In our original research we found startling evidence of the connection between Virtual Distance and several important organizational outcomes. In our studies published in 2006 we reported on data from over three hundred different projects where Virtual Distance was measured for all team members. A wide variety of different kinds of projects and industries were included.
As we've pointed out in several places, we've updated our research to include results covering:
Analyses of our new benchmark database demonstrate the robustness of the relationships between Virtual Distance and organizational performance. There are statistically significant differences year-over-year and the impact Virtual Distance is having on outcomes is getting more intense.
We've also found that the three Virtual Distance factors are exponentially related to critical success factors. These relationships are reflected in:
Overall Virtual Distance initiates serious changes in the health and well-being of companies and their people. In addition, we've found that uncontrolled Virtual Distance is getting more potent all over the world and having more serious effects.
Our original objective was to empirically verify the relationship between Virtual Distance and organizational performance. We used the statistical technique of linear modeling to link the Virtual Distance pieces to critical success factors.
We initially designed our formula to incorporate all three distance facets of the Virtual Distance Model: Physical, Operational, and Affinity. The model provided an overall Virtual Distance Index (VDI), where higher scores mean greater Virtual Distance. The formula now takes the form shown in Figure 4.1.
However, the relative impact of each component of Virtual Distance is better seen when shown as a function of the Virtual Distance Ratio as depicted in Figure 4.2.
To see the measures of impact more clearly, we've charted the three Virtual Distance factors against key performance indicators in order ranked by Affinity Distance. As you can see from Figure 4.3, Affinity has the largest impact on all outcomes and Operational Distance the second largest impact. The bars for Affinity and Operational Distance are all statistically significant whereas the bars for Physical Distance are not. This means that the impact of Physical Distance on Key Performance Indicators is the same as it would be by chance – not by some predictable statistical relationship. To bring the point home, as we talk about in many places in the book, making decisions to bring people back into the same location because it seems like this will predictably improve outcomes is based on an assumption that is not supported by the data.
Figure 4.3 also shows that Virtual Distance can predict whether projects succeed or fail.
Figure 4.4 lists the definitions of each one of the key performance indicators referred to in Figure 4.3.
It's clear that trust is hit the hardest by uncontrolled Virtual Distance. In fact we've also shown that high Virtual Distance is the statistical equivalent of distrust. However, this can change. When Virtual Distance is reduced we get the statistical equivalent of strong trust.
When we work together we experience interactions in two ways: analytically and emotionally. So it's not surprising that studies have identified two types of trust: cognitive trust and affective trust, as shown in Figure 4.5.
As Virtual Distance increases, trust becomes more cognitively based. There are few if any personal ties and relationships are tenuous, so trust is primarily based on the rational belief that others will behave in a trustworthy manner, as they would if there was a contract in place. It also should be no surprise that cognitively based trust tends to be more fragile. In other words, it's easier to go from a trusting to a distrusting relationship when the basis is purely rational.
As Virtual Distance is lowered, meaningful bonds develop and trust becomes more affective in nature; it runs much deeper and creates a strong foundation for collaborative work.
This dynamic clearly comes through in the data, as shown in Figure 4.6. When Virtual Distance is low, 90% of people report high levels of trust. But when Virtual Distance is high, only 26% say they trust others.
Depending on their personality, people vary in the extent to which they are trusting of coworkers, managers, and organizations.1 This personality factor is called “propensity to trust” and has been shown to be a good predictor of trust in organizational settings.2 All other things being equal, if you're going to hire people to work together no matter their location, it's better to have people who are high in propensity to trust. The Virtual Distance formula predicts that team members will likely trust one another when Virtual Distance is low.
In another study,3 we looked at the extent to which pairs of coworkers trusted one another. Propensity to trust was much more important when the two coworkers were working virtually as opposed to when they were collocated.
However, there are three other important factors that lead to the development of trusting relationships: benevolence, ability, and integrity. This translates to:
All three of these influencers are based on information that we have about our coworkers. This information can come from prior relationships or what other people tell us, or, more likely, it comes from our own experience.
Virtual Distance influences not only how much people trust one another, but, as seen in Figure 4.7, also how much they see their coworkers as being benevolent, as having integrity, and as having the requisite ability; all statistically powerful but more importantly as a practical matter, critical to teams in every corner of the world.
Trust is the glue that holds teams and organizations together. Without it teams become less productive, people are less willing to share information and help one another, energy that could be spent on innovation is spent on avoiding perceived threats from others.
