A virtual organizational structure is an opportunistic alliance of core competencies distributed among a number of distinct operating entities within a single large company or among independent companies. For a manager-less organization, the structure seems to be based on a “network of teams“ or self-organizing teams with end-to-end responsibility. Employees allocate tasks and roles based on voluntary and self-selected commitments and consensus decision-making, often supported by natural leaders.
There are many differences between virtual, managerless and conventional forms of organization but the essential difference is that where conventional organizations are the aggregation of factors of production (people, physical assets, etc); the virtual organization and is the coordination of disparate and dispersed factors of production for the creation of value, and managerless is The organisational structure seems to be based on a “network of teams“, around self-organizing teams with end-to-end responsibility.
Conventional organizations are not passe in the 21st century because some employees may have difficulty adjusting to not having a hierarchical structure. Some personality types work better following instructions of a superior rather than managing themselves. With flat organizational structure and an absence of hierarchy, there is potential for some employees to become complacent and acceptable to average performance. If nobody is holding employees accountable for their actions in order for expectations to be met then being mediocre may become the standard (Hamel, 2017).
Another reason why conventional organizations are necessary is because unlike virtual and remote structures; you have the opportunity to work physically along with employees and build relationships. The opportunity to work around others strengthens relations and builds motivation amongst one another. Networking and the prospect of possible promotion also help motivate employees in conventional organizations (Quain, 2019).
Finally, conventional organizations are necessary because of the need to constantly train, teach and grow new talent in an organization. New knowledge always begins with the individual, and an individual’s personal knowledge is transformed into organizational knowledge valuable to the company (Nonaka, 1991). The role of a middle manager can be the piece that connects new knowledge for the individual. In the case of the managerless companies, nobody is responsible to help train new talent. Employees could have a hard time adjusting to the work or learning skills necessary for the job. (Hamel, 2011).
One class example of a traditional structure is in the United States Department of Defense and the U.S. Military. Their structure has a clear chain of command that soldiers can quickly follow. Every military member understands and respects this traditional hierarchy because superiors make all the important decisions and rely on those under their supervision to implement their decisions efficiently (Huebsch, 2018).
Historically militaries worldwide have sustained a strict ranking system that preserves an order when under duress in combat. The hierarchy is essential for procedures to run efficiently. The ranking system serves many purposes, and some of those characteristics are maintaining order, rank responsibility, a continuation of command, performance evaluation, and prestige rank. (Moore, 2017) The U.S. Military continues to utilize the chain of command and has proven how valuable this traditional hierarchy continues to be.
Another example of a company that uses conventional organizations to structure their business would be Ford. Ford found the assembly line the best way to mass produce their vehicles and products. The purpose of this method of production is to reduce labor costs from hiring workers that are trained to perform a specific task.
Ford has announced their plans to open BlueOval City in Tennessee, which will be the largest auto production complex in the world, as well as BlueOval sk Battery Park in Kentucky. Because of the assembly structure of these plants, there will be roughly 11,000 jobs created for people in these communities. Ford’s management structure is a rigid hierarchy where rules and regulations don’t allow for much flexibility, especially on the assembly line. Ford Motor Company and Redwood Materials are collaborating to make electric vehicles more sustainable and affordable for Americans by localizing the complex supply chain network.
“Traditional approaches to work in the United States that once focused on task specialization, simplification, and repetition are being supplanted by approaches that promote higher job skill levels, broader task responsibility, more worker involvement, and, most importantly, worker responsibility for quality” (Russel, Taylor, 2016). This concept is seen in the shift from conventional to modern organizations within the last decade. The power hierarchy of a conventional organization flows vertically and upward, and employees follow a chain of command. Middle management and employees implement top management’s strategy with loyalty and obedience. Top managers focus is on the organizations competitive advantage and employee job security. On the other hand, modern organizations are boundaryless and place soft skills like networking and collaborating at the forefront. Empowered lower and middle managers and employees are responsible for the organization’s competitiveness and their own development. Top management supports personnel development and ensures employability.
Workflow can be defined as the order of processes through which a task or item passes from initiation to completion. In the past, it was advantageous for organizations to focus on standardized workflows. Traditional organizational structures rely on rules and procedures to influence employee workflows (Johnson, 2017). A classic example would be that of an assembly line; the system was built on specialized labor. In contrast, modern organizations are almost boundaryless and collaboration is highly encouraged. Today organizations must be prepared to adapt rapidly. As the Reeves mentions, rather than being exceptional at doing one thing, companies must now be exceptional at learning how to do new things (2011). Employees are required to routinely update their knowledge and skills.
Traditionally companies went by a list of responsibilities, skills, experience, and people performed jobs according to these requirements. Companies didn’t always encourage and support people to step out of their job role and take on additional responsibilities or work as a team. In modern companies the traditional approach is present, but more freedom is given to employees. Businesses have started focusing on productivity and goals and are implementing better strategies to get to the desired result. Employees are now cross-trained, receive additional training, are encouraged to make decisions without management’s approval, work remotely, and are encouraged to move up the ladder within a company. “When integrating both traditional and nontraditional workplace culture practices in your business, balance is key” (Richmond, 2017).
According to Porter, “strategy is the creation of a unique and valuable position involving a different set of activities” (1996) that moves an organization in the right direction. However, conventional organizations follow a static strategy due to undefined or unclear guidelines and struggles with change associated with disruptive transformations. This strategy is noted for having the following characteristics: rigid, task-oriented, and employees are controlled through power and position. Additionally, management controls the flow of knowledge and technology; and confusion between management and leaderships goals and expectations leaves its employees with a lack of motivation. Adopting a dynamic strategy will assist the organization with exploitation of disruptive creations making the organization more flexible, more innovative, and less enamored of its old ideas pushing “the boundaries of what you can achieve faster and further and achieve your most challenging goals” (The Power, 2021).
Conventional organizations are typically centralized in that they rely on an individual to make decisions and lead the company. While centralized systems have been efficient in the past for making business decisions, it leads to more bureaucracy. They are not innovative in nature; employees receive instructions on how they are expected to perform, which limits them from performing at their full potential. In contrast, modern organizations are innovative and creative in design. This usually translates to a positive work environment and enhanced morale. Individual contributors are usually considered to be business generalists with a wide range of skills and projects in which they can choose to complete. This gives the employees the opportunity to be creative and active in business decisions without having to wait for approval from the top. Modern systems develop positive relationships company-wide and give companies more competitive advantage.