Managing Change in an Organization

Abstract

Firms using dynamic networks use a small amount of capital to fund growth allowing them to grow rapidly. They usually have a small staff. They subcontract work and outsource noncore functions. They hire superior talent, avoid idle capacity, and reduce inventory allowing them great flexibility. Dynamic networks have vertical disaggregation, brokers, market mechanisms, and full-disclosure information systems. Firms that function in a global environment have special challenges and environmental pressures. They must respond to local laws and customs, and conditions in their host country. Firms structure their division of labor through horizontal differentiation, vertical differentiation, personal differentiation, and special differentiation depending on the type of firm. Firms are decentralizing responsibility for decision making to more people in the firm allowing for increasing autonomy.

Characteristics of Dynamic Networks Dynamic networks (modular organizations) combine a variety of subcontractors into a working organization. Modular organizations have a small staff that develops strategy, subcontracts work and outsources noncore functions, and monitors the interface with various subcontractors allowing managers to decrease overall costs and speed the development of new products. This allows the company to hire superior talent to perform certain functions, avoid idle capacity, reduce inventory costs, and avoid becoming committed to a technology that becomes obsolete. These companies can grow rapidly since they use a small amount of capital to feed rapid growth. For example, a core firm may sell computers, but contract out design, manufacturing, sales, and distribution. The firm can add or subtract subcontractors as needed. This allows great flexibility for the firm. The modular structure meets the need for innovation and efficiency since subcontractors pursue different strategies, yet complement each other as part of the network (Gordon, 2002, pg. 414). The dynamic network takes different forms. Individual firms join in partnerships to work in international projects. High-tech firms strategically collaborate with each other to form network organizations. General contractors and subcontractors in the construction business form a stable and continuous network over time. Dynamic networks have four characteristics. They have vertical disaggregation in which independent organizations within the network perform the business functions. It is used in product design, marketing, manufacturing, and other functions. They have brokers that assemble the business groups by subcontracting for required services, creating linkages among partners, or locating such functions as design, supply, production, and distribution. They have market mechanisms such as contracts or

payments for results, rather than plans, controls, or supervision, hold the functions together. In addition, there is full disclosure information systems link the various network components. A modular structure also can exist inside an organization. The company creates entrepreneurial and market components, such as distribution, information technology, or research and development that operate as separate divisions or profit centers with bottom-line responsibility (Gordon, 2002, pg. 414). Horizontal organization focuses on core processes, emphasizes on empowering workers by reducing the management hierarchy, and encourages employees to focus on customer requirements and satisfaction. It includes cross-functional teams that manage and run processes. Horizontal structures organizes work around key processes instead of tasks, flattens the hierarchy by empowering workers and eliminating non-value-added work, uses teams to manage everything, and lets customers satisfaction drive performance. It uses information technology to reach performance objectives and deliver value to customers. Process owners take responsibility for an entire core process. It rewards workers for their team-related performance and maximizes contact with suppliers and customers (Gordon, 2002, pp. 410-411). Lattice Organizations emphasizes teamwork and employee empowerment that results in structures that reduce or eliminate organizational hierarchy. It can eliminate assigned or assumed authority. Sponsors rather than bosses work with associates instead of employees. This structure emphasizes strong interpersonal communication. Individuals responsible for accomplishing various objectives are tasked with setting the objectives (Gordon, 2002, pp. 411-412). Some firms unite and form alliances to pursue a set of agreed-upon goals. Rather than acquiring and developing their own resources, some organizations find

