Journal of Perspectives in Organizational Behavior, Management, & Leadership
Volume 1 Issue 1 (2015)
An Exploration of Organizational Structure and Strategy in Virtual
Organizations: A Literature Review
Patricia A. D’Urso, Donna Graham, Robert Krell, June Paradise Maul, Carol Pernsteiner,
Dana K. Shelton, and Gary W. Piercy
Corresponding Author:
University of Phoenix
Patricia A. D’Urso, Ph.D., 2005 N. Taylor Road Brandon, FL 33510. 813-503-5862
Pat.durso@gmail.com
ABSTRACT
The study of organizational structure and strategy in virtual organizations is a broad and current topic. This literature
review includes a number of virtual organizational theorists’ and authors’ positions and philosophies about how
structure and strategy affect the virtual organization. The virtual organization emerged as a need existed to conduct
business in a fast-paced, innovative, global market place whose reach to clients and customers is exponentially
staggering as the world has moved to another plateau in conducting business. In order for the virtual organization to
be successful, leadership (E-leaders) must be able to depend on the structure of the organization to support the
strategy necessary to build a business that could thrive. The structure of the organization must include talented
people who are innovative and visionary within this new entity, and leaders need to learn how to lead, manage, and
earn trust in this environment. The rhetoric concerning virtual organizations often entails mature communication
methods and practices that need to support the new structural relationships. More importantly, leaders need to
respond quickly and make timely decisions in order to maximize human capital--skills and talent--to accomplish
strategic plans, including innovative genius, none of which is exclusive of return on investment. The structure of an
agile organization facilitates swift responsiveness. This literature review contains a discussion of these important
aspects of virtual organizational structure and strategy and ways to manage the human capital in a synthesized
snapshot for the reader, which includes over 80 references in the bibliography.
Keywords: communication in virtual organizations, decision-making in virtual organizations, innovation in virtual
organizations, human capital management, social networking, technology in virtual organizations, virtual
organizational strategy, virtual organizational structure
INTRODUCTION
The virtual organization emerged as a need existed to conduct business in a fast-paced, innovative, global
marketplace in which a physical brick and mortar location often did not exist; yet, a need existed to reach potential
customers and clients through the World Wide Web. In order to survive in such a market, and to compete with other
organizations that are innovating faster or creating a “push/pull” dynamic with pressure to produce products and
services quicker, organizational leadership needed to monitor the competition and evaluate internal contingencies
and external factors. Common denominators among VOs are similar to more traditionally structured organizations
including information technology, computer-aided design and manufacturing technology, quick-response
communication and marketing systems, sophisticated manufacturing and inventory equipment and control, and
customer information databases. Since VOs have no physical boundaries, their global reach has the potential for
exponential profitable increase, which necessitates cultivating the ability for rapid decision-making (Certo & Certo,
2012). Human capital, particularly virtual team management, is necessary for this rapid decision-making
environment. The multimodal reality and the inherent structure in VOs often require e-leaders to engage in complex
decision-making processes. Therefore, strategies should include effective communication by leaders with their
teams and the close management of human capital. E-leaders engage and guide their virtual followers toward the
attainment of specific and strategic goals through consistent communication, relationship building, and the
development of trust (Germain, 2001; Jang, 2013; Peters & Karren, 2009; Staples & Webster, 2008; Tseng & Ku
2011; Zaccaro & Bader, 2003).
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Journal of Perspectives in Organizational Behavior, Management, & Leadership
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The purpose of this literature review is to provide information regarding VO’s structure and strategy, the
effect of quick decision making in a power sharing virtual team, and a maximization of management of human
capital and talent in the process. This process includes affect evaluation, needs assessment, performance monitoring,
and theory building while considering programs, policies, procedures, and causal mechanisms. Broad applicability
of best practices will improve organizational performance and agility and enhance human capital and other capital
investment, which could produce a greater return on investment.
The evolution of organizational structure from hierarchical to agile created a need to understand how to
align structure and strategy within the new VO. From Sun Tzu in 300 B.C. (Huang, 1993) through Henderson’s
(1979) introduction of corporate strategy with the Boston Consulting Group, Porter’s (1980) positioning theory,
Mintzberg’s (1987) organizational learning theory, and micro-foundation reductionist theories, the strategy has been
to achieve competitive advantage for creating value. Initially, the interest in corporate competitive advantage related
to deregulation of the airline, banking, and telecommunications industries. Following was the emergence of new
technologies including computers and the Internet as well as capital markets that enabled mergers, acquisitions, and
globalization (Kiechel, 2010). Thus, the evolution of organizational structural relationships also necessitated the
evolution of differing maturity levels of communication methods, communication processes, and corporate
strategies.
Specific topics under consideration include VO’s structure and strategy and associated subtopics including
elements, factors, and components relative to the VO phenomenon. This research team presents a relatively
sophisticated model, which captures some of the elements necessary to be successful in VO business synthesized
from a literature review. The focus of this literature review is the internal VO, which treats the internal virtualization
based on strategy and structure of distributed collaboration in virtual teams as opposed to a network of smaller
companies or outsourcing combined efforts (Riemer & Vehring, 2012).
