hrm paper detail

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Research paper presentation at International Conference on Emerging Trends

in E-Commerce on March 16th and 17th, 2011 Organised by Department of

Commerce, University of Madras, Chennai.

Mr. Ritesh Kumar Singhal,

Assistant Professor in Economics,

Sydenham College of Commerce & Economics,

Churchgate, Mumbai-20

Contact Number: 09869109674

Email: [email protected] (Please send all correspondence at this

email address).

Dr. (Mrs.) Ekta Singhal (Physiotherapist)

Final Semester Student MBA-HRM, from Sikkim Manipal University

Dadar, Mumbai- 14

Contact number: 09969375623

Email: [email protected]

TOPIC: CHALLENGES IN A VIRTUAL ORGANISATION

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mailto:[email protected]:[email protected]


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Biographical Note:

Mr. Ritesh Kumar Singhal - M.A. (Economics), SET (Economics).

Mr. Ritesh Kumar Singhal is working as an Assistant Professor in Economics at

Sydenham College of Commerce & Economics, Mumbai, India. He is teaching in

Degree College since September 1997. He is been teaching subjects like Micro

Economics, Macro Economics & Indian Economy. He is also a visiting faculty at

Yashwantrao Chavan. Maharashtra Open University, as well as other courses of

Mumbai University likes B. Com in Banking & Insurance & Bachelor of

Management Studies. He also won the second prize for the best Research paper

competition held at S.N.D.T. University, Mumbai in October 2007. His paper had also

been selected at the International Conference on Applied Economics at Greece in May

2008. He has recently submitted his Ph.D. Thesis at the Department of Economics,

University of Pune in February 2011.

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Topic: Challenges in a Virtual Organisation

ABSTRACT:

This study aims to develop and offer some deeper understanding of the impact on

work created by virtual organisations. This study seeks to understand: what are the

advantages in the virtual arrangement that attracts the virtual workers? And what

aspects of the virtual worker enable them to function in this working environment?

The salient feature of the virtual organization is the flexibility to meet the changing

environment, its effectiveness in using electronic communication and the leveraging

of strategic partnerships. Todays organizations are faced with a dynamic and

turbulent environment that requires flexible and fast responses to changing business

needs. Many organizations have responded by adopting decentralized, team-based,

and distributed structures variously described in the literature as virtual, network, and

cluster organizations. Advances in communication technologies have enabled

organizations to acquire and retain such distributed structures by supporting

coordination among people working from different locations. Understanding virtual

work is important as e-commerce and e-business strategies are adopted and

implemented in organizations where flexible work practice is a key component of the

business strategy. Organisations and enterprises can work together in new ways

without leaving their core market and leverage becomes more important in these hard

times of commoditation. As convergence, integration, migration occurs between

technologies, markets and user demands, virtual organisations will be in a position to

react to these changes.

Key words: virtual organisation, e-commerce, communication.

INTRODUCTION:

Human resource management (HRM) is the strategic and coherent approach to the

management of an organizations most valued assets the people working there who

individually and collectively contribute to the achievement of the objectives of the

business. The terms human resource management and human resources (HR)

have largely replaced the term personnel management as a description of the

processes involved in managing people in organizations.

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Organizations have always tried to adapt their organizational structure to suit their

organizational strategy. The factory system that brought labour, materials and motive

power together in the industrial revolution was one example of this. In later years,

organizations have continued this trend of matching strategy with structure and have

gone through cycles of centralisation and vertical integration followed by

decentralisation and a focus on product groups or geographical markets.

Matrix management was an early example of this but proved difficult to manage in

practice, particularly in large, multinational organizations that spanned several time

zones. The notion of the 'virtual organization' is now seen as an organizational form is

capable of addressing the problem of managing transformations in the social,

economic and technological environments in which organizations now operate.

What are Virtual Organisations?

A virtual organisation consists a group of companies, acting as one company to fulfil

a need in the marketplace. These companies collaborate, share skills, information,

products, services etc in order to meet the goal of customer fulfilment. In deed, a

company can itself be a virtual enterprise consisting of interdependent departments.

These companies operate independently of each other but work together to meet a

common goal of meeting a need in the market. In deed, any company can partake

in more than one virtual organisation so long as this does not result in any direct

conflict of interest.

