Performance of Virtual Organisations

As the ratio of knowledge intensiveness increases, the significance of a formal organisation structure decreases. When knowledge is a commodity and the main input is information, an organisation should be flexible. However, the free flow of information and knowledge is often impeded in a formal organisation structure. When an organisation is based on either temporary functional needs or on serving a common strategic goal with no formal limits, it is called a network or virtual organisation. Increased efficiency in a functional organisation is often attributable to synergy and engagement. The objective of this study is to define and enlighten the performance of knowledge work, and especially the knowledge work in virtual organisations. The key topics consist of the virtual organisation concept, the framework of performance measurement and definitions of performance. Methodologically the paper is, firstly, a conceptual analysis the goal of which is to outline the theoretical framework of virtual organisations. Secondly, the case provides an ethnographic description, so no general conclusions are made. However, the case is used for creating hypotheses for further studies. This paper is based on a literature review emphasising current knowledge on knowledge work and virtual organisations. The paper also includes a case description of an ongoing research project and the results of interviews of core members of a virtual organisation. This paper introduces a framework for performance measurement in knowledge work and points out the critical success factors of a virtual organisation.