We will discuss some of the influences of trust in more detail in the rest of this chapter, but it's been clear from our research that the same factors that produce Virtual Distance also lower trust. When Virtual Distance is high, trust is in short supply and often turns to distrust, so it is no wonder that many organizations are trying to find solutions to managing virtual teams.
A woman at State Farm Mutual Insurance Co. was converting a paper database into an electronic one. “Why are you working so energetically?” someone asked her. “Don't you know that you are working yourself out of a job?” “Sure,” she answered, “but I've been here long enough to know that I can trust them. They'll find something else for me. If I didn't believe that, I might be tempted to sabotage the process.”4
Organizational Citizenship Behavior (OCB) includes all those behaviors that are not strictly required by a job description. Some have an altruistic nature like helping others with their work, sharing information, giving time to help coworkers and encouraging coworkers when they're down. Others reflect “civic virtue” that include keeping up with developments in the organization and attending functions and meetings that are not required. OCB can have a negative side as well, as in employees who are constantly complaining about trivial matters, making problems bigger than they really are, and always focusing on the negative side of things. The negative behaviors can escalate to destructive behaviors, such as sabotage or even outright theft. One study showed that thefts increased when organizations communicated a pay reduction in a way that engendered distrust.5
As our State Farm employee illustrates, the level of trust can set the context for either positive or negative OCB. Figure 4.8 shows how trust is related to OCB.
High levels of trust allow people to focus on the work that needs to be done without worrying about someone else undermining their work or falsely taking credit for it. When we trust our coworkers, we don't think twice about sharing information or going out of our way to help someone else. These kinds of behaviors only increase in importance as we move toward remote and virtual work.
Virtual Distance can influence OCB in two ways. Because it influences trust and trust influences OCB, it has an indirect effect. But it also has a direct effect. Figure 4.9 shows the difference between participants in our research who had high or low Virtual Distance and the level of OCB behavior that they reported.
High levels of OCB not only make working more pleasant and rewarding, they also lead to better performance. In a study of factory production teams, OCB led to both better quality and higher productivity.6 Another study showed similar results for the performance of projects.7 Later, we'll present results that show a strong relationship between OCB and project success.
Usually, when people are asked why they work, one answer seems obvious – for the money. While it is true that pay (and benefits) are important, the research tells us that we can be satisfied or dissatisfied for several other reasons: quality of our leadership, how much we enjoy the actual work, and interactions with our coworkers. Having a great manager can make us look forward to coming to work each day, and having a miserable manager can make work intolerable. Likewise, having work that fully engages us can make the day go faster and give us a sense of accomplishment. And having great coworkers can be a source of genuine enjoyment, meet our need for social interaction, and result in higher outputs.
We were interested in how working virtually affected satisfaction, particularly when we looked at the comments from the people we interviewed, such as the following: “The same location can promote interaction and teamwork, but not always.”
We also got this comment: “Distance is not a problem. I am on the best team; have the kindest, most considerate coworkers imaginable; and a great leader who is always positive and supportive. We are all very lucky.”
So we were curious to see whether it was collocation or Virtual Distance that made the difference in job satisfaction. We asked our participants to rate their agreement on the following four questions:
We quickly found that collocation, by itself, had nothing to do with any of the aspects of satisfaction we asked about. We then examined the relationship between Virtual Distance and each of the four aspects of satisfaction. We did not find any relationship with pay, but then we were not expecting one, since pay should not be affected by Virtual Distance. For the other three items, however, the relationships were all significant. Figure 4.10 shows how Virtual Distance is related to each of the satisfaction indices.
Clearly, as Virtual Distance becomes lower, people are more satisfied with their coworkers, their manager, and the nature of the work that they're doing – no matter where they're located!
From an organizational perspective, we know that satisfied employees are more likely to stay with the company, thus reducing recruiting and selection costs. Satisfied employees also create what are called “spillover effects,” such as helping to recruit job candidates, recommending company products and services, and generally creating goodwill toward the company. Finally, satisfaction does have a slight but significant relationship with productivity. In general, more satisfied employees tend to be more productive. By increasing satisfaction, lowering Virtual Distance can also improve the bottom line.
Projects are notorious for being behind schedule and over budget. So success by those measures can be elusive. Given the results that we have discussed so far it would be surprising if we failed to find an influence of Virtual Distance on project success. In Figure 4.11, it's clear that Virtual Distance is having a direct impact on on-time, on-budget performance, which directly go to the bottom line. This particular statistic shows one of the most direct financial opportunities available when Virtual Distance is reduced.