BACKGROUND AND HISTORY
Davidow and Malone (1992) noted that a VO extends the concepts of time and modification in response to
immediate market demands. An organization is virtual in the sense that it has little if any physical presence and
relies on telecommunications and the Internet. VOs tend to be agile, flexible, and fluid. Thus, a VO includes people,
assets, and ideas linked by technology with no physical building. Often, the virtual employee works remotely from
home and employs the Internet to maintain connection to the company.
VOs reflect two different types of structures. First, employees work for a common entity with corporate
goals. In this scenario, employees may work in virtual groups from different geographical locations. Second, the
design of a VO could include different companies that share a common enterprise to deliver products or services in
an effective and lucrative manner (McAfee, 2011). These are actually a merger of all corporate divisions into the
VO. These two VO structures enable organizations to focus on their markets to meet financial goals. Since the initial
introduction of VOs, they have become popular due to low investment requirements, easy start-up procedures and
costs, and quick response time to and from their customers (Venkatraman & Henderson, 1998). This ease of setup
enables many VOs that offer various types of services to merge.
A Google search will reveal many VOs, ranging from virtual doctors (Teledoc) to virtual diet centers
(Weight Watchers). Additionally, VOs include organizations that only have a virtual presence such as Amazon.com,
Rakuten.com, or Overstock.com. Many VOs rely on their parent company to outsource (McAfee, 2011). The
primary benefit for outsourcing for the parent company is that the VO is able to control expenses, enable greater
flexibility, and generate higher volume sales.
Consumers have driven the success of VOs. VOs offer a range of goods from technology components to
travel booking services such as hotel.com. The Rakuten.com portal links specialty stores and features products from
thousands of popular manufacturers. Additionally, these VOs include extensive product reviews to assist consumerbuying decisions. VOs allow customers to shop at any time, track packages, and access customer service as they rely
on technology to meet the needs of their customers quickly and comprehensively. Further, many VOs provide
immediate online chat boxes so that customers might ask questions about products or discuss problems with their
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accounts. VOs allow for the expansion of business globally and represent a way of life for many. However, the
development of VOs is in its infancy as compared to traditional brick and mortar businesses. These VOs will dictate
that traditional companies become more flexible and bring products and services to consumers at an increased speed.
Traditional brick and mortar businesses will not be able to meet the needs of the global market, hence new forms of
managing, creating company culture and climate will be needed (Certo & Certo, 2012). Such development could
lead to many future changes among VOs.
THE EVOLUTION TO A VIRTUAL ORGANIZATION
A global society necessitates organizations that conduct business globally and innovate faster. The
increasing importance of innovation as a supply “push” results from the “pull” of a globalized market demand.
Foreign competition pressures organizations to innovate continuously in order to produce a variety of products and
services, which enables organizations to protect their margins, while investing in product and process innovation
helps them to lower costs.
Technologies enable organizations to develop and produce more product variants that closely meet the
needs of narrowly defined customer groups, thus achieving differentiation among competitors. In addition to
enhancing technology adoption, VOs seem to lower production costs and cycles and allow for the creation of larger
databases to track material use in manufacturing processes spread globally. The lowered risks of using VOs with
collaborative metrics have been explored in-depth in various academic and industrial settings (Ivan, Ciurea, &
Doinea, 2012).
VOs have developed from start-ups to billion dollar multi-national organizations with an unlimited global
reach. A number of elements are driving organizations to become boundaryless. First, social media continues to
increase, as a valuable resource for meeting global information needs (Korschun & Du, 2013). Second, the
accelerating nature of decision-making as applied to the strategic planning process and the need to reduce risk.
Third, VOs, promote faster synchronization thru fluidity in organizational structure rather than redundancy as in
traditional structures (Grabowski & Roberts, 1999). Fourth, the supply chain management and new product
development process (Chandrashekar & Schary, 1999). Fifth, the disruptive nature resulting from technological
innovation and the discontinuities that transpires during technological advances. For example, the structural
adaptation taking place in global academic institutions to boundary spanning challenges that VOs present (Burkhard
& Horan, 2006). Sixth, organizations need to capture and harness expertise and talent globally. Seventh, exploiting
employee competencies thru innovative VO practices and VO structural motivation is possible (Radovic-Markovic,
2014). Seventh, organizations that establish boundaries are finding that the ability to cross those boundaries is
becoming increasingly difficult (Jordan, 2009). Eighth, the VO is boundaryless and is increasingly important as
organizations strive to be responsive and agile in the competitive global marketplace. The identification of a
taxonomy of networked collaborative organizations provides insights into the complexity of entanglements that are
possible to survive using non-conventional VO structures for such areas as supply chain and virtual alliances
(Cheikhrouhou, Tawil, & Choudhary, 2013). Ninth, the needs to ensure, verify, and validate empowerment for those
who have to make decisions quickly. Alignment of goals quickly, over more traditional structures, using a VO
structure among a disparate number of collaborative organizations is now a reality (Cao & Hoffman, 2011). Tenth,
with social networking as a catalyst, innovation is creating an explosion that is unorganized and disruptive in nature
(Sinclaire & Vogus, 2011). Eleventh, the need to process large amounts of data across organizational boundaries to
meet requirements is increasing at an exponential rate (Kumar & Bawa, 2012).
The Value of Social Media
Social networking and the ubiquitous mobility of social media resulting from smartphone technology is
expanding the opportunities for organizations concerning how best to exploit social capital. Social capital refers to
the value of information gleaned from social interchanges; social capital facilitates dialogue among scholars,
practitioners, and policymakers (Woolcock & Narayan, 2000). These interchanges become fruitful when there are
few or no communication barriers within an organizational structure. The establishment of VOs may occur quickly
with little effort and are ideal structures for catalyzing and sustaining social media processes.
