(Editor's Note: This article is an excerpt from Managing Without Walls: Maximize Success with Virtual, Global, and Cross-Cultural Teams, published by MC Press.)

Virtual management is a growing phenomenon in today's business world. It is becoming more and more unusual to find an organization that does not have some "virtual" aspect to it. In fact, sales teams have been virtual for decades. They just didn't have such a fancy title! Traditionally, sales organizations have been scattered around the country or the globe, with salespeople spending a considerable amount of time either driving or flying around their assigned region. With the advent of newer and more mobile technology, virtual management is a growing trend in service as well as sales organizations.

From a financial perspective, it makes sound business sense for many companies to take a decentralized approach to their organizational structures. Outsourcing saves U.S. companies millions of dollars per year. The costs to hire in the U.S. are much higher than in countries such as India and China. The costs of healthcare and workers' compensation in the U.S. have also continued to increase, at a time when many companies are under pressure from shareholders to cut costs and increase the bottom line. Outsourcing to reduce short-term workforce costs may affect the U.S. economy in the longer term, but for now, it is a very attractive option for many companies.

Furthermore, moving to a model in which some employees work at home can reduce facility costs significantly. The costs of leasing and maintaining corporate office space can be very high. Additional costs like onsite gyms, cafeterias, kitchens, and parking increase the overhead even more. Removing the need for employee relocation packages can also save many thousands of dollars.

A workforce that is geographically diverse can be a huge business benefit in less tangible ways, too. Companies tend to like working with other companies that have local representatives. A U.S.-based company with employees in Brazil, Japan, and Italy who are natives of those countries or speak the local language fluently has a strong competitive edge in those countries over solely U.S.-based competitors. Moving into new and emerging markets is also much easier when a company has someone local who understands the political, financial, and corporate landscape.

Needing everything faster used to be something unique to the United States. With globalization, however, worldwide fast food and drive-throughs have whetted the appetite for faster, cheaper, and better everything, no matter where in the world the customer is located. In today's fast-moving and ever-changing business environment, companies are increasingly demanding higher speed without lower quality or higher prices. This demand requires that highly skilled and effective teams be created quickly without regard to time zones or locations. The ability to work together just as effectively while geographically distant as when local makes this possible. If a company had to relocate an entire team to one location, find accommodations, and pay expenses, it would be very difficult to move quickly and almost impossible to do so without passing the costs onto the customer.

Globalization has increased the need for virtual management. Working in an international market space is easier than it has ever been before. However, along with this ease of conducting business internationally comes the challenges of working with cross-cultural teams and the need to understand and overcome cultural and language differences.

From a high-level management perspective, global business and virtual management are the answers to many business problems. A company can increase its geographic footprint and more effectively do business in multiple countries. At the mid-management level, however, these business advantages are not as clear. In some instances, they are positively hazy. On a day-to-day basis, for managers dealing with employees or associates in remote locations, who have different cultural backgrounds, work ethics, and languages, the virtual solution can create more problems than it solves.

While the trend toward virtual teams is destined to continue for the foreseeable future, there is currently a distinct lack of virtual management expertise across all industries. Managers who learn virtual management skills will help their companies avoid a rocky road.

The Virtual Company

A virtual company is any company that has at least one team member working remotely. Team members might be working as close as in the same city or as distant as across time zones or oceans. In many virtual teams, team members are never physically in the same room or office location. The physical distance between team members creates a team dynamic and personality that is very different from that found on a traditional team. This is why applying a traditional management approach to a virtual team does not work.

A team will not thrive in a virtual environment if the team's structure and process has been designed as if it were a traditional team. If you want to learn how to salsa dance, you would not ask a ballet dancer to teach you. All that time spent stretching at the bar might be good for your flexibility, but it is not going to be much use to you out on the dance floor!

Likewise, excellent virtual communication skills are not going to be much help if the remote team member lacks the technical skill required to set up and maintain his or her own virtual office equipment. You cannot afford for one small technical computer problem to bring a worker to a halt for hours or days at a time. It is essential that all virtual workers possess the in-depth knowledge of computers and networks necessary to troubleshoot technical problems in their home offices. A higher level of technical skill is required for a virtual worker than would be necessary for someone working in a local, corporate environment where the majority of computer and networking tasks are managed by a central IT group.

The types of virtual companies and teams range from companies that have just one employee working from home a mile away from the company's office to companies that have entire divisions of workers located 5,000 miles away from the corporate office.

Here are some examples of the different flavors of virtual companies:

• Some Remote Team Members—The company has one or more local employees who consistently work from a remote location.
• Split Team—The company has two or more main office locations, where employees work out of whichever office is closer to them.
• Satellite Team Members—The company has a main corporate office, with numerous satellite employees around the country or the globe who work from home offices.
• 100% Virtual Team—The company does not maintain a central office. All employees work remotely from home offices.
• Outsourced Team—The company has a main corporate office, with some functions outsourced to other companies.

Some Remote Team Members

At first sight, managing a virtual team in which most of the employees work at the same location and only one or two work remotely might not seem like much of a challenge. However, this is not necessarily as straightforward as it might appear. If you are used to managing a local team, you might find the task of managing some remote team members a lot more demanding and time-consuming than you anticipated.

You and your team might not have many virtual management tools at your disposal. It is unlikely that your local team members will be using virtual management software and tools to communicate with each other when most of them are located on the same floor. This leaves the remote workers in a very isolated working environment. Because these people are not around the office very much, they might be forgotten. The team manager should make sure that all team members are aware that they work on a virtual team and that they use the tools and processes necessary to make the virtual team successful.