Learning is a critical factor in the success of teams and, indeed, the entire organization. We asked our participants about the extent to which they learned from others in their teams, whether their experiences resulted in improved knowledge and skill and the extent to which the lessons learned could be applied to other projects or initiatives. As seen in figure 4.12, Virtual Distance makes a big difference.
As we've discussed elsewhere, the explanation for these results can be found in the direct impact that Virtual Distance has on two key measures: trust and organizational citizenship. We then used a technique call Path Analysis to see how Virtual Distance worked, which clearly explained the improvement in learning by the influence of Virtual Distance on trust and organizational citizenship and, in turn, the influence of these two factors on learning.
Team learning occurs as members acquire, share, and combine knowledge through experience with one another. Learning is facilitated when there are high levels of trust among team members and between the team and management. When trust is high, employees are much more likely to engage in open discussions that can lead to the transfer of information and skills. Second, organizational citizenship measures the helping behaviors and support that enable team members to learn from one another. In sum, improved learning happens because lower Virtual Distance increases both trust and organizational citizenship. The importance of these two factors cannot be overemphasized. If we can improve trust and organizational citizenship, a lot of positive outcomes will follow.
Another most important aspect of work today is, of course, innovation. As we reported in our first edition, in 2003, PricewaterhouseCoopers (PwC) conducted a survey on innovation across many different companies. Here's a direct quote from the PwC report: “At the heart of the issues impacting how people work together is trust. Of the quantitative data in the survey, trust between people which enabled them to share ideas freely was the single most significant factor in differentiating successful innovators.”8
How is trust related to innovation? There are three main connections: cross-fertilization, constructive criticism, and acceptance of failure. First, most good ideas come from the cross-fertilization we get when we interact with customers, colleagues, coworkers, or people in other disciplines. This cross-fertilization occurs only when people are comfortable sharing information. But sharing information makes us vulnerable. We might be ridiculed, or someone might steal our idea or take credit for it. In their discovery of the double helix, Wilkins trusted Crick and Watson and shared some information with them that led to the discovery of the structure of DNA. Crick and Watson ended up citing Wilkins and Franklin in their published work. What did Wilkins get for trusting Crick and Watson? He shared with them the 1962 Nobel Prize for medicine!
A second connection is that ideas get better when they're debated, built on, and discussed within a constructive framework. The two types of conflict that we see when people work together – task-related (good) and personal (bad) – have been compared for teams that have different levels of trust. Without trust, conversations that involve task-related conflict and argument may not occur or, if they do occur, can quickly turn into personal conflict. The research shows that when trust is high within a team, task-related conflict is much less likely to deteriorate into conflict that is personal in nature.9
Finally, innovation involves taking risks and occasionally failing. Employees have to trust that failure is acceptable and even part of a healthy process, or they won't take any risks. Management must trust employees enough to give them the freedom to come up with new ideas. One of the most innovative companies in the world, the 3M Corporation, trusts its employees enough to allow them to use up to 15% of their time to work on their own innovative ideas.10
Figure 4.6 shows how dramatically Virtual Distance influences the level of trust. Statistically speaking, high Virtual Distance = low trust/distrust.
This makes sense not only because of the empirical data, but also from a logical viewpoint. Physical Distance lowers the degree of social presence that is critical for building relationships and trust. However, we can get to low Virtual Distance through the two other factors. As we discuss later, social presence is the sense that you're connected to and with the other person. Operational Distance – the day-to-day noise in the systems that can stop meaningful communications from getting through – limits the extent to which relationships can be formed and strengthened over time. Finally, Affinity Distance goes to the heart of trusting relationships. When we have different values and communication styles, no history of relationship either direct or indirect, a formal status that overshadows contributions to the work, and a lack of a felt, shared future, it's difficult to build trust. Figure 4.13 shows how trust and innovation are related.
Higher trust leads to more innovative behavior. But this is only part of the story. Virtual Distance not only drives trust, which drives innovation, but also Virtual Distance has an additional effect on innovation over and above the influence on trust.
We tested the model introduced in Chapter 1, the Virtual Distance Path (shown here again as Figure 4.14).
As we discussed, in that analysis we found that Virtual Distance influences innovation in two ways. First, it influences trust, which in turn influences innovation. This is called an indirect effect.
But Virtual Distance also has an additional direct effect on innovation, as seen in Figure 4.15.
If we consider both the direct and indirect influence that Virtual Distance has on innovation, it's clear that lowering Virtual Distance is crucial if organizations are counting on innovation to build and maintain competitive advantage.
