Disadvantages of Virtual Offices: Key Challenges Explained

Introduction

A & M Services is an alternative dispute resolution agency formed to provide arbitration and mediation services to businesses and individuals. It presently has six full-time employees trained in alternative dispute resolution procedures and one part-time person responsible for scheduling and bookkeeping. At the present time the business does not operate out of a physical location. Instead, everyone is connected to a central server that maintains all company records, including clients' names, addresses, and contact numbers; records of all prior and ongoing procedures; and financial records. Due to logistical problems currently being experienced as a result of lacking a physical storefront, the firm is contemplating either renting or purchasing office space.

This report details the specific problems encountered while operating as a virtual office. What began as an attempt to minimize overhead costs has resulted in problems that may be resolved by adopting a more traditional business structure and abandoning the concept of a fully virtual office. The present plan is to adopt a hybrid-style virtual office that incorporates the benefits of that structure while avoiding some of its inherent disadvantages.

Although the future of the virtual office is bright and will likely eliminate many of the problems that presently exist, the success of this business depends on abandoning the concept as a total solution. A return to such a structure in the future remains a distinct possibility, but the short-term solution is, as noted, a hybrid form.

Traditional Business Structure and Technological Change

Technological change and improvement have inspired the growth of home-based businesses and the increased use of home offices for corporate employees. Many envision employees working at home instead of congregating daily in an office as the way of the future. These same individuals see such a system as a significant cost saver, a source of increased morale, and a means of eliminating unnecessary buildings and equipment. Yet, as appealing as the concept sounds, it is not without problems.

Most businesspeople considering the format under which they plan to operate still think of a building, a telephone system, desks, offices, and break rooms. Such an image has been the American norm for several decades, and escaping that mindset is not easy. The traditional office developed as a result of the technology that existed as the American system of business matured, and it worked successfully for many years. The system operated efficiently and profitably, but as technology has improved — bringing with it new equipment and devices — even traditionalists are beginning to question whether there is a better way to conduct business.

Before the advent of the computer, cell phone, fax machine, and email, a physical location where a business could centralize its operations was an essential element. Businesses needed all their employees near at hand and their information easily accessible. There were no databases stored on computers or servers; information was kept in paper files and folders stored in file cabinets, which required a physical location and building. Employees were tethered to a landline, which required wiring and a fixed place for the telephone. Meetings are an important part of any business operation, and before software programs such as GoToMeeting, Skype, or PowerPoint, these meetings had to be held somewhere — typically an office building with rooms large enough to accommodate a conference table.

The latter years of the twentieth century witnessed phenomenal changes in the business world, brought on by technological improvements that altered the playing field. Beginning with the introduction of the personal computer, and later the cell phone, business personnel were gradually freed from the confines of their offices, and information formerly stored in file cabinets became accessible without leaving one's desk. This was only the beginning. Soon laptops entered the market and cell phones became smaller and more powerful. Suddenly, the desk, building, and office were far less necessary.

As the twentieth century ended and the twenty-first century began, a new concept became popular in the business world. This concept, sometimes referred to as the virtual office, took on various forms and variations (Panchuk, 2010). Some viewed it as renting an office address and occasionally visiting that office, while others viewed it as a totally paperless office with no permanent location. Over time, the virtual office has developed into a hybrid of many different styles.

Maintaining a virtual office involves the full utilization of available technology, including internet access, Voice over Internet Protocol (VoIP), and video chat. For most virtual office practitioners, their laptop is their office, and all the information they need to perform their work is contained on or accessible through their computer. For these individuals, there is no need for a physical office, as their cell phone keeps them connected to whomever they need to reach. Such individuals are free at almost any moment to pick up their computer, cell phone, and associated devices and work anywhere (Burns, 1996).

Advantages of the Virtual Office

This system of working can function as well for a small business as it can for the largest of corporations (U.S. Chamber of Commerce, 2006). For the small business owner, the virtual office allows the business to appear as substantial as a large corporation. For the large business owner, it affords the chance to cut costs. For the virtual office worker, it means no commuting time and the comfort of working from home.