Social media platforms promote “ideation” and actually generate superior ideas faster (Garrigos-Simon,
Alcamí, & Ribera, 2012). Creative industries benefit from social media as it eliminates separate operating units
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within organizations allowing for open innovation with suppliers and customers (Gyorffy, 2010). Accordingly, an
environmental dynamism is proceeding globally. This dynamism is a direct relationship between organizational
structure, strategy, and performance (Miles, Coven, & Heelly, 2000). This dynamism is also the reason that global
organizations become increasingly transparent in terms of their structural relationships with suppliers and others
who represent an integrated approach to producing product and services. Outside-in and inside-out social media
processes support networking facilitating the flow of information. Outside-in processes enrich the organization’s
knowledge base through the integration of knowledge sourcing (Adeyeri, 2014). In contrast, inside-out fosters
transfer of information and ideas from market and selling technology to the outside environment (Jauhari, 2012). In
this manner, networking facilitates developing leaders beyond knowing simply what and how to knowing with
whom to collaborate.
The Accelerating Nature of Decision-making
Shortened cycle times translate into obtaining information about new product development processes
quicker and interpreting the meaning gleaned from the product test results to determine operational performance
achievement. Efficiency necessitates the distribution of product or service information throughout the organization
effectively without artificial boundaries caused by structural inefficiencies. The VO provides a structure for the most
effective and efficient dissemination of such information.
As organizations adopt new technologies and increase their pace of innovation, they pressure competitors,
triggering an industrywide shift to shortened development cycles and rapid product innovation. The net results are
greater market segmentation and rapid product obsolescence. Product life cycles (the time between a product's
introduction and its withdrawal from the market or replacement by a next-generation product) are significantly
shorter. Product life cycles are shorter for consumer electronics as technology advances integrate into product lines
at an accelerated rate with older models barely covering marginal costs of production (Schilling, 2013).
Technological Innovation and Discontinuities
S–curves describe the diffusion of technology in a company, in a major sector, or globally in the aggregate
(Schilling, 2013). S–curves in technology diffusion occur by plotting the cumulative number of adopters of a
particular technology (usually on the y-axis) versus a time element (usually on the x-axis) (Schilling, 2013). With
the introduction of e-commerce and the widespread use of the Internet as a facilitating mechanism, the characteristic
S–curve could realize an additional pattern due to a continuous acceleration and deceleration of innovation. This is
primarily the result of accelerated learning curves and scale advantages that accrue within the technology. This
diffusion is no longer continuous; rather, is the result of disruptions that are discontinuous in nature.
The S-curve models have prescriptive limitations including the inability to determine the limits of current
technology accurately. Technological innovations do not always follow the S curve and changes in market
conditions, complementary technologies, and component technologies could significantly affect the life cycle of a
technology. An S-curve is unadvisable as the sole decision making tool as numerous factors determine the choice to
change between technologies; these factors include the organization’s ability to produce the new technology and the
availability of complimentary resources to support the new technology (Becker & Speltz, 2009).
Processing data across organizational boundaries
Recent technological advances include the advent of cloud computing. Thus, now the possibility exists to
read 200 genomes in one day when previously it took two weeks per genome. Using cloud computing, virtual teams
are able to collaborate on a massive scale. Further, organizations needing to gather information globally at the place
where it is most accurate are able to collect the necessary intelligence from members of the virtual team. The nature
of VOs allow for this flexibility and cloud computing eliminates connectivity limitations.
Aligning communication method and process
Based on commonly understood social interactions, a mental model depicting communication method
versus communication process explicitly demonstrates four related organizational structures. There are four stages in
this model. Stage 1 is the traditional hierarchical structure that organizations have employed for decades intersecting
with face-to-face communications and internet communications. While there are both intra-organization and interorganization communication, due to computer systems and computer networks, widespread knowledge management
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systems and systems theory are relatively confined. This results in the hierarchical structure that provides leaders the
security of control and accountability.
Stage 2 is a flat organizational structure that represents the collapsing of the hierarchical structure to only a
few levels. Stage 2 is the intersection between virtual communications, as the communications method, and the preInternet era. Thus, there is a reduction in reporting channel filters as global virtual teams work collaboratively. Stage
3 includes the evolution of a matrixed structure that organizations employ for cross-functional interrelationships
among and between teams. In such structures, social media supports intensive information gathering, critical
thinking, and assessments. This is an organic structure in the sense that it is based inside the organization rather than
relying on significant external structural support. Stage 4 is an agile structure that allows for rapid reconfiguration
among any number of possible structures to include those mentioned in the previous structures and at this stage,
outcomes are highly dependent on the structure and strategic plan supported by the tasks and objectives. As
technological innovation increases, organizations must adapt swiftly to product development, supply chain
processes, and possible organizational restructuring.