If one member of a family is hearing-impaired, the other family members learn how to communicate using sign language. The family would not refuse to learn sign language and allow the hearing-impaired family member to feel isolated and ignored. In the same way, a team that includes a remote worker needs to use the necessary tools to ensure that all team members are able to communicate with each other. The local team members might not use those tools very often to communicate with each other, but they should be encouraged to use them to communicate with the remote workers.

Split Team

Some virtual companies have two or more main office locations, where employees work out of the office that is local to them. One distinct advantage here is that most non-management employees will have a local supervisor or manager. It is much easier to manage and to be managed when the direct-line employees are in the same location. However, supervisors or managers often report to a higher-up remote senior manager.

An example of a split-team company is one that I headquartered in the U.S. and has six regional offices located in China, Ireland, India, Brazil, Hong Kong, and England. Each location has its own management hierarchy, with only the most senior managers reporting directly to an executive in the U.S. office (see Figure 1).

Figure 1: This example of a split-team company is headquartered in the U.S. and has six regional offices located in other countries.

This type of company might have projects that require cross-location and cross-team communication and participation. Virtual management skills and knowledge are key to the success of those projects. It is very easy for an "us and them" mentality to develop in a setting such as this. Without close attention and a high level of good-quality virtual management, teamwork can soon deteriorate into a negative and competitive environment, with the different teams being reluctant to work together or help each other. Eventually, finger-pointing and apportioning blame become more important than meeting the objectives of the project. The situation can get so bad that one team intentionally sabotages the other. This situation might sound far-fetched, but as you well know, it can occur even in traditional companies where the teams are located in adjacent hallways!

Satellite Team Members

Some virtual companies have a main corporate office with numerous satellite employees who work from home offices around the country or the globe. This is a very typical setup for global sales organizations, and it is fast becoming common in other types of organizations. Some technology companies are moving to this distributed virtual team environment, as are consulting organizations in various industries.

In a satellite-office situation, the manager might be located in the corporate office and might have an administrative assistant or receptionist working onsite. Alternatively, the manager might work virtually. In either case, many of the team members will be working remotely from each other and from the manager. In a satellite-team setup, the corporate office typically maintains some kind of virtual private network (VPN) to enable the team members to communicate securely with each other and to access a centralized server and network system. However, this still requires that each remote employee sets up and maintains his or her own virtual office.

If a corporate office and centralized network exist, there is likely to be a technical support or help desk organization for employees, so they should be able to get some technical help with their equipment if there are problems. However, some of the team members might be using nonstandard equipment, so it might not always be possible for a centralized help desk to successfully troubleshoot a problem.

The satellite-team organizational structure has some significant advantages from a business perspective. It reduces facilities overhead in addition to allowing employees to live wherever they like (though there might be some geographical restrictions, such as limited to North America). In this way, virtual teams can be created based on the skill sets required and the geographical location of the team members.

The exact geographical location of satellite team members might not have a huge affect on the effectiveness of the team. From a virtual team perspective, a team member located 1,000 miles away is not much different from a team member located 4,000 miles away. From a corporate perspective, however, the geographical location of each team member can have a more significant impact on the company's ability to conduct business in different parts of the world. If the team members are located in different geographical regions, the company can maintain global coverage while reducing costs for such things as travel for onsite meetings with customers. These cost efficiencies can lead to competitively priced products and services.

100% Virtual Team

The purest form of virtual management is a situation in which a company does not maintain a centralized office at all and has all employees working remotely from home offices. This 100% virtual company is becoming more popular, especially with smaller companies. It can be difficult to maintain a 100% virtual setup for mid- to large-sized companies because of the complexity that occurs as the virtual system is scaled up. Most large companies prefer to keep centralized business and technical functions such as accounting, legal, human resources, and data centers in-house. Many smaller companies outsource these business functions, as it can be prohibitively expensive to maintain dedicated employees for these functions on a small scale. For this reason, it makes a lot of economic sense for small companies to operate in a 100%-virtual environment.

In this type of organization, it is critical to the success of the team that every team member has the technical skills required to set-up, maintain, and troubleshoot technical problems. A 100% virtual team will often not include any IT support employees, so each team member needs to be able to manage and resolve technical issues quickly and independently.

Outsourced Team

Some companies maintain corporate office or offices where the employees are located yet outsource certain functions to other companies.

This might not seem like a true virtual company, as the employees are all working at local offices. However, if the functions being outsourced are key functions, the employees at those outsource companies become key players in the day-to-day business or projects of the main company. This type of organization requires virtual management processes and techniques to be successful. A similar situation is one in which a company relies heavily on one or more vendors to implement or manage business functions or projects. Again, this is not strictly a virtual company, but certain departments within the company will be working as part of a virtual team.

When working with outsourcers or vendors, it can be very difficult for managers to get the high level of attention or escalation of issues that would be expected from internal groups. Careful management is required to ensure that things remain under control. An outsource company might be taking care of technical support for your company as well as for 20 other clients. Likewise, an outside vendor will have other clients with their own needs and demands and will need to balance and manage those. If another client has a problem that is deemed more important than the one you are experiencing, your problems will not get top priority. Even if the issue you are experiencing is the most serious, if it does not have the highest revenue potential for the vendor company, they are not necessarily going to drop everything to jump on it. If they have another client with whom they are signing a new contract that is worth a few million dollars, you might find yourself on the back burner until the deal is closed. If you just signed a five-year contract, the vendor company might not be motived to continue to woo you; they will focus their attention on their latest flame instead!

Staying ahead of the curve in the realm of virtual management is a challenge, but it is becoming essential to success in both local and global market spaces. What about you? Are you ahead of the curve or behind it?

Colleen Garton is the author of the MC Press books Managing Without Walls and Fundamentals of Technology Project Management .