SECTION C – OB GROUP 8

CASE WRITEUP – APPEX CORPORATION

Question 1 - What were the challenges Shikhar Ghosh faced when he joined Appex?

When Shikhar Ghosh joined Appex Corporation in May 1988, the Cellular Telephone Industry was
growing rapidly and the market for Appex was expanding. The need of the time was a large scale
expansion and organizational level changes to handle the increasing customer demands and planning
for the future strategies. Following were the problems which Ghosh faced when he joined Appex –

People
1.) People were not empowered. Key executives made all decisions.
2.) No formal procedures, there was no proper assignment of roles even though people had
expertise but they did anything this led to improper utilization of people’s expertise.
3.) The atmosphere was changing from entrepreneurial to chaotic. The employees came when
they felt like coming. For instance, the customer service people turned up at 10:00 am while
they were supposed to be present by 8:00 am. This in some cases also led to employees
quitting their jobs.
4.) Recruiting high-performing team and convincing the employees that change was essential.

Product, services and planning

1.) There was no development or future planning. There was only “fire-fighting” with
employees reacting to only the crisis that happened on a day to day basis.
2.) No product plan. People did what they were interested in. Lack of coordination would result
in missed deadlines.
3.) The company was project based and as the number of projects increased, people worked
on more and more projects at once. Due to lack of planning it led to problems of increased
workload, no accountability, no reporting structure and redundancy in operations.
4.) Customer service was crumbling as Appex could not respond to complaints of many
customers. They could not provide proper technical assistance to many of their consumers.
They could not handle the increased demand. They had started to fall behind schedules and
miss installation dates.
5.) The company was spending cash quickly without monitoring the expenses which led to
belief among the investors that company was spending cash too haphazardly.
6.) There was no financial planning and all planning seemed useless. Many customers had
complained of not receiving technical assistance.

Hence the challenge Shikhar Ghosh faced was to create control and structure that would help resolve
the above problems and realignment of the organization structure i.e. restructuring the top
management and creating vision for the company and refocusing the organization towards it.

Question 2 - Evaluate the importance of each of the structural changes Shikhar Ghosh implemented.
How important were they? What problems did each new structure address? What problems, in turn,
did it create?

As the company was rapidly growing and there was a need for organizational structure change, Ghosh
started by implementing innovative structures. There were a series of problems and limitations which
followed after each structural change in the organization and hence Ghosh kept on implementing new
structures to address the issues at each level. Following are the phases of Appex Corporation’s
structural changes implemented by Ghosh:

A) Innovative Structures:

1.) Circular Structure – The structure comprised of concurrent circles with inner most circle
containing the senior executives followed by the functional managers and employees respectively.
The environment around the circle represented the Appex’s customers.

Importance: It was a non-hierarchical structure with continuous free flow of information within
the organization and with the environment (customers) as well.

Problems Addressed:
1. Circular structure introduced a flat structure with well-defined roles and less chaotic atmosphere.
2. It improved coordination, integration and planning over the earlier structure.

Problems Created:
1. Employees could not relate to the unfamiliar circular structure as the new hires couldn’t understand
how they fit into the organization, with whom to talk to get things done, how their performance was
evaluated, what was the power structure and who had authority to make decisions.
2. A mentality was developed that the customer was the enemy.
3. The structure was aligned with responsiveness but had no accountability for planning and as a
results the tasks that required planning were not getting done.

2.) Horizontal Structure – Horizontal structure was the traditional, vertical organization chart turned
on its side.

Importance: It was a non-hierarchical structure in which employees could fit themselves.

Problems Addressed:
1. It was similar to traditional organization structure with clarity of responsibilities and reporting
structure.

Problems Created:
1. Employees didn’t respond to the new structure enthusiastically.

B) Hierarchical & Functional Structure:

1.) Phase1 – In this phase the functions were organized as following teams: Sales/Marketing,
Software Development and Services, Engineering and Technology, Operations, Finance, Human
Resource and Administrative team.

Importance: It was a more broadly classified structure with clearly defined functions and division of
teams which had better hierarchy and flow of authority.

Problems Addressed:
1. It provided clarity of responsibilities and authority across different functions.
2. The structure succeeded in focusing the company on completing tasks.

Problems Created:
1. There was confusion in defining the functions like how many distinct functions should be created,
should marketing be a part of sales, should there be separate finance, human resource and accounting
teams, etc.
2. There was also confusion in assigning new management roles e.g. who should head each of the
teams, could the same management personnel handle the responsibilities with the rapid growth of
company, etc.
3. Horizontal reporting structure of functions implemented by Ghosh displeased the Board of
Directors. The board wanted a traditional hierarchical structure.
4. Politics came into existence as people started caring about their titles and desk locations.
5. Heads of various teams started creating sub functions within their teams and as a result
organizational chart grew vertically and horizontally and managerial roles kept on increasing within
sub functions.
6. Over time teams became polarized. The distinction between various departments inhibited working
relationships and involvements. The cost of resource allocation separately to the teams increased.
7. The source of authority was functional and not managerial expertise.
2.) Phase2 – In this phase Ghosh hired external people experienced in management with broader
functional expertise to head the teams.

Importance: This was the first step towards external integration which focussed on role assignment
based on expertise.

Problems Addressed:
1. Now the persons with functional skills could focus on the product development and the
managerial role was handled by hired experts.