it faster and cheaper to form alliances with another organization. They share control over the performance of assigned tasks and make continuing contributions to the alliance. The linkages between organizations in alliances strengthen companies by bringing additional resources to solving organizational problems and competing in the marketplace. Strategic alliances also create opportunities for learning from a partner. Successful alliances view partnership as an opportunity, attach importance to the results of the collaborative efforts, demonstrate a reasonable level of trust, and demonstrate a willingness to learn from each other. It creates shared goals and realistic expectations, uses conflict productively, redesigns and creates integrated systems, and believes in honest communication. In addition, these alliances have committed leadership; plan and budget jointly, have congruent measurement and reward systems, and provide necessary resources (Gordon, 2002, pp. 412-413). The virtual organization is a network of independent suppliers, customers, and even competitors, tied together by computer technology. The Internet and information technology allows them to share skills, costs, access to markets, and supports the development of this structure. Once the network achieves its objectives, it may dissolve. Each organization participating in the network contributes only its core competencies. Companies frequently regroup which into new virtual corporations which creates flexibility to seize new opportunities. These organizations usually have flat structures in which information and decision making move horizontally. Electronic communication supports multidisciplinary work arrangements that link people across formal organizational boundaries. Virtual organizations may be temporary, and firms may participate in multiple alliances simultaneously. In virtual corporations, computer networks link companies, entrepreneurs, and partnerships. Each partner brings its core competencies

allowing the creation of a best-of-everything organization. Partnerships are more opportunistic, less permanent, and less formal. Since members rely on each other to achieve their goals, there must be a level of trust. The virtual corporation redefines the traditional boundaries of a company. Increased cooperation among competitors, suppliers, and customers makes it difficult to determine companys borders. Virtual organizations can exist within a single company. They have of a pool of employees from whose expertise various business units can draw which allows all parts of the organization access to a broader pool of talent and enables information technology staff to work on a broader array of projects and problems (Gordon, 2002, pg. 416).

Differences between Global Management and Multinational Management Increasingly, companies function in a global environment, with special challenges. Managers in high-performance companies structure their organizations to increase effectiveness of their interactions with the environment. Many of these firms are moving to a decentralized structure that allows managers to respond more quickly and effectively to customer requirements. Organizations that function in the global environment face special environmental pressures. They must respond to local laws and customers, as well as to those of their home country. Multinational companies typically choose the extent to which they create special local structures that respond to conditions in their host countries (Gordon, 2002, pp. 432-449). There are many challenges in the global environment such as the rapidly changing environment, the constant development, and availability of new

technology, and the increased number of knowledge workers in the labor force. Firms that start and develop as part of the dot-com companies face many challenges in structuring themselves so that they are responsive to the changing environment. Companies in this environment tend to implement organic structures, such as horizontal organizations, network structures, and even virtual corporations. Frequent reinvention and restructuring occurs as these companies respond to new product launches, increased competition, and a general environment. These firms combine mechanistic structures and organic structures to create a hybrid firm as they become more established. There may be variations in laws and regulations that require special support staff in various countries to ensure compliance. However, with the elimination of economic boarders between countries and comparable consumer demands, global structures have emerged thus eliminated the need to differentiate horizontally into regional divisions or product subsidiaries. With the Internet and communication technologies of today, coordination across long distances is simple and effortless (Gordon, 2002, pg. 449). Managers of multinational organizations create structures and management strategies that respond to their needs. Firms with similar products in different regional markets such as oil companies, use a global management style. These firms compete worldwide by creating few or no distinctions between markets and developing global economies of scale in manufacturing, distribution, and sales. Firms in the electronic industry or consumer products industry such as the food industry, use a multinational management style. These firms design marketing, sales, and products to meet specific country or regional requirements. Pharmaceutical firms use an international management style that falls between global and multinational management. These firms sell similar products in all

countries but tailor them to meet local requirements. A transnational management style combines elements of each of these approaches. This style adds elements from the other styles to meet special market needs, a changing environment, or cost-reduction pressures (Gordon, 2002, pp. 449-450). Some firms represent a new breed of multinational companies. They outsource part of the manufacturing and distribution process to other countries and focus on their core competencies. Companies that form international alliances need to add a cultural dimension to their normal financial, legal, and strategic planning. There are eight stages in developing a culturally responsive alliance: (1) create cultural profiles of each partner, (2) compare profiles and identify incompatibilities, (3) develop a joint business purpose, (4) identify the desired degree of operational independence, (5) carefully choose the legal structure for the alliance, (6) agree to the management systems for the alliance, (7) staff the alliance, and (8) assess the alliances demands on its parent company cultures and change practices as needed. To increase the likelihood that the international alliance will succeed, companies identify and address cultural incompatibilities. The firm can create a shared vision and smooth its development and operation by involving managers and employees in the alliance. Some companies have moved from high-cost U.S. and European sites to locations in developing countries (Gordon, 2002, pp. 450-451). Multinational firms are organizations that function in numerous countries. They must deal with the unique characteristics of numerous cultures and countries, experiences even greater environmental complexity. They have employees with different cultural backgrounds, experiences, values, and education. A companys employees within a given country may come from both the home country and the

host country. Reconciling differences in employees perspectives, as well as taking advantage of their different views, is challenging when designing organizations. Establishing structures that allow for the fluid exchange of employees at various sites across the world is important. Many companies have shifted work outside the United States to locations with lower-cost labor. The transfer of skills and the translation of knowledge among locations occur more easily in product or project structures, in which people are used to working with diverse groups. Functional structures, in contrast, tend to perpetuate a more holistic viewpoint. Network structures provide the greatest opportunity for taking advantage of synergy from diverse countries and using it to make the parent organization more competitive (Gordon, 2002, pp. 440-450). Global organizations have the same basic structures as domestic ones; they face particular challenges in creating a cohesive structure across countries. They must respond to differences in culture, language, and laws while creating an integrated enterprise. For example, Hewlett-Packard reorganized its global structure so that multinational clients can purchase from a single sales and marketing group in their local area. Other companies have moved key operations to specific business locations. Companies that tend to have longer-lasting international joint ventures are those with experience in forming domestic joint ventures and those that are international, wholly owned subsidiaries (Gordon, 2002, pp. 416-450). Division of Labor The division of labor at Orion College is personal differentiation in which labor is divided according to the workers expertise or training. Orion emphasizes the personal division of labor and organizes labor around workers specialties. With personal differentiation, departments within the organization can vary the degree in

their differentiation. Orion may also organize groups within its management department around professors expertise, such as strategy, organizational behavior, human resource management, and social issues in management. This type of division of labor is also valuable in business situations that require special expertise in firms such as high-technology manufacturing or specialty marketing. Orion College divides its labor according to expertise and specialty. For example, the Admissions Department answers questions about the admissions process, makes admissions decisions, and communicates with students until they arrive on campus. This department sends students information about financial aid but does not answer questions about the financial aid process. The Financial Aid Department receives applications for financial aid, makes decisions about financial aid, and then administers it during the students four years in college. The registrar handles all course registration. In this division of labor, CEOs, CROs, or Executive Vice Presidents are usually at the top. The specialties report to these executives is divided into the Director of Admissions, Registrar, Director of Financial Aid, Director of Housing, and Controller. With this division of labor, Orion College has received an increasing amount of student complaints. The students feel that they must deal with too many departments and that Orion is not customer-oriented and sensitive to student issues (Gordon, 2002, pg. 399). There are other types of division of labor. With horizontal differentiation, jobs are grouped at the same level in the hierarchy according to their function, customer, product, process, or geographical area. There can be a high or low division of labor. The amount of horizontal differentiation varies. It depends on factors as the managers preference and the employees abilities, as well as the organizations size, age, goals, and product or service. As a firm grows and

differentiation increases, barriers to communication also increase. Electronic communication can reduce these barriers since communication as it makes communication across units as easy as communication within the unit (Gordon, 2002, pg. 399). Vertical differentiation exists in tall organizations that have many levels in the hierarchy. This division of labor describes the number of hierarchical levels in a company. Flat organizations usually have few vertical levels. Medium-size firms may have seven or eight levels. Vertical differentiation increases the checks and balances in a company and can help the firm minimize or avoid mistakes by employees. Higher-level employees more often check the decisions made by lowerlevel employees. In tall structures, there are many levels of positions, which provide more avenues for advancement within the organization, which a closer fitting of employees personal needs, and abilities to jobs. However, tall structures can slow decision making if people at many levels in the hierarchy participate. Since higher-level managers make the important decisions, workers low in the hierarchy have be less motivated. With a vertical division of labor, the responsibility for decision-making is usually limited to those at the top of the firms hierarchy. Firms decrease inefficiency by centralizing functions. Decentralization refers to extending the responsibility for decision making to workers at all levels in the organization. This gives workers more responsibility and autonomy. Problems can occur when employees lack training in their roles and can contribute to failure. Decentralization assumes that people closest to the problem have the most knowledge and can make the best decisions on how to fix it. In the vertical division of labor, flatter structures have the potential for faster communication and greater adaptability, however even tall

structures can allow the decentralization of decision-making (Gordon, 2002, pp. 399-403). Spatial differentiation describes the grouping of jobs according to geographical location. This type of division of labor responds best to differences in customers, suppliers, or even regulation in different locations (Gordon, 2002, pp. 399-401). Coordination Mechanisms Firms such as Orion College create positions and departments or other groupings of workers. The firm must finds ways to coordinate the various groups. Coordination refers to the extent and means by which an organization integrates or holds together its various parts and helps them work together to accomplish a common goal or activity. Coordination methods include mutual adjustment, direct supervision, standardization of work processes, standardization of outputs, and standardization of skills (Gordon, 2002, pg. 401). Orion College uses mutual adjustment. With this type of coordination, a firm utilizes informal but direct communication between individuals. It also occurs with electronic media in which employees can have immediate access to co-workers around the world through e-mail, telephone communication, or videoconferencing. Simple organizations rely heavily on mutual adjustment to coordinate the work. Large, bureaucratic firms rely on it in small departments or among top management. Complex firms use it to reduce uncertainty in communication and task performance (Gordon, 2002, pg. 401). Orion College is categorized as a mechanistic structure. Mechanistic structures have relative stability and inflexibility in the way they organize activities and workers. They usually have centralized decision-making accompanied by a unitary chain of command. They rely on extensive horizontal and vertical division of labor

to encourage specialization of activities throughout the organization. Orion has a horizontal division of labor in which there is job specialization. For example, the Admissions Department answers any questions about the admissions process, makes admissions decisions, and communicates with the students until they arrive on campus. Although the Admissions Department sends incoming students information about financial aid, it does not answer questions about it or process aid applications. The Financial Aid Department receives applications for financial aid, makes decisions about financial aid, and then administers it during the students four years in college. The registrar handles all course registration (Gordo, 2002, pg. 403). Firms use direct supervision when more formalized control is needed. A manager directly supervises or has responsibility for the work of one or more other employees. The director of Human Resources may coordinate the work of her employees through direct supervision by providing guidance, timetables, and feedback to employees about their performance. Direct supervision uses the chain of command to ensure that workers do their jobs correctly. Many organizations have substituted mutual adjustment for direct supervision of employees. Horizontal, lattice, modular, and virtual organizations emphasize mutual adjustment rather than direct supervision for coordinating work-related activities. In some cases, it is used with other coordinating mechanisms, such as mutual adjustment or standardization of work processes. With the increased emphasis on empowering workers and using teams in the workplace there has been a trend of reducing the amount of direct supervision (Gordon, 2002, pg. 401). Standardization of work processes occurs when managers specify the actual steps employees should follow in performing the work. Standardization of work

