The boundaryless organizational structure, when fully operational, breaks down barriers to external partners (suppliers, customers, etc.) and barriers created by geography. They put together cross-hierarchical teams and employed participative decision making processes. General Electric used tools like 360 performance appraisals, where peers, subordinates and managers could evaluate an employee’s performance. Functional departments can be replaced with cross-functional teams, and activities can be organized around process. Functional departments create horizontal boundaries, and those boundaries can stifle interactions between departments. When an organization removes the vertical boundaries, the hierarchy flattens.

He wanted to eliminate vertical and horizontal boundaries within GE and break down barriers between the company and its customers and suppliers. The bureaucratic organizational structure seeks control in multiple levels and, if there is a downfall to the virtual organizational structure, it is that there is far less control over the different parts of the business.Īmerican business executive and former CEO of General Electric, Jack Welch, coined the term “boundaryless organization” when he described his ideal General Electric. The virtual organization is definitely on the other side of the spectrum from bureaucratic organizational structure.

The flexibility a virtual organization provides is hard for organizations to resist, as it allows them to contract out any function they feel another organization can do more cheaply than them. General Motors, Nike, and Cisco are just a few of them. Thousands of well-known organizations are virtual in one way or another. Large organizations dabbling in the virtual organizational structure usually do so to outsource manufacturing. Newman’s Own employs only 18 people, and outsources almost everything-manufacturing, procurement, shipping and the like. The chart in Figure 2 illustrates a typical virtual organization, which includes employees that practice flex-time in a home office, ones that are in satellite offices domestically and internationally, and then a group of independent contractors, telecommuters and vendors.Paul Newman’s food product company, Newman’s Own, runs on a virtual organizational structure. Moving from a bureaucratic to a team structure requires a great deal of change, so larger organizations will assemble teams and add a quasi-team structure into their bureaucratic org chart. More often than not, when larger organizations decide to use teams, they do so as a part of a bureaucratic structure rather than a straight team structure.

Modern organizational chart design