Bavec, Cene

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On the Management in Virtual Environments:Between Trust and ControlCene BavecUniversity of PrimorskaSloveniaThis paper discusses trust and control in a virtualized environ-ment, i. e. two sides of the same medal. An extensive use of in-formation and communication technology, and virtualization oforganizations put trust into the core of management challenges.Trust is a glue that bonds individuals and groups together to formvirtual teams and a virtual organization. It is also an importantforce behind their innovativeness and flexibility. Besides the tra-ditional perception of personal or individual trust, we have to in-troduce a much wider concept of organizational trust. It can beenhanced by legislation on e-business, electronic signatures, anddata protection acts. Another factor that can reduce the risk andconsequently build trust is the ability of computer technology toarchive and recover all data and processes. Altogether, a virtualenvironment looks relatively safe if all available techniques andlegislation are employed.introductionTechnological progress and the globalization of economy enable mod-ern organizations to introduce external and internal services that clearlydemonstrate their transition to a more and more virtualized environ-ment, which is characterized by an extensive use of electronic communi-cations, and limited physical contacts (Davidov and Malone 1992; Mow-showitz 1994). Very few companies could be regarded as purely virtual,the majority of contemporary organizations show features of the newemerging organization paradigm (Bavec 2002a).Virtualization of organizations has been a well-known phenomenonto business community for a decade (Kraut et al. 1998). However, man-agement is still moving on an uncharted area with very few navigationalaids. The relative stability of the traditional organization and manage-ment theory is replaced with constant and unpredicted changes. Neworganizational paradigms and managerial techniques that better suit to-day challenges are already emerging. Many corporations are virtualizingtheir internal organization and their business (ibm 2004):397Cene BavecToday, on an average day, more than 40% of 360.000 ibmersare working outside traditional oYce environments. They areworking on site with customers, telecommuting, working fromhome, or are working mobile.In Slovenia, many private and even government organizations followthis global trend and prove that it is a living and promising managerialconcept. Digital economy oVers many new opportunities, particularlyfor small Slovenian companies that would like to compete on the eulevel or even in a global market. Managers show their interest for newservices, and new organizational forms that would support them.Virtualization of a business and organizational environment has sig-nificantly changed a landscape of management (Hesselbein, Goldsmith,and Bechard 2000; Drucker 1999). It also puts an enormous pressure onmanagement, which has to cope with new challenges, unthinkable just afew years ago. Some managerial skills are seriously questioned and manytechniques are losing their edge. For some managers these new conceptsare still completely incomprehensible, for others they represent a chal-lenge.The paper deals with some management challenges in virtualized en-vironments. It discusses two issues: trust and control. Very few researcheshave clarified these issues from a managerial point of view. Managersdo recognize that virtual teamwork means interacting using technology,while they still do not understand trust and control in networked andvirtualized organizations.virtualization of organizationsVirtuality can be described in many diVerent ways, as networked or vir-tual organizations, b-webs, ‘anytime, anywhere, anyhow’ organizationsetc. For example, ibm prefers an expression Business on Demand, otherit companies prefer Flexible Organization, and similar expressions. Neworganizational paradigm is also getting a theoretical foundation (Mow-showitz 1997) with the Switching Principle and metamanagement. Wewill not take into consideration diVerent terminologies and views, be-cause they do not change the essence of the new organizational trends –virtuality and flexibility.We can create a virtual environment with relatively simple and inex-pensive technologies such as e-mails, internet and phone conferencing,cellular phones etc. If we add all arsenals of other multimedia and e-business technologies, we are already deeply in the virtual environment.398On the Management in Virtual Environments: Between Trust and ControlThe simplest form or the fundamentals of virtual organizations arevirtual and mobile teams (Kristof and Satran 1995):Virtual team is a self-managed knowledge work team with dis-tributed expertise, that forms and disbands to address a spe-cific organizational goal.The networking of virtual teams leads tomore complex organizationalstructures and even virtual corporations (Word iq 2004):A virtual corporation is a firm that outsources the majority ofits functions. Typically, a small group of executives will con-tract out and then coordinate the designing, making, and sell-ing of products or services. In theory, this allows small groupsof knowledgeable executives to find the lowest supplier for anygiven service, and to concentrate solely on the ‘big picture’. Intheory, it also allows firms to be nimble, rapidly ramping upproduction without having to slowly develop people and com-petencies.Usually, we discuss virtuality from a business and entrepreneurshippoint of view, but there are also serious issues from a managerial per-spective. How is a virtual environment diVerent from a real world? Whatnew challenges are there for management? How eYciently can we usetraditional managerial techniques?trust and controlThemost confusing issue formanagement is the fact that there is no clearline between the real and the virtual world, and consequently betweentraditional and new managerial paradigms. Many virtual activities basedon the modern technology are diYcult to manage and diYcult to absorbby people. Trust and control are just two of such issues.Trust is one of the most important success factors in environments,where physical contacts and other traditional ways of building andmain-taining trust are not applicable any more. Trust is a glue that bonds vir-tual teams and organizations. Without a positive belief and confidencein actions of other members in the group, electronic communicationswould make people extremely uncomfortable and unwilling to share adestiny of a team. At the end, it would destroy motivation, team spirit,and reduce its eYciency.Trust has many diVerent faces and many diVerent meanings (Daft2001; Tavcˇar 1999). Rational routs of trust lay in a calculus of self-interest,399Cene Bavecand its sociological routs are based on a moral duty and common values.It spreads from a trust on an individual or group level, to a trust amongorganizations or companies. Trust encourages cooperation, productivity,eYciency, innovativity, and positive loyalty. It is a foundation of more ef-ficient organizational structures and processes, so it is a relevant mana-gerial issue.Control of virtual activities is another big challenge. Many traditionalmethods of controlling individuals and organizations are ineYcient insuch environments. How to control the behaviour of individuals, groupsand organizations with very limited physical contacts? An extensive useof electronic communications makes it more diYcult to identify indi-viduals and their locations, and to verify the content of messages anddata files. Misuse of the Internet is nothing new, or rare. Treats are of-ten so serious that management cannot take any risk without employingvery tight and expensive measures of control. But, how far they can gowithout threatening the very substance of e-business and virtual organi-zations? It is obviously a matter of balancing treats and gains.Electronic communications have initiated the problems in the firstplace, while technology oVers also some innovative and eYcient solu-tions. New technologies oVer new possibilities for management to con-trol the organization. Electronic communications can reduce businessrisk and overshadow the traditional perception of trust. If you are notrisking than trust loses its role and value or it can be seen in a completelynew perspective. Virtual environments already show the signs of a newtrust paradigm. In business and management, we should not mix trustund naivety because virtual environments bring some real threats to or-ganizations.As an example, let us take the case of e-learning in the business envi-ronment. Workers are obliged to take a set of courses defined by mana-gement. Courses are organized in virtual classes and are available onlyon-line. Can management control the progress and results of such edu-cation? The answer would come as a surprise to many managers. Theycan follow the educational process in all phases on a very eYcient andsimple way. They can check in real time who started a particular courseand when he started it, how long it takes to finish it, what progress hemakes in interim tests and exams, what was the score of the final exametc. Management can control the educational process much better thanin any traditional environment. There is even a danger of over control.Workers could easily get an impression that they are too controlled and400On the Management in Virtual Environments: Between Trust and Controlthat could have negative consequences. Some researchers (Bavec 2002b)even show that an impression of unnecessary control diminishes trustinto management.building and maintaining trust in a virtualenvironmentIt is obvious that trust is an important factor in virtualized environ-ments; it is also obvious that risk and the ability to control the systemincrease the level of trust. Trust and control are two sides of the samemedal. Intuitively, we would conclude that a lower level of trust requiresa higher level of control, and vice versa. In reality it is not that simple.In the e-world both concepts are independent variables that significantlyinfluence a management view on information and communication tech-nologies (Dixon 2003):Virtual management is a high risk strategy unless corporationsare committed, and requires investment in technology as wellas in team training.Commitment, investments, and training are essential, but they have tobe accompanied by measures that reduce uncertainty of virtual contactsand activities.How to build trust between people or companies that communicateelectronically, if people usually do not even know each other? One ofthe few researchers on this subject (Jarvenpaa and Leidner 1998) revealsthat trust in virtual environments is build and maintained gradually. Atthe beginning we trust a person because somebody else, that we alreadytrust, has expressed his trust on him. It is the transmission of trust fromone person to another. The second level is more active. We value the be-haviour of the person in the past, and predict his behaviour in the future.The third level is even more proactive. We estimate the capability of theperson to perform some activities to deliver expected results (Cortada2000).There are also other researches andmodels dealing with trust, but theyare predominantly oriented towards virtual teams. The question is whatis the role of trust in virtual organizations, and which networks of in-dependent virtual teams and independent organizations oVer their corecompetence. A virtual organization is a much more complex organismthan virtual teams, so it is very likely that we will have to extend ourperception of trust.401Cene BavecThe traditional view expresses some elements of trust that make vir-tual organizations possible. Personal trust is very important, but it is farfrom enough. From themanagement point of view, we have to extend theconcept of trust on an organizational level to all issues that reduce mana-gerial or business risks. Everything that decreases risk increases trust.Non-risk could be even a replacement for trust.The majority of managers understand the role of trust in a virtual en-vironment on a very intuitive way, from their individual perspective andunderstanding. However, intuition can often lead to wrong conclusions.We needmore systematic and objectivemethodologies to asses all aspectsof trust.The most significant contributions to trust between individuals, aswell as organizations come from:• Personal (individual) trust.• Legal framework (legislation on e-business, electronic signature,data protection etc.).• Capacity of the computer technology to remember and reproduceevery transaction and data.As personal trust has already been mentioned we will now focus onthe legal framework. A recent transition from an electronic data inter-change to a wide scale e-business revealed that the traditional legal sys-tem is not applicable in many situations. Because of a faulty legislation,e-business has always been regarded as a very risky endeavour. In thelast five years, the eu has introduced directives on diVerent issues of e-business and electronic communications, including electronic signature.National legislations based on these directives have significantly reducedthe risk of doing business electronically and establishing virtual organi-zations. Today, the legal system recognizes that electronic communica-tions are equivalent to traditional ways of communications, but it alsoadds some new features based on electronic signature, time stamps etc.Legislation is a powerful tool to increase trust on the organizationallevel and to reduce all kind of risks in the world of e-business and virtualorganizations.The third important contribution to trust comes from the unique abil-ity of computers to ‘remember’ all transactions. From an operationalpoint of view, this is the main diVerence between the traditional paperworld and the digital world. All electronic transactions are documentedand ‘provable’ for relatively low costs. That is why they are safer than402On the Management in Virtual Environments: Between Trust and Controltraditional paper documents. This may look contradictory but we couldeasily argue that it is true. Good examples are banks that have reluc-tantly opened their electronic transaction systems directly to customersvia the Internet. Now they consider the Internet banking as safe as thetraditional one. A combination of an appropriate legislation, a computerability to log transactions, and electronic signatures would significantlyreduce the risk of e-business.We can see a very similar situation in internal communications withinorganizations. It is relatively easy to control individuals and virtual teamsthat use e-mails and diVerent conferencing tools. Many companies haveintroduced electronic signatures to all internal e-mails, making every-thing traceable. Some of them are even overdoing control, making theirown workers feel uncomfortable and suspicious.conclusionsTrust is cheaper than non-trust and makes the organization more flexi-ble and responsive. We have less and less time to check and double checkour business relations, so trust can dramatically improve our adaptabi-lity and particularly speed. On the other side, electronic communica-tions make control cheaper and cheaper. Therefore, it is almost sure thatwe will exploit technology to its fullest, and reduce the role of trust tominimum.As inter-organizational relations will be less and less personal, controlwill be higher. We have to be more subtle in group and personal rela-tions, because the ‘Big brother’ symptom will soon play an importantrole. Trust is not a symmetrical relation, you can trust someone, but thatdoes not mean that he will trust you. Management has to trust workers,and vice versa. However, if control is only in hands of management thanthe other side will always feel somehow threatened. Balancing trust, risk,and control opens many dilemmas and problems in management.referencesBavec C. 2002a. An assessment of the Organization Virtuality with threediVerent reference models. Informatica 26 (4): 347–52.Bavec, C. 2002b. Na poti k teoriji virtualnih organizacij. Organizacija 35(4): 221–7.Cortada, J. W. 2000. st century business: Managing and working in thenew digital economy. Englewood CliVs, nj: Prentice Hall.Daft, R. L. 2001. Organization theory and design. Minneapolis: West Pub-lishing.403Cene BavecDavidow, W. H., and M. S. Malone. 1992. The virtual corporation. NewYork: HarperBusiness.Dixon, P. 2003. Global change.Http://www.globalchange.com.Drucker, P. F. 1999. Management challenges for the st century. Oxford:Butterworth-Heineman.Hesselbein, F., M. Goldsmith, and D. Bechhard (Ed.). 2000. The organiza-tion of the future. San Francisco: Jossey-BassKristof, R., and A. Satran. 1995. Interactivity by design: Creating & commu-nicationg with new media.Mountain View, ca: Adobe.ibm. 2004. Global guide to mobile work. New York: Somers.Jarvenpaa S. L., and D. Leidner. 1998. Communication and trust inglobal virtual teams. Special issue on virtual organizations, Journalof Computer-Mediated Communication 3 (4).Kraut, R., C. Steinfield, A. Chan, B. Butler, and A. Hoag. 1998. Coordi-nation and virtualization: The role of electronic networks and per-sonal relationships. Special issue on virtual organizations, Journal ofComputer-Mediated Communication 3 (4).Mowshowitz, A. 1994. Virtual organization: A vision of management inthe information age. The Information Society 10 (4): 267–88.Mowshowitz, A. 1997. On the theory of virtual organizations. BehaviourScience 14 (4): 373–84.Tavcˇar, M. I. 1999. Razsežnosti strateškega managementa, 2nd ed. Koper:Visoka šola za management.Word iq online Encyclopedia. Http://www.wordiq.com.404

On the management in virtual environments

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