'Virtual organizations' are a set of organizations that rely on multiparty co-operative

relationships between people across structural, temporal and geographic boundaries.

Flexibility is brought about in part by reconfigurable networks of computer based

communications that allow organizations to co-ordinate their activities and in part by

a management philosophy based on collaboration and innovation.

CONCEPT DEFINITION

Davidov and Malone in their paper: The virtual corporation are credited for

initiating the discussion on virtual organizations use the term virtual corporation to

refer to a very broad concept encompassing any new organizational form, inter-

organizational forms, etc.

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Other definitions that can be found in the existing literature include:

VO is a form of cooperation of legally independent companies of people contributing

their core competencies to a vertical or horizontal integration and appearing as one

organization to the customer.

K. Laudon, J. Laudon and other authors claim that virtual organizations are

Organizations using networks linking people, assets and ideas to create and distribute

products and services without being limited by traditional organizational boundaries

or physical location.

Travicca gives a more comprehensive definition of the VO:

Virtual organization refers to a temporary or permanent collection of geographically

dispersed individuals, groups, organizational units which do or do not belong to the

same organization or entire organizations that are dependent on electronic linking in

order to complete the production process.

Why do we need virtual organisations?

Most markets require virtual organisations to fulfil the needs of customer/s that would

otherwise go unmet. We have seen some enterprises partially virtualise their

operations, Cisco operates virtual factories, so if we look at it from the point of view

of the factories that produce routers and switches. Cisco is the virtual organisation.

What are the charactereistics of a virtual organisation?

Dispersion. Virtual Organizations break the barriers of space and times, which may

even lead the virtual organization to become a 24-hour organization, thus improve its

responding to customers.

Based on core competencies. Core competencies form the fundamental nucleus of

Virtual Organizations. The combination of all core competencies leads to synergy and

enables a flexible way of meeting the customer demands.

Based on Information Technology. IT is a key factor in the spread of VOs.

Globally dispersed firms, individuals, material and information resources come

together in a VO by becoming connected through communication and information

flows. Important for a VO are the advances in transportation, communication and

computing and particularly the Internet.

Customer based and mass customization. A Virtual Organization is focused on

customers, who ask for individual products. VO should arise from a response to

customer need and it should disintegrate with the fulfillment of that need.

One identity. The VO must have its own identity and although it can consist by many

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partners it should be recognized as one by customers.

Interdependence. Interdependence among partners differentiates the virtual

enterprise from traditional ones. Participants share accountability and responsibility

for the success of the enterprise as a whole, as well as for their particular portion of its

operations and they are involved more or less actively in all enterprise operations.

Based on trust. There is need for trust at all levels i.e. between management and

employees, management and managers, employers and employees, and customers and

organizations.

What are the challenges against creation of virtual organisations?

There are different challenges to be overcome in the virtual organisation environment.

These challenges include infrastructure and people issues.

CHECK LIST FOR VIRTUAL TEAMWORK

1: SYSTEMS AND PROCESSES

technology

adequate resources

reward/recognition systems in place

system and metrics to measure performance

2. PEOPLE

necessary skills

skill based training programs

technology based training programs

senior leaders

selection practices

In order for a virtual organisation to operate efficiently, the flow of information toenable decision-making and management is required. This means that all members of

a virtual organisation need to introduce a coherent IT strategy that enables

information free flow. In the centralised example it will be the core

organisation/enterprise that takes the leading role in directing the IT strategy and in

the decentralised virtual organisation each member needs to agree to this strategy.

Ensuring that the right IT infrastructure is deployed is paramount to achieving a

workable virtual organisation; it must conform to the ideals of being flexible and

scalable.

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The IT challenges that must be overcome include:

Availability as close to five nines as possible

Expense not cut corners

Performance no matter what the load is

Mobilisation is the network capable of going mobile?

Meet user requirements the user interface needs to be easy to use and meet user

needs

Architecture scalable, flexible, migratable

Integration networks of different members need to interoperate

Application support the network must support new applications

Communications how will members interact? Deployment of VPN, Extranet?

Security members should not be able to access information that falls outside the

remit of the virtual organisation

The people issues are easier to solve in the centralised model since the core

organisation is in the position of power and dictates objectives and solutions,

members that do not conform will not be chosen. The people challenges that need to

be overcome include:

Unrealistic expectations expectations of any part of the virtual organisation must be

achievable. Clearly defined objectives and solutions must be determined.

Different culture members of a virtual organisation must be able to work together.

Work cultures must be similar, bit discrepancies will lead to problems.

Collaboration over long-distances/time-zones people co-operate over long-

distance or time zones, this should not hamper workflow, the right IT solutions must

be out in place.

Diverse processes/procedures each member must understand his/her role,

responsibilities and objectives and so must the people that are included as part of the

virtual organisation. These must be clearly defined.

Management practices each member must be able to manage their objectives as

part of the virtual organisation to suit their needs and objectives.

The implementation of a virtual organisation portal will enable members to

effectively operate and access information, processes and applications to enable them

to achieve this goal. The information, processes and applications must be globally

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available in order to empower each member of the virtual organisation so that they

effectively operate. The virtual organisation portal provides a workplace solution on

which members and employees can:

Collaborate

E-learn

Information share

Web-conference

Delegate

Manage

Interact with customers, partners, suppliers

Project Manage

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Transact Value

(courtesy: gstatic.com images)

There is no hard and fast way to virtualise an organisation and which IT/Business path

to follow, there are many choices to be made, however some of the most important

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aspects that must be addressed in order to create a successful virtual organisation

include:

Virtualisation must be based on user, market and customer requirements

Define SLAs with external service provider and internally if needs be

Integrate solutions end-to-end across the virtual organisation network

Implement security end-to-end across the virtual organisation network

Build in scalable solutions and flexibility

Make sure there is Value for each partner

Go for Some quick short term wins whilst developing the infrastructure

/Organisation

Get hands-on management team even if it starts of as a project

What next for virtualised organisations?

Virtual organisations are beginning to emerge and develop, the market conditions are

right; the technology is there along with the drive to do it. The appearance of true

virtual organisations will take time to appear, it may occur in a phased approach and

develop out of many industries. Virtual organisations do not mean the imminent

arrival of another Dotcom type bubble; it is the creation of new business practices to

meet the demands of new market dynamics, being better able to react to the customer

demands. Virtual organisations will only work where there is benefit for all members,

whether it is a centralised or decentralised virtual organisation. It is quickly being

realised that in many emerging market it is very difficult for individual enterprises to

meet the demands of the individual and in many cases expectations go unmet. These

end-user needs can sometimes only be met through co-operation and in a virtual way.

As convergence, integration, migration occurs between technologies, markets and

user demands, virtual organisations will be in a position to react to these changes.

The VO problems and how to solve them

A virtual organization is dependent on technologies and experiences. However,

people are the entity who owns technologies and experiences. Therefore, how to

promote the knowledge capital of an organization through human resources

management is the key to improve the competitive advantages. Because of the special

virtual nature of the virtual enterprise, the human resources management faces new

problems.

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The fact is that the processes of the creation and functioning of the virtual

organization are not simple. Eliezer Geisler, , (2001). They are accompanied with

various problems, from those arising from the cultural differences among the team

members, their sometimes quite unreal expectations of what they and other team

members can and cannot do, to the problems concerning the coordination of all virtual

organization members.

Yet, the following may be the key problems:

(1) The problems of (un) trust among the team members, The all present danger in

most virtual teams is that the members who are from different places, belonging to

different cultures and possessing different level of technological knowledge feel some

kind of fear concerning the way in which their information will be used, or whether

other members of the team will give the same contributions to the realization of the

mutual task, etc. It takes some time to develop the "on-line" trust, although a little

time is usually spent on that.

(2) The problems of communication inside the virtual organization :Different

problems concerning communication represent the serious problem in the functioning

of the virtual team. One of such problems is the inability to view the whole project.

(Karin & Hemingway, 2004, p.195) The specific communication inside the virtual

organization may even create some situations in which a member of the virtual

organization does not under-stand the received message completely.

(3) The development of trust. This question has to be of the central importance to the

team managers. It is the fact that the old-fashioned ways of the management based on

the permanent supervision and control are not suitable for the virtual situation.

(4) The encouragement of direct (face-to-face) contacts, if at all possible. It is often

suggested to the virtual organization managers to organize at least one initial meeting

for the virtual organization members, so that they can meet one another in person and

develop some personal contacts. Such meetings, if they are possible at all, make

interpersonal contacts and relations among the virtual organization members stronger.