As a result, Cushman and O’Reilly (1996) argued that the solution is to create an ambidextrous
organization composed of multiple internally inconsistent architectures melded together collectively. This
necessitates a collective focus to ensure that inefficiencies do not arise caused by needless formalization,
standardization, or lack of consistent incentives. Siggelkow and Levinthal (2003) found that some organizations are
able to achieve the advantages of constant reconfiguration while alternating through different structures. In many
organizations, a dynamic tension exists between formal, quasi-formal, and informal reporting structures
(Shoonhoven & Jelinek, 1996). There are inherent natural conflicts that exist between and among functions no
matter the structure and strategy in organizations. As is indicated in Stage 4 of this model, challenges exist in virtual
organizations in many ways to survive and thrive in this age of social media with total interconnectivity provided for
by e-commerce assets and capabilities.
STRUCTURE AND STRATEGY IN THE VIRTUAL ORGANIZATION
VOs Share Common Themes
According to Palmer and Speier’s (1997) typology, a VO operates across organizations and communicates
through the web, groupware, wan, or remote computing. VO members share mutual goals within a non-physical
communication model (Khalil & Schikuta, 2014). A common and synthesizing theme within definitions of VOs is
the importance of communication method and communication process in a non-physical environment.
Process for strategy in a VO
In a traditional organization, strategy formulation begins with identifying core competencies, customer
preferences and demand, competitors’ strengths, and environmental factors. After formulating the corporate
strategy, elements flow to functional departments within the organization for operationalization. Since a VO lacks
in-house functional departments, a VO may follow a simpler process to formulate strategy including identifying a
product strategy and deciding a competitive priority. The core competencies of a VO are those of the companies in
their network. The VO adopts a flexible structure related to the availability of internal and external resources and the
needs of the organization.
Strategies for a VO
Three prominent strategy theories for the VO stem from the positioning strategy (Porter, 1980),
organizational learning strategy (Mintzberg, 1987), and micro-foundations theory (Felin & Foss, 2005). Strategy and
structure align in a VO to support the organization’s vision. With the inter-relatedness and environmental dynamism
between organization structure, strategy, and performance, and with the maturation of communication methods and
processes, researchers sought effective strategies for the VO (Ahmed, Montagno, & Sharma, 2012; CamarinhaMatos, Afsarmanesh, Galeano, & Molina, 2009).
Positioning strategy
Porter (1980) produced a seminal work on competitive positioning purporting that organizations achieve
competitive advantage by performing different activities than their competitors or that they perform similar activities
in a different or unique way. With the maturation of communication methods and processes, VOs, and the increasing
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imperative for organizations to renew their strategic core competencies, Porter introduced the shared value theory. In
the shared-value theory, organizations achieve competitive advantage and profitability as they solve societal
problems (Porter & Kramer, 2011).
Other strategists contributed to positioning theory, including Kim and Mauborgne (2005) who proffered the
Blue Ocean Strategy, which aligned with Porter’s competitive positioning strategy. Kim and Mauborgne promoted
avoiding “red oceans” industries with many competitors and exploring “blue oceans,” which are new markets with
few or no competitors to achieve competitive advantage. VOs engage in collaborative positioning structures with
other organizations to create core competencies and to achieve competitive advantage.
Organizational learning strategy
Mintzberg led organizational learning strategy (Mintzberg, 1987) in which organizations achieve
competitive advantage through learning and knowledge management. Early organizational learning strategists
include Peters and Waterman (1982) and Senge (1990). Related themes that evolved from Mintzberg’s
organizational learning strategy were learning organizations, communities of practice, and knowledge management
(Kiechel, 2010). In virtual organizations, learning becomes a focus for virtual teams striving for competitive
advantage. Although virtual teams are dispersed geographically, and communicate using computers,
telecommunication technologies enable virtual teams to experience parallels with teams in more traditional
environments (Pinar, Zehir, Kitapei, & Tanriverdi 2014). With the availability of information made possible by
advances in technology, there is a need to find competitive value by managing “big data” available to support
organizational learning. Technologies that support individual and organizational learning in virtual environments
include open-source software and other technological advances such as cloud computing.
Micro-foundations strategy theory
Micro-foundations have origins in the social sciences. Since the advent of social science, there has been a
discussion whether social science should focus on the individual or the collective; or on the individual micro or on
macro factors such as culture, structure, routines, or capabilities (Barney & Felin, 2013). Guided by Durkheim, the
father of social science in 1962, the focus has been on macro rather than micro factors in social science research
(Barney & Felin, 2013).
While there is a plethora of literature related to micro-foundations, there is a lack of consensus as to the
definition of micro-foundations (Abell, Felin, & Foss, 2008; Barney & Felin, 2013; Felin & Foss, 2005; Felin, Foss,
& Ployhart, 2015; Molina-Azorin, 2014). Although organizations continue to strategize for competitive advantage, it
is unclear how or what strategies to use in the evolving ambidextrous and agile structures to achieve competitive
advantage. Organizational, management, and strategy scholars question how micro factors relate to macro factors for
competitive advantage (Abell et al., 2008; Barney & Felin, 2013; Felin & Foss, 2005; Molina-Azorin, 2014). Microfoundation researchers study the individual and the micro-macro links contributing to competitive advantage (Felin
& Foss, 2005). ). From a micro-foundations perspective, individuals and lower level processes help to explain macro
level outcomes. The micro-foundations theorists have received pushback from macro theorists who questioned if a
need exists for micro research or how micro-research may contribute to macro theory (Felin, Foss, & Ployhart,
2015).
