Recently, on an airplane returning home to Seattle from a consulting job with a large corporation, I realized that, once again, I was seeing the same kind of problem in the company I was working with that I had seen many, many times before. Over the course of my 36 years in business, I have come to realize there is a set of behaviors that people exhibit which remind me very much of the feudal fiefdoms of the Middle Ages. Individuals and groups tend to isolate themselves from the larger organization, and worry more about defending their turf and protecting the status quo than moving the organization forward. I call such behavior the "Fiefdom Syndrome."

After retiring from the position of COO at Microsoft, where one of my chief tasks was to break through corporate fiefdoms and help to streamline the company, I decided to write down what I'd discovered about fiefdoms. To a greater or lesser extent, fiefdoms have been a part of every organization I've ever encountered, and they can absolutely hamstring an organization's effectiveness -- far more so, in fact, than any cyclical downturn or economic recession. I believe that conquering the Fiefdom Syndrome is one of the most important things a company can do to improve its business performance.

The Fiefdom Syndrome When Robert J. Herbold arrived at Microsoft in 1994, he was surprised to find that the king of software design had so many different accounting systems in its various divisions that it could barely close its books at the end of the quarter. Herbold, whose job as COO at Microsoft during much of the 1990s was to fight complexity in the face of 30 percent growth per year, revamped the company's structures, systems, and processes and helped propel its rise to the top. He identified the problem at Microsoft as one that commonly infects many organizations -- what he calls the "Fiefdom Syndrome." Simply put, it's the very human tendency people have to protect their turf and create bureaucracy in order to become important and indispensable to their companies. This article is excerpted from Herbold's new book, "The Fiefdom Syndrome," published by Doubleday, a division of Random House. In it, Herbold explains how fiefdoms develop at every level of an organization and reveals the seven key disciplines for eliminating them wherever they appear.

Recognizing Fiefdom Types

While you can observe fiefdoms in a huge variety of situations, they generally fall into six major categories: personal, peer, divisional, top-tier, group, and protected. Each can cause varying degrees of negative impact on an organization.

The personal fiefdom, or the fiefdom of one, can affect co-workers, work groups, entire departments, and even the actions of the entire company if the person's impact is broad. Personal fiefdoms can create major blockages within an organization and can control information, stifle creativity, and inhibit positive change.

Fiefdoms can sprout up at the peer level as well, with similar groups in an organization each operating as a fiefdom. When taken together, these parts can affect how an organization conducts business in a given market.

In larger organizations with multiple product lines, growth adds complexity over a period of time. This can lead to divisional fiefdoms, where each product line or division of an organization ends up acting as its own entity, without the necessary synergy or interaction with the rest of the organization, its external distribution channel, or its customers.

One of the easiest fiefdoms to spot, and the most difficult to alter, is the top-tier fiefdom, where the person at the top of the organization cuts himself off from the marketplace to such an extent that he becomes immune to the realities of the business. Market forces often correct this type of fiefdom naturally, but the organization can generate some ugly problems until this happens.

Perhaps the most harmful and common fiefdom in business today is the group fiefdom, where a relatively small group of people forms around some common task, responsibility, or objective. There are examples in recent years of group fiefdoms -- like the finance team at Enron -- that were extremely harmful to the organizations in which they resided.

Protected fiefdoms occur when a top executive or a board sanctions, harbors, or even creates a fiefdom and provides long-term protection of the fiefdom by sheltering it from financial or strategic scrutiny and, in general, ensuring a hands-off approach to it.

To be clear, a protected fiefdom is different from a top-tier fiefdom; in the latter case, one individual at the top of a particular organization is running the show and keeping his management out of things and is truly the feudal lord of the fiefdom. With a protected fiefdom, you have an individual who is not really involved in the activities of the fiefdom; their fiefdoms operate as they wish. The leader, therefore, is not the feudal lord; but by allowing fiefdoms run by other feudal lords to exist, he or she is, in fact, enabling their continued growth.

Each of these six categories of fiefdoms results from some very basic human behaviors or tendencies. Each of them can damage the company, sometimes to a surprising extent. But the Fiefdom Syndrome can be controlled.

Controlling the Data

The majority of people want to do well in the workplace. They want the organization to do well, too. As a result, they are highly motivated to be involved in the generation of data or information that reflects on their performance within the company. That desire to do well is good as long as the information about performance remains objective. Unfortunately, that's where problems can occur.

To demonstrate that they are doing well, employees naturally look for ways to control the information about them that is used to evaluate their success, or that of their group or division. In talking about their performance with superiors, they tend to want to present information that shows them and their group, division, or company in a good light.

Fiefdoms at times emerge when people place more energy and emphasis on demonstrating that they are doing well than on changing their behavior to improve their actual performance.

In every organization, it is important to share key information and measurements across the enterprise. When the right information is widely available, the leaders of the organization can easily see what is going on in each of their businesses. Subsidiaries or divisions in other parts of the country or world can be compared with one another. More important, a company's business can be compared with its competitors'. The CEO or boss can determine whether or not operations are running on all cylinders, while leaving the responsibility for generating growth to the individual business units.

To foster a performance-driven organization, vital data and standards to measure performance must be available to the business units as well as to top management so that everyone can understand the overall progress of the company. This will benefit all stakeholders. Individuals can see how their unit is doing and what they must do to improve its performance; top management can see the performance of the various groups.

10 Key Principles To Make Standardization a Reality All departments/areas must be involved in design, implementation, and maintenance of companywide processes and systems. The data and terminology in each department must be standardized across the entire company. The business processes and templates must be standardized companywide. The number of information systems used must be winnowed down to a very small number companywide. Direct most users to data warehouses via simple, menu-driven intranet pages. Don't build bridges to old systems. Eliminate old systems and methods. Each department head needs to drive down the size of the IT organization and the number of IT systems developers serving that particular area. No paper allowed. Period. Each department head should stream- line the size of his or her staff in the corporate group and in the regional and business units. The CEO must be 100 percent behind this effort .