(5) To introduce the team members into the way and time schedule of the task

realization. The basic idea is to enable the team members to realize their own position

in the whole team. This can be done by showing the complete plan through the

electronic means.

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(6) To find the model how to avoid "delays".(P Kearney ,Trust ,2006) This model can

include, for example, the obligatory reply to the sent question, or the necessity to give

the needed information for the stated time period (24 hours, or 48 hour, etc.), or the

obligation to send the return information to the per-son looking for the answer that the

question has reached the proper ad-dress and that giving the answer will take some

time.

(7) To take records of each team member. (Deborah Bigelow, 2000). Although it can

be difficult to take records every day, it is advisable to send the information

concerning the absence of each team member to other members

(8) A framework for trust, security and contract management A new economy based

on virtual organizations requires an environment within which businesses can quickly

come together to share resources and work together to achieve the project goals. In

addition, there is a requirement for services to replace the trust inherent in operations

within an integrated real organization (trust in colleagues even when not known

personally, trust in procedures and processes, etc), and the trust between customer and

an established service provider with a clear legal identity and brand/reputation.

Human Resources Management Strategies in Virtual organizations

For the human resources management problems in virtual organizations, it is critical

to timely identify and fix them effectively. This is imperative to ensure the positive

development of the enterprise.

(1)Must establish a common goal.

In virtual enterprises, the ultimate goal is to achieve certain business functioning and

to realize projected economic and social values by utilizing market opportunities. The

goal of employees is to get competitive earning and to realize personal values.

(2)Experimenting virtual human resources department.

The temporal nature of virtual enterprise is not the absolute truth. the organization

should try virtual human resources department. A human resources management

team may be organized from resources of member companies HR departments. One

of the responsibilities of this team is to deal with the challenging problems related to

human resources in the virtual organization. However, the human resources

departments of member companies still function independently from each other.

(3)Develop trust and good relationship.

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Trust is the basic foundation of maintaining regular operations of virtual

organization. Distribution of resources, calculation of work contributions,

performance evaluation standards, information sharing, opportunities are all factors

in trust development. Therefore, the operation of the organization must be open with

high visibility, fare, and respectful to individuals knowledge, expertise, attitude,

behavior, and culture, etc. It also must establish and maintain good reputation.

(4)Cross culture training.

Cross culture training is the most effective measure to resolve culture differences and

realize good cross culture management. Generally, the main strategy of cross culture

training is to have cross culture sensitivity training to the managers of the member

companies having frequent interactions. The training can be many formats, including

culture education, interactive communication, cross culture study, and experiencing

inter-personal relationships from different culture societies. The goal is to give the

trainees an opportunity to learn the culture in other companies and understand the

existing differences. The training will help managers to gain skills of identifying and

resolving problems during collaboration and make it easier to have multiple-

company cooperation.

(5)Establish double incentive system primarily based on member companies and

supplemented by virtual organization incentives.

To have each employee highly motivated is the ideal situation desirable to virtual

human resources management. Human resources capital theory pointed out that

employees with human capitals play a decisive role to business performance. To

increase productivity of employees and use the maximum of their potentials, the

employer must declare that the employees own their human capitals. The employer

needs to share dividends with his employees and make his employees decision-

makers. The virtual organization built upon technical employees is not a legal

physical entity and it does not have the traditional performance incentive base.

Under this unique circumstance, the double incentive system is an alternative.

(6)Assist employee personal development.

Besides maintaining its normal business operation, the virtual organization may

develop an affordable employee career development plan. The organization should

assist its employees to expand their knowledge and potentials, provide opportunities

to fully utilize employee expertise, and help employees plan realistic career

development goals. Provide key employees with comfortable working environment

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and personal development opportunities in order to increase positive motivation and

creativity of these employees.

VIRTUAL TEAMS

The team is generally defined as "a small number of people with complementary

skills who are committed to a common purpose, performance goals, and the approach

for which they hold themselves mutually accountable". (Karin Breu, Christopher J

Hemingway, 2004, p. 192)

The creation of groups, that is, teams, "is a normal part of human social behavior".

Their importance for the organization lies in the fact that teams can make the

organization "more flexible, quality-conscious and competitive.