In the reductionist micro-foundations theory, researchers focus on ubiquitous topics. Examples of these are
the search for the micro-foundations of strategic management and organizational analysis (Felin & Foss, 2006),
human capital (Coff & Kryscynski, 2011), and strategic advantage (Bowman & Pavlov, 2014). Micro-foundations
strategy theory is a recent focus with opportunities for future research in traditional and in virtual organizations.
VIRTUAL TEAMS
Comparing Virtual Teams and Traditional Teams
Virtual teams have many similarities with those in traditional settings. Both involve people brought
together to combine their talents and expertise to solve an organizational problem or to meet a common goal.
Powell, Piccoli, and Ives (2004) defined virtual teams as groups of geographically, organizationally and/or time
dispersed workers who have information and telecommunication technologies in common to accomplish one or
more organizational goals. This definition illustrates two important ways in which virtual teams differ from
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traditional teams. First, Zaccaro and Bader (2003) noted that space and/or time separates members of virtual teams.
Second, communication occurs via some form of computer-mediated communication technology (CMCT).
Consequently, team members must continually work to combine knowledge and contributions effectively as any
facet of group interaction that hinders team problem solving may occur (Zaccaro & Bader, 2003).
Effective virtual teams have high cohesion, trust, and commitment as well as ongoing communication. As
with traditional teams, these factors develop over time as the members work together to meet team goals
successfully. Therefore, virtual teams rely on continual communication and effective sharing of knowledge for team
cohesion to occur (Brandt, England, & Ward, 2011; Powell et al., 2004; Townsend, DeMarie, & Hendrickson,
1998). Ratcheva and Vyakarnam (2001) discussed how this team cohesion occurs in a non-linear pattern within
which members progress through stages (much like Tuckman’s 1965 model) toward mutual understanding, goal
commitment, and cooperation (Figure 1).
Figure 1. Team cohesion stages. Figure created by D. Shelton from information in Tuckman, 1965.
Virtual teams, like their traditional counterparts must have other factors in place along with continual and
clear communication. According to Duarte and Synder (2001) and Berry (2011), these factors include a willingness
to collaborate; clear expectations concerning technological types and purposes; agreed upon definitions for
successful work completion; agreement for team norms, responsibilities, and expectations; specific deadlines and
individual results; shared accountability and organized documentation; and records of team products and
communication. Thus, virtual teams have additional challenges from those of traditional teams. With the ability to
exploit global talent and knowledge comes the need to set clear expectations for communication, collaboration,
shared norms, and desired outcomes (Berry, 2011). With these factors comes shared team commitment and
accountability, which lead to team productivity and goal achievement (Berry, 2011; Duarte & Snyder, 2001; Furst,
Reeves, Rosen, & Blackburn, 2004).
Communication and Knowledge Sharing
Communication is important for all teams whether traditional or virtual. However, a CMCT creates
differences for virtual team members and their leaders due to the varying richness of virtual media. For example,
Kayworth and Leidner (2002,) asserted that voice only or written communication loses or distorts the wealth of
information available through body language and voice inflexion. Other potential communication problems include
the loss of social/contextual information such as team member expertise, social status, and ability to build team
relationships or form trust (Kayworth & Leidner, 2002). Additionally, cultural differences and different time zones
are factors that virtual teams; therefore, multicultural understanding and time flexibility are crucial. For example,
Cascio and Shurygailo (2003) noted that European and U.S. business hours overlap by only a few hours each day,
which presents a specific window for meetings to occur.
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Advances in technology have made communication easier. In fact, Thompson and Caputo (2009)
commented that different video technologies allow web communication to function like the old-fashioned water
cooler in that team members could meet, become acquainted, and develop social networks and team cohesion.
Moreover, virtual teams tend to communicate less than face-to-face teams necessitating the need to develop a
communication plan (Berry, 2011; Ferrell & Herb, 2012; Furst et al., 2004; Ratcheva & Vyakarnam, 2001).
Depending upon the task at hand, team members may choose between synchronous (e.g., videoconferencing or chat
sessions) or asynchronous (e.g., e-mail) for communication and knowledge exchanges. Interestingly, Hambley,
O’Neill, and Kline (2007) found no increase in team interaction for members using videoconferencing over chat
sessions; however, there was an increase in team cohesion among teams using videoconferencing. In sum, virtual
team members should be comfortable using technology. Fortunately, Thompson and Caputo (2009) asserted that
Gen Y’ers and Millennials (born between 1980 and 2000), a substantial portion of the virtual labor force, are
comfortable with virtual communication methods, which makes them adept virtual communicators.
Trust
Trust is a fragile yet vital factor for effective group functioning and productivity (Germain, 2001; Jang,
2013; Peters & Karren, 2009; Staples & Webster, 2008; Tseng, & Ku 2011; Zaccaro & Bader, 2003). However, due
to virtual team members’ isolation from each other and the organizational hierarchy, the development of trust may
be problematic. Jang (2013) posited that virtual teams could face an awareness deficit about other teammates’
progress and problems, which might reduce collaborative effort and mutual trust. Ongoing, expected communication
between team members could reduce members’ awareness deficit as well as increase their understanding and trust
(Jang, 2013; Jarvenpaa, Knoll, & Leidner, 1998; Jarvenpaa & Leidner, 1999; Olson & Olson, 2014). Therefore,
effective teams have members who concurrently and continually participate in production, member support, and
group well-being (Jarvenpaa & Leidner, 1999).