processes is used in production that uses assembly-line technology, such as manufacturing tires, parts, or hamburgers at a fast-food restaurant. This standardization uses equipment, computer programs, or written directions to define each step in the process. This reduces the need for other forms of coordination. Empowered teams of the modern firm have the autonomy to adjust work processes to meet the needs of the firm. Coordination also occurs by specifying the nature of outputs, known as standardization of outputs. For example, managers who are judged based on their groups productivity or profitability have their work coordinated by standardization of outputs and motivate workers to accomplish goals based on outcomes. Standardization of outputs coordinates the work of top management by allowing managers discretion to devise the best processes to get the job done. This results in worker empowerment by allowing more workers to respond creatively to changing conditions or customer demands (Gordon, 2002, pp. 401-402). Other professions such as teachers, nurses, and pharmacists rely on their training and expertise to coordinate their work through the standardization of skills. Licenses, certification programs, and training offer ways of standardizing skills. For example, certified public accountants and board-certified surgeons participate in new programs directed at creating and maintaining skill standards. Through training, school, and on the job, nurses know how to interact with physicians and other medical personnel. Through legal training, lawyers know their responsibilities in the courtroom. In addition, these professionals may also use mutual adjustment supplement the standardization of skills (Gordon, 2002, pp. 401-402). Organizations can Solve or Create Problems

Orion College has a functional organizational structure. In functional structures, employees are grouped according to major categories of work activity. At the corporate level, companies may group employees into marketing, information systems, and human resources functions, among others, and then into further groupings within each major function. At Orion College, there is horizontal differentiation that characterizes the structure. The functional structure works best when the roles or jobs in the organization are grouped into functional areas, employees need relatively little communication outside the groupings, the organization has a well-developed product or service, and few exceptions occur. In addition, the company has a relatively benign environment, such as a stable and predictable market, and the organization is small-to medium-sized, making face-toface communication feasible (Gordon, 2002, pg. 405). There are three types of functional structures: simple structure, machine bureaucracy, and professional bureaucracy. Firms that have a simple structure are small and young use mutual dependence and direct supervision as coordinating mechanisms. The top manager has significant control. As the organization grows, the simple structure either departmentalizes by function or develops a more complex form that relies on other means of coordination. As organizations, grow in size, horizontal and vertical differentiation increase, leading to the standardized and formalized behavior characteristic of machine bureaucracy. They key coordinating mechanisms are direct supervision and standardization of work processes. Largescale firms such as automobile, steel, equipment, and consumer goods manufacturers organize this way (Gordon, 2002, pg 405-406). Orion is considered a professional bureaucracy. This structure has the formalized characteristics of the machine bureaucracy, but emphasizes

standardization of skills rather than standardization of work processes for coordination. A professional bureaucracy typically has little vertical or horizontal differentiation, but extensive personal differentiation. Firms train workers to ensure that they have the required skills for organizational functioning (Gordon, 2002, pg. 406). The advantage of a functional structure is that it encourages people with jobs in the same area of specialization to work together. This type of interaction builds a strong loyalty to the functional group and offers extensive expertise in specified areas. The relatively high vertical division of labor that often accompanies this structure provides employees with many opportunities for advancement within a functional discipline. This structure avoids duplication of effort in different parts of the organization since typically only a single human resources department, operations division, or accounting group services the entire company. The

disadvantage is that the high horizontal and vertical differentiation can cause problems. Dysfunctional performance and competition results when communication is limited between functional areas. There may be a call for communication up the hierarchy when dealing with problems, which slows the response time and hinders the response time to customer demands. Although this specialization can work well in predictable situations, it tends to slow decision-making and impede effective communication as seen with the increasing number of complaints from students. Students feel that they must deal with too many departments and the college is not customer-oriented (Gordon, 200, pp. 403-406). Effective Types of Organizations Mechanistic structures rely on standardization of work processes and direct supervision. These approaches limit the discretion of most workers in the