Accordingly, "the organizations that recognize the impact of teams on productivity

can use that knowledge to their advantage ".

The virtual team (VT) is one of the forms, characteristic for virtual organizations. It

can be often heard that virtual teams represent the basic cell of the virtual

organization. (Deborah Bigelow, 2000) There are various definitions of the virtual

team.

What most of these definitions have in common is the fact that they emphasize that

the members of the team are, besides being the representatives of the team, separated

(in space and/or time) and that they interact primarily by e-mail.

So, the virtual team is defined as "team(s) of people who primarily interact

electronically and who may meet face-to-face occasionally" or "a self-managed

knowledge team with distributed expertise, that forms and disbands to address a

specific organizational goal" and "a group of people who interact through

interdependent tasks guided by common purpose", that "works across space, time, and

organizational boundaries with links strengthened by webs of communication

technologies".

It is precisely in this definition that there is four essential dimensions of the basic

model of VT "to hold something as distributed as a network and something as

immediate as a virtual team-people linking with purpose over time" .(Bekkers,

2003,p.102) The purpose, important in any organization, becomes a key factor in

virtual organizations and teams, since it is the "glue" that holds them together. In fact,

it requires the establishment of co-operative objectives, individual tasks and specific

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results. People make up the heart of the virtual team. One of the most stressed aspects

is their high degree of independence or autonomy, while the need for interdependence

and collaboration is also recognized.

Connections between the team members are critical and must be able to be made both

by face-to-face interactions and through ICT (Information and Communication

technology). Calendars, include team-specific result deadlines, task-completion

milestones, and scheduled events, as well as holidays and other organizationally

significant dates that impact timing.

They are three components to defining virtual team,

Different geography of locations of team members: virtual team members can

be located in different parts of a city or in different parts of the world. As the

distance increases and more time zones are crossed, the window of

synchronicity in the workday narrows.

And, Team members from different organizations are parts of the

organization: Team members can be from different organizations or from

different parts of the same organizations.

Finally Different durations or lengths of time that members work together as a

team: Depending on itsmission, a virtual team may unite for a project that

lasts a few days, months, or years.

There exist different variants of the virtual teams.(Karin Breu, Christopher J

Hemingway, 2004, p. 192) About, the called, "distributed teams" and some variants

of the so called "cross-organizational teams".

Distributed teams are (teams) composed of people in the same organization who work

in different places, either interdependently, or separately. The basic variants of the

distributed teams are "task forces and project teams (as temporary teams). Such teams

are formed specifically to solve a particular problem or to perform a specific task.

When the problem is solved, or the task completed, the virtual team disappears (and

team members go back to their normal duties). (P Kearney ,Trust ,2006)

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The basic variants of the so called "cross-organizational teams" are "collocated cross

organizational teams" are "distributed cross-organizational teams". "Collocated cross-

organizational teams comprise people from different organizations who work together

in the same place. On the other hand, the so called "distributed cross-organizational

teams" involve people from different organizations who work in different places.

CONCLUSIONS

virtual organizations may well be non-hierarchical and decentralized from an

authority standpoint; however, from a communication standpoint they may still be

hierarchical and somewhat centralized. The reason for this rests in the communicative

efficiency and robustness of the hierarchical form and in the benefits of role

specialization. Virtual organizations allow relatively easy access to people in the

know by making it easy to obtain information from experts, regardless of where they

are located

The challenges virtual team leaders face are often exacerbated by their virtual settting.

Effective leaders may be pinpointed to have five leadership differentiators :

top performing team leaders are able to successfully manage change,

foster collaboration,

communicate team goals and direction,

use strong interpersonal communication skills,

and empower team members.

Understanding that leading from a distance can be more challenging than leading

from co-location is the first step in adressing the problems of virtual team leaders.

Many companies feel that if theyy have the technology their virtual teams cannot fail.

As a result, they neglect other interpersonal and structural factors necessary for virtual

teams.

Technology is of course, only a tool. It is important for virtual teams as a prerequisite

rather than a differentiator. Technological advancements will certainly continue to

impact how people collaborate and work from a distance. Organisations need better

planning and the right mix of communication technologies to address particular

business needs. In addition to technology leaders need to have the skills to lead from a

distance.

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(courtsey; Plexus Communication.)

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hrm paper detail