Overcoming the Fiefdom Syndrome: Discipline

At its heart, a fiefdom lacks discipline. It can be corrected only if management adopts new behaviors that make discipline a priority.

There are seven key disciplines that must be instilled to eliminate fiefdoms. The first three are process-related and require an organization to institute precise ways to do things. The other four relate to behavior -- how activities are approached by groups and individuals. Taken together, these seven disciplines provide strong and efficient functional practices in the core areas of an organization.

The discipline of creating lean global processes and accessible data companywide. Fiefdoms tend to hoard and hide their data. They often try to create their own information systems to reflect how "unique" their territory or turf is and show how well they are doing, making it difficult for top management to determine the health of the fiefdom and leading to significantly increased costs.

To fight this human tendency to control information, companies need to institute systems that disseminate all crucial data to the entire organization. Such systems should reach across every part of the organization and be extremely easy to access and use.

The discipline of standard templates and data. Each department of the company, such as finance, human resources, manufacturing, product development, etc., should make its data available across the entire organization to employees authorized (via password) to have access to it.

Individuals should be able to pull up templates of key information on the screen of their personal computer that can answer 95 percent of the questions that come up. Having that ability is an incredibly powerful tool in every area of the business.

With such databases and easy-to-use tools in place, it becomes extremely difficult for fiefdoms that try to hoard information to prosper. While business units and subsidiaries may need to have limited unique programs or data to help them run their business, such information should be kept to a minimum. The goal is to keep the business as simple and focused as possible. Such an approach yields the right kind of checks and balances that make it difficult for fiefdoms to form. When top management and the management of the individual business units have easy access to such data, they can better understand what is working and what isn't, while they delegate responsibility for generating the positive results to the individual groups within the division.

The discipline of inspection. There is simply no substitute for the leaders of an organization to regularly schedule reviews to inspect key performance data of the various groups under each manager's responsibility. This is much different from an audit, which is more of a checkup. "Inspection" implies a direct involvement in understanding what is going on. The intent of such an inspection is to ensure that key measures about the performance of a group, division, or company are being reviewed and that action plans are being put into place to generate improvement where it's needed.

In his book "Execution: The Discipline of Getting Things Done," Larry Bossidy, former CEO of Honeywell, discusses what he calls the "importance of robust dialogue." What Larry is suggesting is that top management regularly meet with key groups in the organization to have a thorough discussion of the critical issues. Such discussions are open, candid, and informal. Larry points out that only when such dialogue occurs can real progress be made on key issues. This is the kind of interaction I suggest should occur during inspection. It means that top management is working to assist the groups in thoroughly understanding their business and creating action plans that will lead to significant improvement.

The discipline of avoiding overconfidence. One reason fiefdoms occur is that people convince themselves that their work and their products/services are better than they actually are. Such overconfidence leads to disastrous results in just about any setting. Ken Olson's confidence in the ongoing success of the VAX minicomputer led to DEC's downfall. On the other hand, Bill Gates is constantly looking for problems; he looks at everything that happens on a day-to-day basis and asks what Microsoft needs to improve upon. This willingness to ignore your successes is critical -- it's the only way to get serious about preparing for the future.

The discipline of avoiding fragmentation. In finance, human resources, manufacturing, procurement, IT, and public relations, business units tend to want to develop their own departments in order to make their group as independent as possible. Each business group wants to do its own thing and respond to its own unique needs. Unfortunately, this leads to enormous increased costs and potentially massive duplication.

The discipline of constantly learning new skills. Another characteristic of fiefdoms is that they tend to freeze the skill level of people caught inside them. When people are protected and are not challenged to continually improve or to offer new ideas, their motivation for change evaporates. They assume they have already mastered their job and often doubt that anyone outside the fiefdom has anything to teach them -- especially competitors.

The discipline of avoiding bottlenecks. Sometimes in finance, human resources, manufacturing, or procurement, you will find individuals who are in very important jobs with respect to their expertise but are not strategic to the corporation; they are important executionally. This alone shouldn't be viewed as a negative. However, because such people often have difficulty accepting this fact, they set up procedures to exercise veto power over aspects of the company's business and create processes that elevate their importance.

These kinds of fiefdoms emerge when people with key executional roles understand that if the process changes, their role might be eliminated. As a result, they build their responsibilities in such a way that they remain critical to the company. This kind of defensiveness is extremely destructive to the organization and can kill a career.

The benefits to overcoming the Fiefdom Syndrome are not merely theoretical. Doing so produces concrete, measurable, and -- in many cases -- extraordinary results.

But how can you achieve the constant vigilance needed to eliminate the basic tendencies that contribute to the Fiefdom Syndrome?

Each organization needs a high-level "enforcer." At Microsoft, I played that role in instilling discipline in the various functional areas (finance, procurement, IT, HR, manufacturing, etc.). Steve Ballmer played a similar role in sales. And most important of all, Bill Gates, as the CEO, played a pivotal role in backing us up. We pushed for discipline across the company, while he pushed hard on the business units to achieve the creativity needed to constantly improve Microsoft's products and services.

To eliminate weak links in the top management team, everyone must understand the need for the proper balance of discipline and creativity in driving the company forward. Companies that balance innovation with corporate discipline do not offer the kind of fertile soil that allows fiefdoms to grow. Balancing those two different directives, however, requires strong leadership at every level.

Robert J. Herbold was recently COO of Microsoft, and before that he held several senior executive positions during a 26-year career at Proctor & Gamble. He is now president of the Herbold Group LLC.