What Makes a Virtual Organization Work: Lessons From the Open-Source World

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In his 1998 article “Management’s New Paradigms,” Peter F. Drucker argues against the traditional view that the essential managerial task is to tell workers what to do.1 In fact, managing a workforce increasingly made up of knowledge workers has very different demands. Managers today, Drucker tells us, must direct people as if they were unpaid volunteers, tied to the organization by commitment to its aims and purposes and often expecting to participate in its governance. They must lead workers instead of managing them.

Drucker’s view of knowledge workers as volunteers seems to be on target with today’s economic, business and workforce trends. A number of industries have seen the breakup of large traditional organizations and the emergence of new, networked organizational forms, in which work is conducted by temporary teams that cross organizational lines. With a booming economy, there is a shortage of skilled labor, exacerbated by an aging population and fewer new workforce entrants. High-tech companies in particular are facing a war for talent, while people increasingly value personal time and autonomy over greater income and advancement. Consequently, companies seek to harness the talents and energies of dispersed “communities of practice.” At the same time, a record number of knowledge workers are self-employed freelancers, and more people choose periods of less than full-time work. If those trends continue, managers will increasingly face a workforce of volunteers — at least in spirit if not in fact.

How will the traditional management tasks of motivating and directing employees have to change in the face of these new realities? One way to answer that question is to examine an example of an economic enterprise that acts in many ways like a voluntary organization: the open-source software movement. Open-source software, such as the Linux operating system, is licensed as a public good — in other words, it is essentially given away for free. And many open-source software products are built, at least in part, by people who are neither employees nor contract workers and who receive no direct compensation for their participation. Nevertheless, open sourcing has become an increasingly popular way of doing business in the software world, and many entrepreneurs and investors are making considerable money from companies involved with open-source software. (See “About the Research.

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1. P.F. Drucker, “Management’s New Paradigms,” Forbes, Oct. 5, 1998, 152–177.

2. E.S. Raymond, “The Cathedral and the Bazaar” (Sebastopol, California: O’Reilly & Associates, 1999).

3. E.S. Raymond, “Homesteading the Noosphere,” http://www.tuxedo.org/~esr/writings/homesteading/homesteading.html.

4. E.S. Raymond, “How To Become a Hacker,” http://www.tuxedo.org/~esr/faqs/hacker-howto.html.

5. W.C. Taylor, “Inspired by Work,” Fast Company, Nov. 29, 1999, 200.

6. J. Lerner and J. Tirole, “The Simple Economics of Open Source,” working paper, Harvard Business School, Boston, Feb. 25, 2000.

7. “Is Microsoft the Great Satan?” http://www.gnu.org/philosophy/microsoft.html.

8. E.S. Raymond, “The Halloween Documents,” http://www.opensource.org/halloween/.

9. J. Corbet, “Letters to the Editor,” Linux Weekly News, March 25, 1999, http://www.lwn.net/1999/0325/backpage.phtml.

10. N. Bezroukov, “A Second Look at the Cathedral and the Bazaar,” First Monday, Dec. 9, 1999, http://firstmonday.org/issues/issue4_12/bezroukov/index.html.

11. C. Shapiro and H.R. Varian, “Information Rules: A Strategic Guide to the Network Economy” (Harvard Business School Press: Boston, Massachusetts, 1999); and

“The Business Case for Open Source,” http://www.opensource.org/for-suits.html.

12. N. Petreley, “It Takes a Village of Detectives to Solve the Case of the Faulty 3Com,” Infoworld, May 4, 1998, 4.

13. F. Hecker, “Setting Up Shop: The Business of Open-Source Software,” http://www.hecker.org/ writings/setting-up-shop.html; and

T. O’Reilly, “The Open-Source Revolution,” Release 1.0, November 1998, http://www.edventure.com/release1/1198.html.

14. L. Radosevich and B. Zerega, “Free Money Model,” Infoworld, June 8, 1998, 102–110.

15. “Getting Involved,” http://www.mozilla.org/get-involved.html.

16. “Apache HTTP Server Project,” http://www.apache.org/ABOUT_APACHE.html.

17. “Debian Constitution,” http://www.debian.org/devel/constitution.

18. Our thinking in this section has benefited from a governance-research collaboration involving McKinsey & Company’s Organization Practice, Josh Ober of Princeton University and John Ferejohn of Stanford University.

19. J. Billones, “First Call for Votes,” Linux Weekly News, March 15, 1999, http://lwn.net/1999/0318/a/cols.html; and

J. Billones, “Results of Vote,” Linux Weekly News, April 11, 1999, http://lwn.net/1999/0415/a/cols.html.

20. J. Patokallio, “An Introduction to Usenet Voting,” http://www.hut.fi/~jpatokal/uvv/intro.html.

21. L. Kahney, “Open-Source Gurus Trade Jabs,” Wired, April 10, 1999, http://www.wired.com/news/news/technology/linux/story/19049.html.

22. N. Bezroukov, “Open Source Software Development as a Special Type of Academic Research,” First Monday, Oct. 12, 1999, http://firstmonday.org/issues/issue4_10/bezroukov/index.html#b5.

23. J.S. Brown and P. Duguid, “Organizing Knowledge,” California Management Review 40, no. 3 (spring 1998): 90–111.

24. C. Jones, W.S. Hesterly and S.P. Borgatti, “A General Theory of Network Governance: Exchange Conditions and Social Mechanisms,” Academy of Management Review 22 (Oct. 4, 1997): 911–945.

25. S. Turkle, “The Second Self: Computers and the Human Spirit” (New York: Simon and Schuster, 1984).


The authors would like to thank Les Gasser of the University of Illinois, Alexander Hars of the University of Southern California, John Ferejohn of Stanford University and Josh Ober of Princeton University for their valuable suggestions about the research.

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