Businesses that can react quickly to an economic downturn have the best chance to survive hard times, but perhaps none are as nimble as a "virtual" company that has no central office, minimal overhead and can even go into hibernation if circumstances demand it.
Agility is just one reason the virtual company has established a foothold in the workplace that isn't likely to be lost even during an economic slowdown. For certain small companies, such as Portland, Ore.-based Web design firm Sparkplug, going virtual represents the ultimate "run lean" model, allowing them to undercut competitors' bids while still maintaining a high profit margin. And some employees who have opted to join a business without walls like it so much they can't imagine working in a regular office again.
"Every day from my old office, I would call the woman taking care of my newborn daughter and cry," said Lisa Davey, now a Sparkplug project manager who works from her Laguna Niguel home. "The day I decided to quit, a friend called and said, 'I have this idea. Work with me, and we can build a business. You can work at home and do as much or as little as you want.' "
Traditional businesses are borrowing from the model, shedding costly office space and reducing staffs, although with admittedly mixed results, experts say. In a true virtual company, contact between co-workers is maintained via the Internet on high-speed connections and through e-mails and telephone calls. Co-workers might meet with one another at the beginning of each new project with a client or as seldom as once a year at a company retreat.
"One or more aspects of virtuality are being built into parts of most businesses," said Al Vicere, professor of strategic management at Penn State University's Smeal College of Business. "This is the wave of the future."
David Lewin, the Neal Jacoby professor of management, human resources and organizational behavior at UCLA's Anderson business school, agreed to an extent.
"You can clearly make the argument that there will be a growth in virtual companies. It won't replace the traditional ways of doing business, but it certainly will supplant some of it," Lewin said.
Some of the reasons are illustrated by stories of virtual businesses.
* Tabula rasa, clear the slate:
When Matthew Triplett's parents were finally fed up with the public schools in hometown Anchorage in the 1970s, they banded together with other parents and opened the Stellar Alternative School for grades seven through 12. Years later, Triplett, now 32, would become exasperated with traditional business and office environments and take a similarly radical step.
Long commutes and staggering local real estate prices were bad enough, but the meager rewards at work were intolerable, said Triplett, who was a technology director for a Bay Area Web site design company at the time. "We worked in this extravagant office building, and the top people in the company were raking in the money and driving BMWs."
Toiling away at the office late one night, it hit him: " 'What am I doing here? Why keep doing it?' It became crystal clear that I could start my own company," Triplett said.
Triplett founded Sparkplug in 1997. Within nine months, his best friend from the Stellar School, Dave Bowers, had joined him as a roommate and co-worker. They left the Bay Area for the much lower cost of living in Olympia, Wash. They added colleagues as the business grew. Sparkplug now includes seven main employees, spread from Vancouver, Wash., to Laguna Niguel, plus seven others who are called on as needed.
Like most virtual businesses, there is a central telephone link that forwards calls to the employees, and there is a mailing address and, of course, a Web site, (http://www.sparkplug.com).
Last year, the company grossed $1 million in fees, leaving the main employees with incomes as high as six figures. Sparkplug hasn't had a new contract since February, but Triplett says that his company has a special ability to survive.
"We've got some work from existing contracts, and people are allowed to do other things," Triplett said. "In the meantime, we're not paying rent on an office or on equipment. We have no salaries to meet."
* Virtual and proud of it:
Everything about the Cabot Advisory Group, from its slick brochures to its Web site (http://www.cabot grp.com) communicates self-assurance. Unlike Sparkplug, which neither hides nor emphasizes its virtual nature, the Cabot Group brochure announces its structure up front.
That is perhaps easier when every principal employee at one time commanded six- or seven-figure incomes with such major corporations as GTE (now Verizon), Texas Instruments Inc., Wells Fargo Corp., Gannett Co., Xerox Corp. and Hewlett-Packard Co.
All used to work as human resource directors, said Pam Farr, president and chief operating officer for the Cabot Group and a former senior vice president for Marriott International Inc. "We wanted to start an adventure and with the cumulative experience we had, we wanted to give something back to the next generation."
The Cabot Group advises clients on how to best handle mergers and acquisitions, including some involving their former employers. But Farr works only occasionally from her suburban Maryland home. When she requires an office environment, she rents one from a company that leases office space at various locations around the country.
"We have privileges with their facilities in other cities and can use offices there with secretarial support and equipment when we need to," said Farr, who fielded a telephone call from a reporter in the glass-enclosed sun room of her suburban home just north of Washington, D.C.
Farr says the Cabot Group comes together to meet new clients on their own turf but otherwise work from their own homes, as far flung as a farm in Nebraska to a working vineyard in California wine country.
* Delegate or perish:
Lou Adler is the chief executive and co-founder of Power Hiring, a training services company for hiring managers. It's based in a tiny office in Tustin with 20 trainers in Japan, Canada and the U.S. who work for Adler as independent contractors. The company sends its trainers to work at client company sites and also has conducted online training sessions over its Web site (http://www.powerhiring.com).
"The cost of doing business this way is a lot less, and I can scale up quickly if I need to," Adler said. "You do have to be willing to relinquish some control. My trainers don't work for me exclusively. It's evolutionary, and it's logical."
* Pluses and minuses:
UCLA's Lewin points out that some traditional companies have tried to reduce their dependency on fixed locations with mixed results, perhaps most notably with failed and consolidated grocery delivery operations.
But "lots of companies--even old-line oil companies--have adopted virtual team-based organization, with virtual teams spread across several time zones rather than co-located in one office," Lewin said.
One of the caveats about eliminating staff and overhead is that each remaining job "gets bigger," Lewin said. "You have to be in touch with everything. You have to master things that your assistant or secretary used to take care of."
That's something Cabot Group's Farr remembers every time she has to look up a telephone number on a hand-held device she is trying to master. And Davey, of Sparkplug, knows more about overnight package delivery pickup times and locations now than she ever had to in her previous career.
To Penn State's Vicere, the shift to virtual office models was the greatest lesson to emerge from the dot-com implosion.
"It did help prove that telecommunications and the Internet can work as a business model," Vicere said. But he added that the organization has old roots, most notably in the entertainment industry and the movie-making business.
"You bring together the main parts of the project as they are needed, from writers, producers, directors, actors, stage crews and marketing firms. Then the whole thing disbands once the project is completed," Vicere said. "It's an ad hoc pulling together of resources as they are needed. It's not far-fetched to see a number of sectors in the business environment moving in that direction."
Adler, of Power Hiring, doesn't know about all that. He just knows that the business model he is using eliminates a lot of extra work.
"If someone wants to come by my office, though," Adler said. "I might get up and wipe off a chair."