Tseng and Ku (2011) asserted that team trust commences once team members begin to interact and share
positive experiences involving each other’s behavior and cooperation. Trust, like team cohesion, grows as the team
coalesces and team members develop relationships and come to an agreement about group processes and individual
responsibilities (Zaccaro & Bader, 2003). Figure 2 contains a model representing this sequential growth of trust.
Lewicki and Bunker (1995) and Lewicki, Tomlinson, and Gillespie (2006) proposed that three types of trust develop
as a team matures.
Figure 2. Lewicki et al.’s transformational model of trust. Figure created by D. Shelton from information
in Lewicki and Bunker, 1995.
According to Lewicki and Bunker (1995) and Lewicki et al. (2006), calculus-based trust is the first to
develop stemming from quid pro quo types of transactions between team members. As team members understand
one another’s needs, wants, and preferences, trust evolves to knowledge-based trust. Identification-based trust
evolves from increased connections as the team advances, deepens relationships, and set mutual goals. In sum, as
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O'Hara-Devereaux and Johansen (1994) proffered trust holds the virtual workspace together and that frequent
ongoing communication between team members increases trust.
E-LEADERSHIP
E-Leadership Challenges
Leadership involves influencing others in order to bring about the successful completion of a collective
undertaking (Yukl, 2006). Leadership in traditional organizations tends to fall into one of two dimensions including
either directive or participative (Avolio & Kahai, 2003). Further, Bass (1997) noted that the true transformational
leader knows when to use behaviors from each dimension. Effective leadership is good for all stakeholders;
however, ineffective leadership makes subordinates miserable, harms morale, lowers productivity, and could
eventually destroy the organization (Hogan & Kaiser, 2005; Padilla, Hogan, & Kaiser, 2007). In VOs, however, time
and technology accelerate leaders’ positive or negative organizational effects even in a global manner (Avolio &
Kahai, 2003).
E-leaders have much in common with their traditional counterparts such as establishing organizational
goals, strategies, and policies. In addition, both types of leaders develop monitoring systems for multiple purposes
from keeping track of employees’ motivation and performance to their organizations’ fiscal bottom line (Hogan &
Kaiser, 2005). Behavioral complexity theorists suggested that the most effective leaders are able to perform
numerous and conflicting behaviors simultaneously to manage their present situation (Denison, Hooijberg, & Quinn,
1995; Jawadia, Daassib, Favierc, & Kalikad, 2013; Kayworth & Leidner, 2002). Such complexity may be especially
important for E-leaders as the ongoing multimodal reality of VOs creates important differences in how they create,
maintain, and communicate with the virtual teams they lead. Jawadia et al. commented that while communication
for traditional leaders tends to use one channel at a time, E-leaders must be capable to convey information via
multiple channels such as email and other Voice over Internet Protocol (VoIP) methods. Thus, the effective E-leader
is both a director and mentor skilled in CMCT and capable explaining responsibilities, enabling a continuous
communication flow while demonstrating a confident yet caring attitude (Kayworth & Leidner, 2002). E-leaders
engage and guide their virtual followers toward the attainment of specific goals through consistent communication,
relationship building, and the development of trust, which contribute to maximizing the management of the human
capital.
Technology is continuing to evolve rapidly. Concurrently, globalization continues its expansion. Therefore,
it is necessary to expand the literature concerning how these realities affect virtual teams and how to maximize the
management of the human capital and talent assigned in this process. For example, Duranti and Almeida (2012)
found cultural differences, based upon Hofstede’s (2001) cultural dimensions (i.e., individualism/ collectivism,
power distance, and uncertainty avoidance) in what type of CMCT global team members prefer to employ.
However, Gilson, Maynard, Jones Young, Vartiainen, and Hakonen (2015) noted that the majority of literature
concerns current technology (e.g., e-mail, IM chats) rather than on developing technology. Further, Gilson et al.
pointed out that current research is predominantly cross-sectional, which limits results to a point in time.
Consequently, longitudinal studies would provide insight regarding how virtual teams change over time due to
generational differences, work-life balance, and changes in communication, trust, technology, and leadership
(Gilson et al., 2015). The challenge for Human Resource Managers is to consider all of these simultaneous effects,
and using current advanced technology, maximize the talent in the existing workforce.
The Influence of VOs
The ambidextrous nature of VOs and the communications among stakeholders affects organizational
results. Chandler (1962) identified an organization’s strategy should influence organizational structure. As this
concept evolved, the nature of the structure of an organization also included its intangible assets. Organizations can
convert these intangible assets into tangible outcomes (Kaplan & Norton, 2004). According to Kaplan and Norton
(2004), the Balanced Scorecard includes the framework for defining these potential tangible benefits or areas of
business influence.
The intangible assets of a VO create tangible outcomes in many different ways. The VO provides many
different areas of opportunity and influence (Maul, 1994). The challenge is to recognize the opportunity and define
its influence in a way that creates value for organizations. Each organization must identify the area for potential
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impact for their organization (Maul, 1994). Some of these areas of influence have been identified in all four areas of
the Balanced Scorecard™ financial, operating, customer value, and employee value.