Problems Created:
1. The hired external managers didn’t know about the product as well as the existing team.
2. It was difficult for new managers to gain respect of the teams.
3. Ghosh found it very difficult to measure the managerial competence.

3.) Phase3 (Product Teams) – In this phase on the basis of the suggestion of Paul Gudonis, Senior
Vice President of Sales and Marketing, Ghosh set up separate product teams for each of Appex’s main
products.

Importance: The structure was made more product centric with product team managers assigned
with the role of writing business plans for the products and integrating the functions.

Problems Addressed:
1. The product teams coexisted with functional teams and there was no need of having the
knowledge of each other’s responsibilities.
2. Functional teams were informed about the product happenings on a daily basis.
3. Product managers could handle extended managerial activities which went out of capabilities of
some personnel.

Problems Created:
1. There was no system which specified who had the authority to make which decisions within the
Multifunctional product teams.
2. The conflicts between the product managers and the operations personnel became acute.
3. Product teams didn’t know the limits of their authority decisions related to sales price, allocation
of resources and prioritization of activities.
4.) Phase4 (Business Teams) – In this phase Ghosh created business teams as intermediaries between
product teams and corporate management team.

Importance: Business teams included representatives from senior management and had the authority
to make decisions including those related to resource allocation and products.

Problems Addressed:
1. The conflicts of authority and resource allocation was resolved.

Problems Created:
1. Ghosh realized that there were a lot of people planning, counting and greasing the wheel as
compared to the revenue producing people in the past.
2. There were a lot of managerial levels and the infrastructure, hiring and training costs increased
considerably.
3. Customer focus diminished and people became concerned with internal processes and issues rather
than meeting customers’ needs.

C) Divisional Structure:

In Aug. 1990, Ghosh implemented divisional structure. He established two broad divisions or
businesses: Intercarrier Services (ICS) and Cellular Management Information Systems (IS).
Importance: Appex’s product could be divided into one of these two businesses. At the same time a
separate Operations division could service both the businesses with utility functions.

Problems Addressed:
1. This structure improved accountability, budgeting and planning.
2. Employees could relate themselves to the divisions and there was a sense of cooperation. They now
focussed on meeting the financial targets.
3. The role of Ghosh changed. He could now dedicate more time on planning and strategy building
rather than addressing day to day operations of the company. The company could run without him.

Problems Created:
1. The resource allocation between the divisions was not perceived as equitable.
2. Politics again came into existence and a lot of second guessing started happening in the divisions.
3. Divisions wanted control over all their resources and didn’t want to share resources thus increasing
the costs.
4. The divisions started functioning as different companies with barriers between them and there was
a little flow of communication and ideas.
5. New product ideas reduced significantly as they needed interaction between the divisions which
was not happening.

Question 3 - What would you have done in Shikhar’s place? Were all the changes in structure
necessary? How would you address the challenges Shikhar is facing towards the end of the case?

Shikhar kept on introducing new structures very rapidly which, in some instances, was not necessary.
Instead of focussing on the creation of new roles and organizational levels, he should have handled
the issue of assigning authority and control to the respective executives and managers first. With each
organizational structure change, he should have communicated the implications to the employees
clearly and also gathered feedback from them.
Necessity of structural changes:
Circular structure: Circular structure was not necessary. This structure was not oriented towards
providing solutions to current problems Appex was facing. Being non-hierarchical, issues regarding
accountability, control could not be solved.

Horizontal structure: Horizontal structure was also not necessary. This structure did not answer
questions regarding accountability and lack of authority.

Functional structure: This structure was necessary to gain control and provide direction for the
company by implementing goal setting.

Product Teams structure: This structure was necessary for a clearer definition of job
responsibilities, better planning and inter departmental working. Issues of resource allocation and goal
setting could have been handled by aligning them with goals of the company. Authority over decision
making may be given to the product team manager who should have a clear understanding of the
company's targets and his/ her business plan.

Divisional Structure: Divisional structure was also necessary for better resource allocation and
providing better accountability.

If we were in place of Shikhar then we would have introduced a Matrix structure for integrating the
product teams with the businesses or divisions which were usually divided in terms of resource
allocation and decision making and acted as separate companies. The matrix structure will give a
product centric view of business operations as well as a functional view thus encouraging the flow of
information, idea sharing and focus towards new product development and customer oriented strategy
planning.

Advantages of Matrix Structure:

1. Cross functional teams will reduce the functional barriers and overcome the problem of subunit
orientation which is evident in almost all structures of Appex.
2. It opens up communication between functional specialists and provides an opportunity for different
functions to learn from each other and develop skills. This was needed for Appex as the new ideas
had stopped coming from the divisions because of the barriers.

Plan for Post EDS Acquisition:

When Electronic Data Systems (EDS) acquired Appex in Oct. 1990, the challenge before Shikhar
Ghosh was to align Appex’s structure based on EDS’s requirements. His role changed in dealing with
EDS for planning the strategic direction of Appex. The divisional structure of Appex needed to be
designed as a division of a larger, bureaucratic organization.
This could be achieved by pooling in the executives from EDS senior management with relevant skills
and integrating them at the top level of the vertical functions in the Appex’s Matrix structure. Appex
could be integrated with the existing support functions of EDS for its resource allocation and financial
planning. This would eliminate the need for individual support functions for the divisions and hence
reducing the cost and make the decisions equitable.