organization for processing information because they use the hierarchy for communication and problem solving. In Orion College, each individual reports to one supervisor. This results in clear lines of authority. Each person knows whom to communicate problems or questions. Although each individual reports to a single person, many organizational members have more than one subordinate as seen with Orion College. A managers span of control is the number of people who report to him. Orion focuses on standardization of skills and personal differentiation. This structure seems to work best for universities however; Orion can increase the skills of workers, through cross training and reduce the number of departments students must involve. By providing training to increase the knowledge and empower employees with responsibility, employee morale can improve as well as customer service. Employees can focus on their main role; however through training employees can answer a wider range of student questions. For example, the Admissions Department and Student Accounts Department may be trained to answer certain questions regarding financial aid (Gordon, 2002, pg. 403). Market-Oriented structures groups employees according to functional areas according to the market they serve. For example, a consulting firm may organize its workers into projects for a particular industry. In market-oriented structures, a product, project, client, or geographical grouping exists at one level, but other forms may exist elsewhere such as a product structure. A product manager may supervise various functional groups where the top level of a geographical structure emphasizes location. In addition, a more typical functional structure may exist within each geographical division. Larger firms may create market-based divisions or separate subsidiaries. Firms can respond to a mixed environment and diverse cultures by setting up mini-organizations that meet unique needs of various

countries and cultures. The market-oriented structure responds effectively when the company faces a dynamic and unpredictable market situation, success requires rapid communication for rapidly changing conditions. In addition, the organization has abundant resources for meeting customer needs (Gordon, 2002, pp. 407-408). The advantage of market-oriented structures is that it focuses on the needs of particular products, projects, customer, or geographical areas. Teams develop the common goal of meeting market demands, which is advantageous when market needs require a fast response. This structure speeds problem solving and adaptation when combined with decentralization. The disadvantage is that it increases costs since it can duplicate knowledge throughout the organization. The focus on market requirements also prevents workers from developing a wider, functional expertise that lets workers moved from market group to market group as necessary (Gordon, 2002, pg. 408). The integrated structure is a combination that incorporates both functional and market-oriented structures. It responds to the needs of a changing and complex environment (adhocracy). It uses a variety of ad hoc or temporary liaison devices such as task forces, projects teams, and matrix structures, to encourage mutual adjustment among members. Flexible structures respond to a complex, changing environment. It incorporates sophisticated information technologies that support teamwork and information. The integrated structure has flexible groupings of individual and change as the organizations needs change. It groups individuals that emphasize a market focus. With decentralized decision-making, there is increased autonomy, responsibility, and accountability of all employees allowing them to respond faster to unpredictable conditions. It also groups employees that combine functional specialties. Some firms have an integrated structure (matrix), which

combines the best aspects of functional and product structures (Gordon, 2002, pp. 408-409). The advantage of integrated structures is that they respond well to a changing environment. Firms can add or delete product of project groups as necessary. Firms adopt this structure when they have high information processing needs. Since project teams share functional sources, some cost economies can occur. Workers retain a strong functional identity that helps bring special expertise to the needs of various products or projects. The matrix form of an integrated structure has special costs such as overhead costs from more managers and personal costs for workers from reporting to more than one boss. There may be conflict and stress among workers from working for people with different standards, expectations, and work priorities. There may be power struggles from competition among managers. The matrix structure slows time-to-market in new product development. Although these situations can improve from clarifying responsibilities and quickly identifying problems, firms look for other ways to combine functional and market-oriented structures. More adaptive structures include horizontal organizations, lattice organizations, alliances, modular organizations, and virtual organizations (Gordon, 2002, pp. 409-410). Horizontal organization focuses on core processes, emphasizes empowering workers by reducing the management hierarchy, and encourages employees to focus on customer requirements and satisfaction. It includes cross-functional teams that manage and run processes. Horizontal structures organizes work around key processes instead of tasks, flattens the hierarchy by empowering workers and eliminating non-value-added work, uses teams to manage everything, and lets customers satisfaction drive performance. It uses information technology to reach

performance objectives and deliver value to customers. Process owners take responsibility for an entire core process. It rewards workers for their team-related performance and maximizes contact with suppliers and customers (Gordon, 2002, pp. 410-411). Lattice Organizations emphasizes teamwork and employee empowerment that results in structures that reduce or eliminate organizational hierarchy. It can eliminate assigned or assumed authority. Sponsors rather than bosses work with associates instead of employees. This structure emphasizes strong interpersonal communication. Individuals responsible for accomplishing various objectives are tasked with setting the objectives (Gordon, 2002, pp. 411-412). Some firms unite and form alliances to pursue a set of agreed-upon goals. Rather than acquiring and developing their own resources, some organizations find it faster and cheaper to form alliances with another organization. They share control over the performance of assigned tasks and make continuing contributions to the alliance. The linkages between organizations in alliances strengthen companies by bringing additional resources to solving organizational problems and competing in the marketplace. Strategic alliances also create opportunities for learning from a partner. Successful alliances view partnership as an opportunity, attach importance to the results of the collaborative efforts, demonstrate a reasonable level of trust, and demonstrate a willingness to learn from each other. It creates shared goals and realistic expectations, uses conflict productively, redesigns and creates integrated systems, and believes in honest communication. In addition, these alliances have committed leadership; plan and budget jointly, have congruent measurement and reward systems, and provide necessary resources (Gordon, 2002, pp. 412-413).

Modular organizations (dynamic networks), combines a variety of subcontractors into a working organization. Modular organizations have a small staff that develops strategy, subcontracts work and outsources noncore functions, and monitors the interface with various subcontractors allowing managers to decrease overall costs and speed the development of new products. This allows the company to hire superior talent to perform certain functions, avoid idle capacity, reduce inventory costs, and avoid becoming committed to a technology that becomes obsolete. These companies can grow rapidly since they use a small amount of capital to feed rapid growth. A modular structure has vertical disaggregation in which independent organizations within the network perform the business functions. It is used in product design, marketing, manufacturing, and other functions. Brokers assemble the business groups by subcontracting for required services, creating linkages among partners, or locating such functions as design, supply, production, and distribution. Market mechanisms such as contracts or payments for results, rather than plans, controls, or supervision, hold the functions together. There is full disclosure information systems link the various network components. A modular structure also can exist inside an organization. The company creates entrepreneurial and market components, such as distribution, information technology, or research and development that operate as separate divisions or profit centers with bottom-line responsibility (Gordon, 2002, pg. 414). The virtual organization is a network of independent suppliers, customers, and even competitors, tied together by computer technology. The Internet and information technology allows them to share skills, costs, access to markets, and supports the development of this structure. Once the network achieves its objectives, it may dissolve. Each organization participating in the network

contributes only its core competencies. Companies frequently regroup which into new virtual corporations which creates flexibility to seize new opportunities. These organizations usually have flat structures in which information and decision making move horizontally. Electronic communication supports multidisciplinary work arrangements that link people across formal organizational boundaries. Virtual organizations may be temporary, and firms may participate in multiple alliances simultaneously. In virtual corporations, computer networks link companies, entrepreneurs, and partnerships. Each partner brings its core competencies allowing the creation of a best-of-everything organization. Companys band together to meet a specific market opportunity. They disband after meeting the need. Partnerships are more opportunistic, less permanent, and less formal. Since members rely on each other to achieve their goals, there must be a level of trust. The virtual corporation redefines the traditional boundaries of a company. Increased cooperation among competitors, suppliers, and customers makes it difficult to determine companys borders. Virtual organizations can exist within a single company. They have of a pool of employees from whose expertise various business units can draw which allows all parts of the organization access to a broader pool of talent and enables information technology staff to work on a broader array of projects and problems (Gordon, 2002, pg. 416).

References

Gordon, J. R. (2002). Organizational Behavior: A Diagnostic Approach (7th ed.). New Jersey: Prentice Hall.