Various organizations have identified different potential areas of impact on their organization’s
performance based on organizational strategy. The Balanced Scorecard contains a framework within which to look
at these different areas of potential influence and provide the ability for an organization to assess progress and adapt
quickly to succeed (Niven, 2014). In the 1990s, AT&T introduced the concept of the VO as a part of a strategy to
serve various markets. AT&T organized large markets salesforce as a VO involving thousands of sales employees.
At the same time, AT&T introduced the concept of the VO and Virtual WorkplaceSM as a new way to organize and
conduct business. AT&T provided consulting, products and services, and training to help organizations (Maul,
1994). The areas of improved performance focused on the consulting and training including cost reduction due to
reduction of real estate, increased revenue, and customer satisfaction due to increased amount of time sales
employees could spend with customers by being virtual, and increased productivity of the sales force (Table 1).
AT&T also included an increased capability with virtual technology, which enabled employees to be more
productive.
Table 1. Potential Organizational Influence of the VO
Financial
 Cost reduction (AT&T)
 Increased revenue (AT&T)
 Reduction in number of facilities/buildings
(AHCCCS)
 Increased flexibility by replacing headcount
and fixed cost with variable costs (TPI)
Operations
 Increased productivity of sales employees
(AT&T)
 Increased capacity for work (AHCCCS)
 Reduce time for service (AHCCCS)
 Improved service quality (AHCCCS)
Customer
 Increased customer satisfaction (AT&T)

Increased hours of availability (AHCCCS)


Improved brand recognition globally (TPI)
Improved quality of service (AT&T,
AHCCCS, TPI)
Employee and Capabilities
 Increased technological capability (AT&T)
 Increased flexibility of workforce (AHCCCS)
 Increased level of talent (AHCCCS and TPI)
 Improved job satisfaction
 (AHCCCS)
 Improved Quality of Life (AHCCCS)
 Feel respected by leaders (AHCCCS)
 Improved employability in the industry (TPI)
A more contemporary implementation of the VO came from the healthcare organization Arizona Health
Care Cost Containment System (AHCCCS). This organization implemented its VO project to establish purpose and
provide stakeholder value (Maul, 2007). The employment of a case study approach enabled the identification of the
results of implementing the VO for a call center serving health care clients. This case study involved interviewing
over 30 senior AHCCCS leaders and employees over two months via telephone and in-person interviews. The data
from this case study contained evidence of improvement in the operating metrics of the customer centers that had
moved to a Virtual Office Structure.
The purpose of the AHCCCS study was to provide the information necessary for senior leadership to make
a decision to expand, continue, or stop the virtual office based on defined value to stakeholders, impacts to the
business, and challenges and risks associated with the initiative. Table 1 contains many of the benefit the
organization derived. These impacts went beyond cost saving, revenue products, operations efficiency, and
improved job satisfaction. In the study, employees noted that their quality of life improved and they felt respected by
senior leaders, which led the employees to work harder. Another benefit was the range of the environmental and
social impacts beyond the typical reduction in pollution, as people were not commuting. These impacts included
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reduced fuel consumption, reduced pollution, and reduced traffic. Further benefit included the ability to offer
employment to “homebound” workers. These areas do not fit into the traditional Balanced Scorecard without the
addition of a fifth box for contributions to the environment and society.
Another innovative application of the VO concept was Pathways to the Future, later called Training
Partnerships, Inc. (TPI). TPI was a VO developed and led by an alliance of a telecommunications company (US
West who later became Qwest) and a union, the Communications Workers of America (CWA). TPI was a non-profit
corporation (Ellingson & Maul, 1999). A board comprising eight members, half from each organization, led this
VO. The Chairman of the Board came from the company. The President came from the Union. Operations were
outsourced to the Council for Adult and Educational Learning (CAEL). A presentation of this case study at the Sixth
European Ecology of Work Conference in Bonn, Germany (Ellingson & Maul, 1999) identified many of the benefits
provided to their stakeholders from this jointly led company-union virtual organization. This organization allowed
employees to share in the organizational success without being detrimental to the overall viability stemming from
disproportionate wage inflation (Ellingson & Maul, 1999). The benefits to the Union and the employees included
improved employability resulting from enhanced skills, both to the company and in the industry. These employees
also developed the skills to move into leadership positions in the company and the union. For US West (Qwest) the
program helped to attract and retain needed talent and created source pools of needed skills. Additionally, the
program provided flexibility by replacing headcount and fixed costs with variable costs. Further, the program
contributed to their brand image nationally and internationally. Although various articles and studies have identified
the benefits of the VO, the results have yet to be linked clearly to theories. Apgar (1998) identified the need to begin
researching to understand why these areas of improved performance exist. These three case studies concerning VOs,
include the identification of a broad range of improvements in organizational performance from a Balanced
Scorecard model perspective. However, they did not identify why these improvements occurred nor the theories
supporting them, such as psychological components of trust. Further research is necessary to explore how and why
VO structures lead to the myriad of benefits identified. Potential research designs could include explanatory case
study, phenomenology, or narrative inquiry, each of which could help address the how and why questions. In
addition, further quantitative research should occur using quasi-experimental designs to identify the specific increase
in measurable performance areas such as increased customer satisfaction, increased employee satisfaction, increased
employee trust, increased sales, and increased operating results. Thus, a longitudinal study should extend over at
least three years to determine the potential for the VO structure to yield ongoing annual improvements. This area
remains robust for future research.
