The Performance Management Revolution

Chapter 1. The Need for Change

In his 2004 book, The Future of Work, Thomas W. Malone, the Patrick J. McGovern professor of management at the MIT Sloan School of Management and the author of the foreword to this book, wrote about a dramatic shift that is occurring in how businesses are organized. According to Malone, the first and second stages of the shift are already mostly complete, as large, centralized corporate hierarchies have come to replace small, informally organized businesses over the last 200 years.

There is a third stage, however—one in which corporate hierarchies evolve to more decentralized business networks—and it's just beginning. In this stage, enabled by technologies that drive down the cost of communications, large corporations actually shrink in size through a combination of outsourcing and vertical disintegration. Through outsourcing and vertical disintegration, big companies off‐load work to contractors and create networks of separate but interrelated businesses. These business networks perform much of the work that previously has been done inside large organizations.

Malone often cites eBay as a prime example of a company that operates as a business network. Today, several hundred thousand eBay sellers around the world make their full‐time living on eBay. If these people were employees of eBay, the company would be one of the largest global employers and retailers in the world. But eBay sellers are independent business people.

This way of organizing delivers ...