It's only natural for employees to protect their own turf, but what feels right to an individual is often wrong for the organisation as a whole.
Former COO of Microsoft Robert Herbold remembers walking into the office of one of the financial analysts who was trying to pull together all of Microsoft's European results during the first week of January 1995.
"I had been at Microsoft for only a few months, and as the new chief operating officer, I was making the rounds to see how the place operated," writes the author of The Fiefdom Syndrome: The Turf Battles That Undermine Careers and Companies - And How to Overcome Them. "The analyst was on a speakerphone in the midst of a screaming match with the Italian subsidiary about why they seemed to change each quarter how they categorized marketing costs for shipping promotion materials and what they classified as cost of goods sold . . . It was clear to me that there was no discipline in the system. The Italians weren't trying to be difficult - they felt that they were running their business smartly. The problem was that the corporate folks didn't have a focused, disciplined approach towards the basic elements of the company's financial structure."
Herbold says it used to "drive Bill Gates nuts" that it took weeks for the company to figure out what the quarter was going to look like, not because he was overly interested in the short-term financial results but because of what it said about the lack of information systems capable of making the financials fall into place in a timely manner. "Bill Gates would regularly pop into my office and ask when in the world we would be getting those final numbers. While he was modestly anxious to see the numbers, Gates was frantic about the poor systems that led to such late results."
However, the real problem was not with the information systems so much as a build-up of fiefdoms, says Herbold, a "simmering and potentially infectious condition inside virtually all organizations" that can lead to massive operational inefficiencies and strategic mediocrity.
Fiefdoms arise where individuals or groups try to protect their turf and reshape their environment to gain maximum control. Fiefdoms are filled with people so fixated by their own activities, careers and territory that they are heedless to any damage they might cause to the company. "People who create such fiefdoms become dangerously insular, losing perspective and awareness of what is happening in the world outside of their own control. They also tend to hoard resources and are determined to do things their own way, often duplicating or complicating what should be done company-wide," Herbold wrote recently in a Microsoft-published magazine.
As the world's foremost software company, Gates expected Microsoft to have superb systems, Herbold says. However, when Herbold started work there, they simply did not have them. In fact, Microsoft's systems were in such terrible shape that when a customer would come in to learn about Microsoft software products - and halfway through the session ask the inevitable question: "Well you guys are smart, we do a terrible job at financial systems, can you explain how you do your financial systems using Microsoft software, how you manage your HR systems, how you do procurement?" - Microsoft staffers in the meeting would inevitably have to change the subject.
"Our customers were expecting to learn the best practices from a global leader in information technology. After all, they reasoned, a totally networked high-tech company with offices throughout the world must have the most sophisticated financial reporting system," he says. On that expectation, at the time, Microsoft simply could not deliver.
So Herbold made it his mission to make Microsoft's internal systems a showcase for its customers, and did so in a series of moves that he says not only simplified the running of the company (today the company can close its books each quarter in a couple of days), but turned those systems into a powerful sales tool. But only after smashing down the fiefdoms that were getting in the way.
The detrimental affect of those fiefdoms - which Herbold says are common in almost every organization - was sweeping. In the early 1990s, Microsoft's sales subsidiaries in most major countries were feeling very confident in their abilities to run their businesses, and enjoyed impressive revenue and profits. When Microsoft started these subsidiaries in the 1980s, they were intentionally made independent to ensure they could grow fast, unencumbered by directives from the Redmond headquarters. It was the perfect environment for fiefdoms to take hold.
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