A “Traditionally Virtual” infrastructure rethinks the advantages and disadvantages of virtual and traditional work designs. As a result, it better supports worker autonomy while maintaining a consistent, effective, and efficient corporate infrastructure for employees and customers
The traditional model for managing infrastructure (i.e. company controls all buildings, systems, personal technology, etc.) produces diseconomies in the Knowledge Age. For example, building the company’s virtual capabilities on top of traditional infrastructure has added the cost of mobile technology to the cost of maintaining the status quo (versus replacing it). Also, the practice of controlling personal technology has resulted in high costs and high employee frustration in most large organizations. Adam Smith wrote that “technology” should turn inputs into more outputs. With Knowledge work, we have increased the number of IT inputs without a corresponding increase in output (see Nobel Prize winner Robert Solow’s productivity paradox).
Infrastructure needs reinvention. The new model needs to remove hierarchical status from the equation. One difficulty is that infrastructure related decision are usually based more on status rather than on expertise or the needs of those who have to work with it. None of the organizational energy that goes into the number of windows, floor number, corner / non-corner, square footage, and availability of technology helps the customer. This traditional approach leads to difficulties with collaboration, autonomy, serendipity, decentralization, openness, community, meritocracy, and speed.
Adding the traditional and virtual model together also leads to over-controlling the use of personal technologies. This is both frustrating to employees and expensive for employers. For example, in 2006 Gartner research estimated the average cost of a PC for the average company to be more than $6,000 per year – when the cost to an individual with no purchasing power was less than $1,000. There are clear dis-economies of scale with managing "personal infrastructure" as if it is "corporate infrastructure." An increasing number of corporations are now starting to let employees buy their own devices because they combine both personal and business use. A Bloomberg study shown nearly a 30% increase in worker productivity when provided flex time].
Standard expense management is another problem with the traditional model, which can be reinvented with a Traditionally-Virtual approach. In the traditional environment, individuals are largely incented to spend up to their budget (and negotiate for continually higher budgets). It is better to give individuals their own expense fund for government-approved business expenses (including personal technology, office, and other non-billable personal business expenses). If employees are given an expense fund to manage on their own and get to keep what’s left over (as taxable income), they will spend the company’s money as if it is their money because, in a real sense, it is their own money. Doing this eliminates company expense, provides much more individual flexibility, and aligns the interests of the organization and the employee.
The solution to this problem is to take the best of the traditional thinking and virtual thinking and reinvent the company’s infrastructure into a “Traditionally Virtual” design.
A Case Study: Brand Velocity
“Traditionally Virtual” organizational structure was implemented in management consultancy Brand Velocity (BV). Advantages of implementing this structure are that the cost structure is low for BV and the satisfaction rate is high for BV employees.
The design of BV’s Traditionally Virtual infrastructure is central to the company’s organizational design. It provides a customer interface that is very traditional, using a largely virtual structure. With meeting space, document retention, and physical mail distribution, for example, BV contracts with Regus and has access to more than 1200 locations worldwide.
BV’s guiding principle is to make “personal infrastructure” personally determined by the individual employee and “corporate infrastructure” totally controlled by the company. To support this infrastructure design, Brand Velocity provides Employee Infrastructure Advances (EIA) for self-directed business expenses, advances employees $2,000 per month for these types of expenses and they are settled via an expense report quarterly – to reduce the number of transactions for the employee and the company.
The Employee Infrastructure Advance allows employees to make business-related purchase decisions that are most relevant to them, for the good of Brand Velocity business. The key areas supported by the Employee Infrastructure Advance include: office supplies, business equipment, continuing education and training, business development, telephone and internet service, client entertainment, business meals, and non-client-reimbursed travel expenses. At the end of each year, any unused funds are earned by the employee as ordinary income—ensuring that individuals spend personal infrastructure money as if it is their own money.
As part of this design, there are several non-negotiable routines (from a communications standpoint) to ensure that some key benefits of a traditional environment are attained in the traditionally virtual structure. They include: 1) EIA reconciliations at the end of each quarter, 2) Weekly two minute voice-mail reports to the BV peer group, distributed via email on Friday night or Saturday -- linked to consulting strategy, sales, relationship management, delivery, HR, business systems, 3) Weekly time-tracking via OpenAir each Friday night or Saturday, 4) Attendance / participation in the weekly Friday conference calls.
Implementing a Traditionally Virtual environment should start with a clean sheet of paper and a clear differentiation between "corporate" and "personal" infrastructure should be made at the enterprise level. Corporate infrastructure (e.g. systems such as email, time tracking, intranet, accounting, payroll, and look and feel of business cards, etc.) should be handled centrally with no variation. Personal infrastructure (e.g. phones, computers, printers, office requirements, supplies) should be handled by the individual as long as decisions are secure and don't interfere with the person's ability to collaborate with others.
At Brand Velocity, people are advanced $2,000 per month for "personal infrastructure"-- and use widely available technology resources (e.g. Geeksquad or other locally available resources) to help them. In practice, response time and frustration levels are often less, as the technology help tends to be more market driven and customer-oriented. Economy of scale is one of the most surprising and important benefits of the Traditionally Virtual structure. At the individual level, depending on the technology chosen, it is about 1/4 the cost that most other organizations have for computing costs. Similar with mobile phone service, in that the market is changing so rapidly that large companies often negotiate short term savings that are higher than consumer market prices by the time the contracts expire.
To make it work, the structure needs to be clearly thought out based on the needs of the company. It needs to be as simple as possible so that people "get it." For it to work, the company needs to control "corporate infrastructure" tightly, the lines between corporate and personal infrastructure need to be clear, and the use of "personal infrastructure advances" needs to be in place. The system works well. One interesting "fun fact" : after selling and delivering around $25,000,000 in services, Brand Velocity does not own one fixed asset (i.e. computer, chair, desk, filing cabinet, car, phone).
In adition, to be effective, the “traditionally virtual” structure needs to be led from the top - and everyone needs to play by the same rules. Otherwise, status will enter in, and dis-economies will follow.
In summary, the steps for implementing this structure should be started via a prototype (ideally a stand-alone division or geographic region) in large organizations:
- Explaining the purpose and processes for the new structure to get buy in from employees
- Decide which parts of the corporate structure will be managed centrally (and explaining why)
- Decide on processes that can be implemented virtually in a distributed way
- Operationalize virtual processes
- Reimbursing employees for their “employee infrastructure”
- Iteratively simplify the corporate infrastructure with every personal infrastructure / corporate infrastructure change - eliminating bureaucracy
- Assess the impact and continually improve and expand the traditionally virtual infrastructure
Table 1 summarises guidelines for implementing Traditionally Virtual organizational design, by specifying which aspects of corporate infrastructure should be controlled by a company, and which could be managed by employees to avoid any potential security and IT systems management issues.
Table 1. Traditionally Virtual Organizational Design: Guidelines
Company tightly controls Corporate Infrastructure
Employee personally directs Personal Infrastructure
Establishes Traditionally Virtual strategy, design, rules, enforcement and funding
Individual “freedom within a framework” – consistent with the established Traditionally Virtual design
Establishes and enforces Traditionally Virtual organizational routines (e.g. weekly live meetings, time tracking, weekly reports, coaching sessions)
Mandatory participation in the established Traditional organizational routines and benefits
Secure physical space and physical mail re-routing
Personal working space – with 1200 worldwide office options via, for example, Regus, or other chosen option
All external look-and-feel materials (e.g. business cards, stationery)
Personal office materials such as printer paper and other office supplies and tools
All core systems and secure access to core systems (e.g. CRM, Financial, Payroll, e-mail, voice-mail, website)
Personal hardware such as phone, printer, personal computer, other mobile / personal technologies
Corporate business expenses (e.g. legal, accounting, marketing)
Personally directed business expenses (e.g. professional development, business development)
Advances employees money to pay for Personal Infrastructure
Uses personal infrastructure, advances. settles up quarterly, and money left over is redirected as personal income
There are a number of practical benefits that the “Traditionally Virtual” organizational structure can provide:
- This structure leads to more autonomy as employees can choose and manage their own personal infrastructure and expenses.
- It also leads to more meritocracy as personal infrastructure is separated from a hierarchical position in the formal organizational structure.
- This leads to a better decentralization-centralization balance, as employees can make their own decisions on selection and acquiring of the personal infrastructure and other personal expenses, whilst the company can have a very efficient corporate infrastructure.
- This speeds up the process and reduces the cost of approving requests for and acquiring of personal infrastructure.
- Cost savings are achieved by improving the efficiency of the corporate infrastructure and allowing greater flexibility with their personal infrastructure and business expenses.
QUICK AND DIRTY IMPLEMENTATION:
STEP 1: Select a pilot group (a Department, unit or a team)
STEP 2: Explain the purpose and processes for the new structure to get buy in from employees
STEP 3: Decide which parts of the corporate structure will be managed centrally (and explaining why) (see Table 1)
STEP 4: Decide on processes that can be implemented virtually in a distributed way (see Table 1)
STEP 5: Operationalize virtual processes
STEP 7: Reimburse employees for their “employee infrastructure”
STEP 9: Assess the impact and, if positive, roll out a new experiment with a larger group
Hypothesis 1: Implementing “traditionally virtual” structure leads to a reduction in a cost of the personal and corporate infrastructure.
Hypothesis 2: Implementing “traditionally virtual” structure increases employee satisfaction.
Hypothesis 3: Implementing “traditionally virtual” structure leads to increased effectiveness of employees.
For Hypothesis 1, the impact could be measured quantitatively using organization’s financial data. The cost of personal and organizational infrastructure could be compared before and after implementation of the “Traditionally Virtual” organizational structure.
For Hypothesis 2, employee satisfaction could be measured by a survey (which could be supplemented by interviews) to assess employees’ perceptions about individual and organizational benefits of the new Traditionally Virtual” structure.
For Hypothesis 3, effectiveness could be measured quantitatively, for example, by outputs produced, projects completed etc, and/or qualitatively by incorporating questions related to effectiveness into a staff survey.
Experimental subjects would be employees in a preferably knowledge intensive organization.
If an organization is chosen to participate in an experiment, one unit/department/division could be randomly allocated to the control group and another to the experimental group. Control group would keep using the traditional structure and experimental group would implement “traditionally virtual” structure.
It will take at least 90 days to see any results.
A suggested timescale for experiment is:
Day 1-3: Selecting experimental group and explaining the purpose and processes for the new structure to get buy in from employees
Day 4-7: Decide which parts of the corporate structure will be managed centrally (and explaining why)
Day 8-10: Decide on processes that can be implemented virtually in a distributed way
Day 11 - 26: Operationalize virtual processes
Day 27- 85: Reimbursing employees for their “employee infrastructure”
Day 27- 85: Iteratively simplify of the corporate infrastructure with every personal infrastructure / corporate infrastructure change - eliminating bureaucracy
Day 86-90: Assess the impact and continually improve and expand the traditionally virtual infrastructure
A credit should be given to Jack Bergstrand, a CEO of Brand Velocity Inc., for providing case study material for this hack.