CONCLUSION
This literature review contains information regarding VO’s structure and strategy, quick decision making in
a power sharing virtual team, and discussion points about how to maximize the management of human capital and
talent in the process. The outcome of the review contains options or means by which organizations might benefit
from a fuller understanding of many aspects directly or indirectly related to virtual organizational structure and
strategy. Social networking and social media, innovation maturity and organizational structures, and the
management of human capital all influence organizational strategic planning. These possibilities correlate with
different stages in the innovation/diffusion process and social media “intelligence” assimilation. The catalyst in
prompting this interconnectivity appears to be the extensive use of social media enabled with mobile devices. This
discussion may help organizations better understand the potential and the actual mandate for using multiple VO
network structures simultaneously as a survival strategy in this new age of instantaneous information sharing
through extensive global knowledge management systems. Virtual business transformation and therefore business
structure will rely on the use of enterprise mobility—social networking, social media, smartphones. Next generation
technological mobility is happening at indiscernible rates of advancement. Some critics feel that the Internet
evolution has decimated multi-billion dollar industries not the least of which include music, publishing, and retail
(Hand et al., 2013).
Although positioning strategy, organizational learning strategy, and micro-foundations strategies have
different perspectives, each contributes to the study and practice of strategy in the VO. Technology has enabled a
maturation of communication methods and processes, enabling a VO without boundaries. Information has become
available for the common good, rather than competitive among rivals (Felin, 2012), fostering collaboration and
innovation in a dynamic environment. Positioning strategies, learning organization strategy, and micro-foundation
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strategy, provide different perspectives and individually contributes to the study and practice of strategy in the VO.
Many factors influence the structural relationships in virtual organizations and without proper understanding of
these factors that include, but are not limited to, communication, trust and respect, worker validation, appropriate
strategic formulation and execution, and an overall openness to the need to facilitate adjustments for virtual workers,
practical challenges will remain. Challenges have beset each era that evolved throughout time and the virtual
organization era is here, and workers, individuals, and organizations collectively are experiencing VO’s unique
challenges. As demonstrated in the case study analyses of AT&T, AHCCCS, and US West, the purpose of the VO
early on was to realize a purpose and contribute to stakeholder wealth.
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Dr. Patricia D’Urso is a university professor and dissertation chair. Dr. D’Urso holds a B.S. in OB/HR from State
University of New York, an MBA in HR from Pennsylvania State University, an MS in Psychology from University
of Phoenix, a Ph.D. in Adult Ed with cognate in research and measurement from the University of South Florida,
and a Green Belt and Black Belt in Six Sigma from Villanova University and the American Society of Quality
respectively. Dr. D’Urso is a blind reviewer for several peer-reviewed journals. Current research interest is the work
of Paulo Freire.
Dr. Donna Graham is a university professor and dissertation chair. Dr. Graham holds a B.A. in Psychology and
Education from Rosemont College, a M.S. in Counseling from Villanova University, a M.Ed. in Educational
Technology from Rosemont College and a Doctorate in Philosophy from Capella University. Dr. Graham is editor
of the peer-reviewed journal – JOET (Journal of Educational Technology).
Dr. Robert Krell has significant complementary career roles in the Federal Government, the private sector, the
military, and academe. He is a retired Air Force General Officer who led command, control, communications and
intelligence systems. He was a Corporate Senior Director of Strategic Planning for AT&T Corporation, a Senior
Director of Networking Systems for CSC Corporation, and has been a Management and Systems Consultant in
marketing systems. Dr. Krell has been a Graduate School Professor of macroeconomics/ finance and information
technology for over thirty years at a number of national universities where he is active in doctoral programs.
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Journal of Perspectives in Organizational Behavior, Management, & Leadership
Volume 1 Issue 1 (2015)
Dr. June Paradise Maul: Having held operations and strategic leadership roles in the telecommunications industry,
June retired as a corporate officer to do consulting, teaching, and research. At Grand Canyon University, in the
College of Doctoral Studies, she teaches research, psychology and leadership, chairs doctoral learners, and coaches
doctoral chairs. June has conducted research in virtual workplace, leadership development, learning as strategy, and
use of emerging technologies
Dr. Carol Pernsteiner’s background in business includes leadership positions in the hospitality industry, including
hotels, industry association boards and civic organizations. She retired and transitioned to education where she
teaches in the College of Doctoral Studies at Grand Canyon University, chairs dissertation committees and supports
learners in methodology and research design. Her research interests include strategy, organizational design, ethics,
and innovation.
Dr. Dana Shelton: Dr. Shelton has experience in Industrial-Organizational consulting for brick and mortar and
virtual organizations. Her area of professional expertise is in the use of personality-based assessments for conflict
resolution, employee misbehavior, team building, and employee development at all organizational levels. Dr.
Shelton currently serves as a chair, master methodologist, and professor for Grand Canyon University’s doctoral
programs.
Gary W. Piercy, Ph.D. is a university professor, dissertation chair, content expert, and leader with over 30 years of
leadership and educational experience. Dr. Piercy earned a Ph.D. in Applied Management from Walden University
and MA in Biblical Languages from the Assemblies of God Theological Seminary. Dr. Piercy served as the guest
editor of the Canyon Journal of Interdisciplinary Studies and serves as a blind reviewer for several peer-reviewed
journals. Dr. Piercy’s research interests include organizational learning and leadership. He is the husband of one, the
father of four, and the grandfather of three.
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