Managing Virtual Organisations : What are the Underlying Implications?


First of all, an organisation according to Wikipedia is “an entity such as a company or an association comprising one or more people and having a particular purpose”. Virtual means “not physically existing as such, but made by software (a set of computer programs).” Virtual Organisation in this sense means a company with an electronic presence and one which does not have a physical existence. A virtual organisation can also be called a digital organisation, network organisation or a modular organisation. They operate across different geographical regions or locations while appearing as a single unit using the digital or the advanced means of telecommunication. Virtual Organisations are formed informally as an agreement between two or more legal entities of independent nature.

Virtual organisation actually emerged in 1990 but the rapid changes in the global business environment in recent years have given it a new impetus with some small and large businesses operating as virtual organisations. Indeed, today’s business environment requires enterprises to be more flexible and responsive to consumers’ needs which virtual organisations promise to satisfy.

Virtual organisations are usually driven by business opportunities and are willing to share the risks and rewards associated with those opportunities. Once the alliance has been formed and the opportunity has been exploited, partners may move on to new partnerships and alliances. Virtual organisations are usually anchored on the presence of seamless and unified communication system to keep the organisation working smoothly. Thus, virtual organisations operate effectively in the technological space with an e-mail integration system-Short Message Service (SMS), Computer Telephony Integration (CTI), Voice mail alert and mobile device network (mobile data connections).

There is the tendency to confuse virtual organisations with virtual teams but there is a clear difference between the two.

Virtual Teams

Two authors, Jessica Lipnack and Jeffrey Stamps define virtual teams as “a group of people who interact through interdependent tasks guided by a common purpose.” Virtual teams may include employees, management, consultants or suppliers who work together to achieve a common purpose. These teams often stay together only to perform a specific task. They may work jointly on a new project but when the current project is completed the virtual team is dissolved. Invariably, virtual organisations use virtual teams to undertake their projects.

To enable virtual teams to work effectively, there should exist a defined purpose to bring the group together. Virtual team members must have appropriate skills and knowledge for the task. There should be an effective system of connecting team members by way of communication channels to facilitate interactions and relationships.

Spectrum of Virtual Organisations

Virtual organisations take different forms. They operate as either telecommuters, outsourcing employees/competencies or completely virtual. Telecommuters, for instance, work with a small office space and allow majority of employees to work from home. This helps to save the cost of renting a big office space with workstations for all employees. Completely Virtual organisations on the other hand are generally described as companies without walls which are rightly connected to a large network of third-parties made up of distributors, suppliers, customers and other stakeholders. They are linked to strategic and joint venture partners to ensure smooth operations or service delivery. Some of the world’s completely virtual organisations are GitLab Inc., Automattic, Toptal, Zapier, Basecamp, Articulate, Time Doctor and X-team. GitLab, for instance, sells subscriptions to support its open-source devOps. DevOps is used to describe a set of modern IT practices which seek to more closely bring together software developers and operations staff to work on the same project in a more collaborative manner. GitLab’s devOps platform is used by more than 30 million people around the world to help speed up software development timeframes. It has a virtual team of about 1,300 people across 65 countries.

Paradigm Shift

The emergence of virtual organisations has created a new work environment known as E-environment. This requires E-leadership to provide influence and direction to achieve results. To note, the distinguishing feature of E-leadership is the new interface between the leader and his followers comprising a global pool of talents and specialists. This means, the traditional face-to-face interaction is being replaced with unified communication tools (information technology). Even though the leadership traits or skills required of traditional leaders are equally relevant to e-Leaders, two authors, Grenier and Metes have clearly provided a list six skills that the e-leader must have to excel in the virtual workplace. These are:

  • The e-leader should understand the relationship between the use of relevant information and the enabling technology.
  • S/he should be familiar with the technologies and techniques that are central to establishing and maintaining the flow of the information during virtual operation.
  • S/he should know how and when to replace traditional work processes with virtual ones.
  • S/he should be able to calculate the value of e-technologies.
  • S/he can recognise and encourage creativity and technological innovation.
  • The sixth competence of the E-leader is that s/he should not be hesitant in experimenting new ideas and their implementation.

Influence of Virtual Organisations

There are many advantages of a virtual organisational structure to the modern world of commerce. Some of them are as follows:

Control of Overhead Expenses

Conventional organisations operate from physical locations which are becoming increasingly costly to maintain. Some of the physical locations are built with modern architecture with plush décor which attract high rents. The other itemised overhead expenses go into hiring many employees to handle the work in the physical space, costs of maintenance, expenses for lighting, furniture, cleaning and stationery. A Virtual Organisations tend to reduce operational expenses since they have a minimal administrative expenses to incur.

Improving scalability

As I pointed out early on, physical office spaces are attracting high overhead costs. But virtual organisations do not require expenses as such. As a result, virtual organisations optimise their resources by way of capital to improve growth potential and scalability. Their operations also tend to be very efficient due to the fact that there is an absence of bureaucratic structures. Hence, major decisions and activities can be conducted in a quick and efficient manner.

Access to New Markets & Opportunities

Virtual organisations can tap new markets or exploit new opportunities easily since they do not depend on physical office space. They operate with flat organisationsal structures by relying on remote sales teams which can reach out to new markets. Based on the fact that they use unified communication systems, virtual organisations are able to offer excellent services to customers.

-Global Pool of Talents/ Specialists

Virtual organisation can hire talents or specialists from any part of the world. Indeed, hiring employees remotely gives virtual organisations an access to a larger pool of talents which are necessary to undertake special projects of mutual interest. This strategy also enables them to provide superior and better services to its clients across the global. In a related development, the culture of global pool of talents ingrains flexibility of working hours. Thus, flexible hours allow employees to determine their own schedules within certain parameters and accommodate diversity and inclusion with ease.



Virtual organizations can be very complex and problematic to manage. Some of the identified challenges of managing a virtual organisation are:

-Loss of control over operations

Virtual structures create a loss of control over some operations. This loss of control calls for effective communication, coordination, and trust among the various partners to achieve a common purpose. The virtual arrangement tends to create an ambiguity about organisational membership and superior-subordinate relationships among employees. This ambiguity requires management to have e-leadership skills to create and sustain this organisational type. Virtual organisations also create a situation where there is lack of bonding among employees, hence, there is the tendency to mistrust one another.

Security/Compliance Risk

A virtual organisation means sharing information remotely. There is the likelihood of breach or cyber-attacks which can lead to loss of vital data to a third-party to misuse for personal interest. Indeed, traditional organisations are equally prone to cyber-attacks. What is necessary is to use modern and robust technological architecture to control the associated risks.

The Way Forward

Les Pang of ISACA (Information Systems Audit and Control Association) as it was previously known offers a list of best practices based on a review of implementations of virtual organisations. E-leaders need to:

  • Foster cooperation, trust and empowerment.
  • Ensure each partner contributes and identifiable strength or asset.
  • Ensure skills and competencies are complementary, not overlapping.
  • Ensure partners are adaptable.
  • Ensure contractual agreements are clear and specific on roles and deliverables.
  • If possible, do not replace face-to-face interaction entirely.
  • Provide training that is critical to team success.
  • Recognise that it takes time to develop the team.
  • Ensure that technology is compatible and reliable.
  • Provide technical assistance that is competent and available.

During the COVID-19 pandemic, some companies had adopted some of the elements of virtual organisations especially virtual teams. In the face of increasing cost of doing business and in line with the Environmental, Social and Governance (ESG) principles, I believe that the time has come for many companies to build synergies which will see them explore and adapt to virtual organizational models convenient to their operations.


Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.

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