The virtual office concept does not work for everyone. Manufacturing firms still need a facility to produce their products, but their sales force, management, and marketing staff no longer have to be present in physical offices to be productive. Professionals such as architects, lawyers, and accountants are natural fits for this style of business. Service businesses such as plumbers, carpenters, and appliance repair technicians can also operate effectively without a storefront.

The most obvious advantage of a virtual office is eliminating the cost of maintaining a physical plant. Such a facility involves the expense of rent or mortgage payments, insurance, utilities, and maintenance. Without these costs, a business has an excellent opportunity to reduce its operating costs and free up funds for other purposes. For a start-up business, not having these costs significantly lowers the capital needed to begin operations and allows the owner to concentrate efforts on other concerns.

Disadvantages of Virtual Offices

Not being tied to a physical location also allows a business to attract employees from different areas, as commute time is no longer a consideration. Employees are free to work comfortably in their own homes, where they are exposed to less stress. Environmentally, less commute time, fewer vehicles on the road, and less need for dedicated office space means a reduction in the carbon footprint of each worker.

As compelling as these advantages are, there are disadvantages that must be examined. First, there is the loss of social interaction among fellow employees. The traditional workplace is highly social — it is the source of many friendships and a forum for expressing ideas and concerns. During a typical work week, many employees spend more time with their coworkers than with their family and friends. Moving from a busy office full of colleagues to a quiet virtual office can be psychologically difficult for many workers. The effect has been debated for years, but studies indicate that the more engaged workers are with one another, the more successful the business tends to be. In a business that is highly dependent on remote employees, there is little or no interaction between staff members, and a feeling of isolation can develop along with a disconnect from the organization.

Virtual offices also create legitimate security concerns. When employees are located in one building, access to valuable and classified information is limited and can be controlled. When employees are spread across a wide area and their only access to company information is through laptops, PDAs, or cell phones, the opportunity for abuse is enhanced. Security measures are available to minimize this effect — indeed, an entire industry has emerged to address these needs — but control will never be the same as when employees are under one roof, subject to oversight, and computers and cell phones are shielded from potential hackers.

To put virtual office security into perspective, consider all the security measures taken in traditional offices to ensure the safety of a business's equipment and information (Lombardi, 1994). Closed-circuit surveillance systems, alarm systems, and security guards are used to protect the physical plant, while extensive firewalls, network passwords, and layered access systems are used to protect business information (Rodriguez, 1996).

A distributed workforce can also create problems related to collaboration. Many work projects require the coordination of different skills, and a distributed workforce can make this difficult. Specialization of knowledge-based work, falling communication costs, and globalization have increased the need for collaboration in most businesses, and the move toward virtual offices exacerbates this need. Through sophisticated video conferencing equipment, wireless communication devices, specialized collaboration software, and coordinated servers, some collaboration problems can be reduced — but the advantages of face-to-face contact will still be lost.

Businesses that operate from an office have employees who can easily communicate one-on-one or in informal groups. Often, these chance meetings lead to the exchange or initiation of new ideas that may benefit the business. A group-think mentality — when harnessed productively — can be beneficial to business success, and a large measure of this is lost when operations are divided into many individual units where the only contact is through the internet, email, or cell phone (Whyte, 1989).

The lack of a physical presence in the form of a building can have a chilling effect on a business's perceived prestige (Liparulo, 1998). Customers and clients still place a premium on their business contacts having a dedicated building in which to meet their attorney, accountant, or insurance agent. Being asked to meet at a neutral site or in their own home may make clients uncomfortable. Some virtual office practitioners choose to address this problem by utilizing temporary office services that provide meeting facilities, but these services have not met with universal approval.

Conclusion

The advantages of the virtual office concept have attracted many business owners to adopt it as part of their business plan prematurely. The cost savings, the flexibility, and the ease of operation make it difficult to dismiss as an option. However, the system is fraught with potential problems that are not initially considered, and the prudent business owner will carefully evaluate the concept and assess its fit with their particular business before adopting it wholesale. As promising as the virtual office may be in theory, problems remain that must be addressed and solved before it becomes the standard model for operating a business. For the present, the traditional office setup remains the standard and is likely to remain so for some time to come.