first century business model" (see [Venkatraman, 1998]), is the virtual organization. Although concept of virtual organizing, which is a response of contemporary enterprises to requirements of the marketplace, has been commonly discussed in recent years, not all as-pects were given the same attention. The most frequently mentioned issues comprise: role of enabling technologies, stages of virtualization, strengths and weaknesses of virtual organiza-tions, business network strategy, coordination aspects, communication across virtual teams or efficiency of VOs. It seems that element which is very rarely considered, are socio-cultural implications of employees work in new business models based on ITC utilization, which virtual organization is the best known example. In fact it is very important and disregarded aspect of virtual orga-nizing approach and attention of this the paper is focused on this issue. The rest of the paper is composed of four parts. First one discusses briefly virtual organizing concept. The following part is focused on general chances and challenges connected with establishing and functioning of VOs. Particular attention is paid to human aspects of virtual organizing. Third part of the paper is devoted to the case study of the company operating in power industry. The concept of the internet-based virtual organization is presented there and socio-cultural implications connected with its implementation have been identified. In the final part of the paper, the most important conclusions and suggestions are provided. 2. Virtual organizations as the response to the requirements of customers and markets Although there is quite common unanimity concerning general goals of a virtual organi-zation, there are numerous definitions of a VO and each one emphasizes different feature of this organizational form. For example known Byrne s definition underlines The ETHICOMP E-Journal 2
limited life-span of co-operation connected with realization of specific goals. [Byrne, 1993]. On the other hand Arnold does not determine time of a VO s existence, but emphasizes lack of any kind "hierar-chy or vertical integration", while Michal E. Porter lays stress on a role of outsourcing in case of this organizational form [Wielki, 2000], [Porter, 2001]. Basing on analysis of existing definitions, Bultje and van Wijk formulated their own complex, working definition composed of two parts. According to them "a virtual organiza-tion is: primarily characterized as being a network of independent, geographically dispersed or-ganizations with a partial mission overlap. Within the network all partners provide their own core competencies and the co-operation is based on semi-stable relations. The prod-ucts and services provided by a virtual organization are dependent on innovation and are strongly customer-based. secondarily characterized by a single identity with loyalty being shared the partners and the co-operation based on trust and information technology. In addition, there is also a clear distinction between a strategic and an operational level" [Bultje, 1998]. As underlined by Venkatraman and Henderson, a VO should not be treated as a separate struc-ture like functional, divisional, or matrix [Venkatraman, 1998]. Important aspect of the virtual organization concept is lifespan of co-operation. Taking this element into consideration, VOs can exist on the following bases: Temporary Semi - stable Stable Since, internet technologies allow for easy establishing a virtual organization based on ad hoc selected partner companies coming theoretically from any place in the world, initially as a basic form of VOs was considered the temporary one. It seems that in practice, more probable is the semi-stable form of a virtual organization based on pre-selected partners, cho-sen depending on type of project being executed. In this case important aspects are such issues as credibility and ability to execution of required tasks. According to [Kisielnicki, 1998] there are three types of virtual organizations. They can be distinguished because of: The ETHICOMP E-Journal 3
Scope of activities: single line or various line. Clients: organizations working for specialized clients or general clients. Range of influence: local, national or global organizations. 3. Chances and challenges connected with establishing and functioning of virtual organizations 3.1 General issues As chances and expectations related to establishing virtual organizations are considered, they seem to be quite clear and obvious. They comprise such issues as [Venkatraman, 1998], [Kisielnicki, 1998], [Kisielnicki, 2000]: Maximal agility of operations. Synergy effect as a result of bringing into a VO the best supplementary competencies of each partner. Sopportunity of dynamic customization of goods and services. Overcoming space limitation. Transaction costs reduction. Application of the most recent methods and techniques for realization of a project as well as for its management. There can be also perceived numerous challenges and potential problems connected with functioning of virtual organizations and virtual organizing. Issues which are very often under-lined comprise possibility of cooperation with incompetent (unreliable) partners or lack of appropriate legal regulations. Also technical problems as necessity of possessing suitable IT solutions or potential failures related to multimedia transmission are emphasized as well [Kisielnicki, 1998], [Kisielnicki, 2000]. The ETHICOMP E-Journal 4
It is necessary to take into consideration two more issues connected with implementation of the virtual organization concept. First one is the problem of clients preparation for collabo-ration with VOs (see [Kisielnicki, 2000]). It seems that in practice this aspect is of no impor-tance, because customers perceives the virtual organization as one company which delivers product or service they need and its internal structure as well as rules on which its functioning is based does not matter at all. Far more important is second issue, which one should perceive as a crucial element for its success. This issue is preparation of each individual company for functioning within a VO. In fact it relates to three aspects, which are mutually related to each other: Technological. Organisational. Human. Especially underestimated is the last element and it will be discussed below in more detailed way. 3.2 Human aspects of virtual organizing Since implementation of virtual organization concept is strongly supported by ICT, radi-cal rethinking and redesigning of numerous business processes is required. In consequence many social and cultural implications emerge. They relate both to internal groups within a company (own employees) as well as to people outside an organization (vendors, subcontrac-tors etc.). The most important implications relate to changes in: Skills (e.g. ability to operate in electronic environment, utilization of Internet-based tools). Behavior on the job (e.g. changes in workers scope of responsibilities, work in cross-functional and cross-organizational teams, shifts in so far used procedures). Employees knowledge (e.g. security issues connected with operating in electronic envi-ronment). The ETHICOMP E-Journal 5
Organizational culture. In case of implementing any changes in organization s operations, extremely important issues are various psychological barriers. Since virtual organizing requires numerous deep shifts in many elements of company s functioning, this aspect must be taken into considera-tion very carefully. Generally three kind of barriers connected with redesigning of business processes can be identified. According to Schumacher, they comprise [Wielki, 2000]: Internal individual resistance Internal group resistance (formal and informal). External resistance. First two barriers refer to changes in internal business processes of a company, which effect individual employees or groups (e.g. functional departments). They can result from such issues as shifts in work style, scope of responsibility or position in company s hierarchy. Third potential barrier refers to resistance of people from cooperating firms (e.g. suppliers) effected by redesign of company s business processes. In case of virtual organizing such rea-son can be necessity of work in the electronic environment. But barriers which result from necessity of redefining each company s business proc-esses are not the only human related challenges, which can occur during establishing a VO. Another important element which can make cooperation within a virtual organization difficult are differences in corporate culture between collaborating companies. It relates to such issues as [Carnall, 1995]: system of shared values, the informal means of communication, approach to the corporate environment (markets, clients, stakeholders) or systems and procedures which it is expected that employees will follow. Significant discrepancies in corporate culture can be a source of serious barriers of cooperation despite implementation of necessary IT solutions and redefinition of business processes. In case of a virtual organization based on collaboration of companies from different countries, one more barrier can occur. It is a barrier which is connected with cultural differ-ences and its source can be discrepancies in national culture of enterprises which make up the VO. According to Hall in case of business cooperation important cultural differences relate to matters concerning the language of time, space, material possessions, friendship patterns and agreements [Hall, 1960]. Hofstede identified diversity among countries in work-related val-ues in four dimensions: individualism/collectivism, power distance, uncertainty avoidance and masculinity/femininity [Hofstede, 1997]. Of course the meaning of such difficulties can sig-nificantly very in case of various types of VOs (see table 1.). The ETHICOMP E-Journal 6