In an effort to boost innovation at one client that had a highly distributed new product development organization, they went so far as to relocate all of their employees into a common, specially designed building at a cost of over $7 million. They thought it would eliminate the problem.
It did not.
As we noted above, we did not originally include employee engagement in our Virtual Distance measures. However, we now have data spanning over seven years from a wide array of companies and industries and the results are dramatic. Employee engagement includes pride in the organization and a sense of shared values, with work, loyalty, and motivation going beyond normal expectations.
As you can see in Figure 4.16, our data show that high Virtual Distance produces significantly lower employee engagement
Given our other results it's not surprising to find employee engagement is influenced by Virtual Distance.
In Chapter 3 we discussed how Virtual Distance created a problem in a NASA project.
Some background may be helpful in understanding how some clarity ultimately made this project successful. On February 1, 2003, the orbiter module for the Space Shuttle Columbia was destroyed because of damage to its thermal control system. All seven crew members were killed. Within hours of this disaster, the Columbia Accident Investigation Board (CAIB) was formed, and in August 2003 they issued their report. Among the recommendations made by the CAIB was the development of a system for inspecting the tiles in the thermal shield once the orbiter module began orbiting the earth. On September 3, 2003, the Orbiter Boom Sensor System (OBSS) project began at the Johnson Space Center. The OBSS project not only met an extremely aggressive schedule, but produced an innovative solution to a significant problem in the space shuttle program. One of the major reasons for that success was the clarity of vision established at the very outset.
The vision for the product was clear from the first stages of the project: “Develop a capability for inspecting damage to the Orbiter TPS while in orbit.” The vision was clear and accepted as a given by all project team members interviewed, although there were still some uncertainties. Two of the most critical concerns were (1) the technical requirements for the laser sensors; and (2) the ability to repair tile damage if detected. Members of the project team understood and accepted these uncertainties and did not let them interfere with their objectives. All team members expressed a high level of commitment to the project and underscored its importance to resuming shuttle operations. For example, “the OBSS will have a capability of detecting damage to a depth of 0.25 inch.” The vision for the team was clear, and within the specified design parameters, team members were empowered to make decisions, problem-solve, and be innovative. This empowerment contributed to the sense of ownership and the high level of commitment on the part of team members.
The OBSS is an example of how clarity of vision can provide the basis for success. Clarity of vision means that everyone on the project team understands the goals of the project, their roles on the project, and what needs to be done, how it should be done, and who needs to do it. The problem we described in Chapter 3 was solved by reducing Virtual Distance and getting the Canadian subcontractor on the same page as the rest of the team. Team researchers use a closely allied concept called the “shared mental model” to describe a quality that most high-performing teams have. They know how the team interacts, who has specific knowledge and expertise, and how information can be shared and communicated.
The NASA project is not the only one in which clarity was important. In our research on over seven hundred new product development teams, we found clarity of vision to be the single most important differentiator between successful and unsuccessful projects.11 We had not yet looked at one important question. How did Virtual Distance affect clarity?
We first looked at collocation alone to see if it had any influence on the clarity of vision, roles and goals. It didn't. But Virtual Distance had a dramatic effect on vision, role and goal clarity. Figure 4.17 shows the difference in vision clarity for the lowest 25% on Virtual Distance and the highest 25% on Virtual Distance.
Around the same time we decided to incorporate employee engagement in our survey, we decided to add another outcome called Strategic Impact. Briefly, this outcome includes activities that either result in improved business practices and rules or help set the stage for further development of new business practices or services for customers. Think about it: when an employee feels as though they have a direct influence on strategy and growth, they become more motivated to work for the cause.
Strategic Impact is rarely included in typical organizational management metrics; however, it can be a strong contributor to less successful initiatives. However, when Virtual Distance is reduced and managed over time, and Strategic Impact predictably increases significantly, this influencer can be like a booster shot and help create much higher results on innovation and project success, as can be seen in Figure 4.18.
We have shown how Virtual Distance influences trust, organizational citizenship behavior, satisfaction, success, learning, leader effectiveness, innovation, employee engagement, clarity, and strategic impact.
Based on our updated worldwide analysis and our experience with dozens of organizations, the implications of Virtual Distance for companies are obvious and will only continue to grow in importance as we become more virtual, remote, and project-based. Lowering Virtual Distance has a positive impact on all of these key performance indicators. However, the measures alone are just the first step in solving for Virtual Distance. Next we use Virtual Distance Mapping as a way to get a closer view of where Virtual Distance lives.
Some key takeaways from our chapter on measuring Virtual Distance: