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APPEX CORPORATION CASE REPORT ( Group no 8 )

Members:
Kandalkar Swapnil (0266/55)
Rakhame Devendra Zulal (0271/55)
Shireesh.B.B (0282/55)
Shrikanth B Tantry (0283/55)
Snigdhajyoti Das (0287/55)
Vipul Kukkar (0301/55)
CASE BRIEF
The case describes the choices and challenges faced by Shikhar Ghosh, wrt organizational structure, a
HBS alumnus with 8 years of work experience in Boston Consulting Group as he joined Appex Corporation
as it’s Chief Operating Officer. The company provided service to cellular carriers through a) Engineering
expertise and b) Business and Systems expertise, for territory management with 25 employees and $2M
in revenue. Being a specialist in organizational structuring, Ghosh was introduced to the company at a
time when the situation was chaotic and required immediate action with respect to creating a formal
structure and to restrict the haphazard outflow of cash. With the structure being informal and loose,
Shikhar Ghosh found it as the perfect opportunity to try out his skills at implementing the innovative
structures he had built in his mind during his stint at BCG. He was recruited on May 1988 and interpreted
his job to be one that brings control and accountability to the firm. During the following three-year period,
he implemented innovative, hierarchical - functional and divisional structures. These structures had their
own advantages and flaws, which will be discussed over the course of this report. The changes in
organizational size demanded a change in structure in every phase. As a result, there was an introduction
of a lot of middle level managers and the workplace mind-set shifted from a primarily revenue generating
workforce to a planning and counting workforce.

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

The initial problems arose due to the inability of the otherwise competent employees to meet increasing
demand because of their involvement in multiple projects at once. As a result, employees were hired at
the rate of 10/month, and this led to excessive investments, began to fall behind schedule and missing
installation dates. Financial planning was non-existent, and all other planning measures weren’t given
much time, and nevertheless turned out to be futile, thus leading to excessive cash outflow, and added
to it, there was no monitoring of the expenses. There was also a lot of troubleshooting within the
organization and future business development was absent. Mr Ghosh was brought in at a time when
there was a huge need to fix the internal leakages, which acted as a deterrent at a time when the market
and Appex in particular was growing at an exorbitant rate. He was expected to stop the loss of potential
clients due to employee behaviour, as explained through illustrations, at a time when the company
atmosphere seemed to be moving from that of entrepreneurial to a chaotic one.

Customer turnover was one important issue to deal with. As employees were engaged due to increased
demand, there were a lot of unattended customers and this led to a higher customer attrition rate. Also,
due to customer engagement, product development was hampered, which was the strength of Appex,
and clashes between two employees working on the same project individually resulted in frequent system
crashes. The project-orientation and the looseness, as illustrated by Mr Ghosh himself, wasn’t the way
forward and required a reform with respect to long term vision as well as immediate action. Also, Ted
Baker’s (VP Operations and Service Management) view of the organization suggested that no one had a
clear idea of their role/job expectation, suggesting that the structure was informal and fluid.

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?
Name of the Importance Problems Addressed Problems Created
structure
Created a non-  Creates a non-hierarchical  Employees couldn’t relate to the
hierarchical organization structure
organisation where  Free & continuous flow of  Confusing for new employees as
information flowed information within they expected more traditional
continuously and organization organizational structure
CIRCULAR
STRUCTURE
freely within the  Considered every division  No clear performance evaluation
organization and as a part of the same whole metric
between the  Customers considered as enemy
organization and the  Geared towards responsiveness,
environment. not towards any form of planning
Better at designating  Overcome the difficulties  Employees didn’t respond
tasks to employees faced in the circular enthusiastically
than circular structure  Less control over the employees
method; well-
HORIZONTAL defined
STRUCTURE
responsibilities for
employees;
generally easier to
manage
More broadly  Promotion of specialization  Titles were given great value &
classified structure & productivity among politics came into existence
with clearly defined employees  Source of authority was functional,
functions; division of  Develop norms & values not managerial and expertise
teams having better over time  No planning, only fire-fighting and
hierarchy; flow of  Peer supervision among
HIERARCHICAL, multitudes of projects. There are no
FUNCTIONAL authority is defined employees with common financial forecasts.
STRUCTURE skills
 Lack of Accountability, no clear
“Checks and Balances” system
 Limited senior management
teamwork
 Polarization of Departments
 Laxity in meeting commitments
According to the  Increased responsibility  No system to specify who had the
structure, it was a towards success of project, decision-making authority
more product which had diminished after  Increased horizontal & vertical
centric approach. structuring differentiation
New Product Team  More decentralization than  More resource allocation problems
Managers were functional; allowed on-the- within the team & with other teams
assigned, with the spot decisions
PRODUCT
TEAMS role of writing
business plans for
the products and
integrating the
functions.
The business teams  Resource allocation  Less focus on company-wide
were intermediaries problems solved financial goals
between the product  Better Managerial expertise  Training costs were high
teams and the existed along with  Customer focus diminished
corporate functional expertise  Infrastructure costs were increased
management teams.
Business teams
PRODUCT + included
BUSINESS representatives from
TEAMS senior management
& had the authority
to
make decisions
including those
related to resource
allocation &
products.
Appex’s product  Improvement of budgeting  Problems of functional structure
could be logically accountability, & planning still persisted
divided into one of  Focus of employees on  Problem of shared resources led to
these two meeting financial targets antagonism between divisions
businesses.  Great deal of cooperation  Little communication across
Operations included observed within divisions division and little sharing of ideas
DIVISIONAL the utility functions  Improved speed &  Divisions began to act as small
STRUCTURE that serviced the two efficiency companies, developed their own
businesses. Each business procedures
 Best suited to rapidly
division had one
changing business
 Divisions began to “play games”
head, responsible for with their financial statements to
the entire division environment such as Appex meet financial objectives
and reported to  Difficult to get accurate sense of the
Ghosh. financial status of the company

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?

Rather than starting with the circular structure (leaned towards responsiveness rather than planning)
and moving towards horizontal functional structure (with informal titles and a who cares attitude), and
then going on for a product team and further onto a business team organizational structuring, a better
approach would have been to start off with a divisional structural done in a thorough manner (with
proper accountability and budgeting and planning). After implementing the structure, he should have
stuck onto it for as long as the structure allowed to, by providing enough time. This would have
provided him quality inputs about the problems in the long run. as problems start to emerge sometime
after implementation and hence might have been able to properly address the issues, which would
have been lesser than what he had to face due to the changes made in a hurried manner.
I would not have complicated the structure by introducing a matrix or a hybrid structure. The case of a
former structure in place would’ve required any employee to report to 2 heads - a product and a
functional head, causing more confusions, and making it similar to that faced initially – of job ambiguity.
Since, Appex was an organization with around 150 employees in the years given, a hybrid structure
wasn’t required, considering the workforce was really low. Hence, Shikhar did a right choice of not
choosing these organizational structures during his time period.

During the span of more than two years, the changes implemented by Shikhar in the structure of the
organization were hurried, sticking to his belief that it was mandatory to change the structure once the
company grew by 50% since the previous change. This ensured that each organizational
structure/change’s long term effects could not be realized and analysed. Another thought was that
getting inputs from employees and deciding the right structure based on the same by making constant
changes indicated that Shikhar wasn’t assertive. Since the organization hired him for a reason, to bring
his expertise/make the calls, and not seek guidance from employees, whose thought process could’ve
been easily biased towards the informal, fluid structure with which they were comfortable. Basically it
was the investors who felt that there were problems mounting in the company, and not the employees
themselves. Shikhar never seemed to have been thorough during the process of creating a new
structure, and a testament to this, was inability to address basic problems like delegation of power,
making the employees aware of the changes etc.

Considering the fact that Appex was acquired by EDS, the structure of the company was at the
discretion of the parent company. The problems with the existing structure of Appex were:

1. Resource allocation: Not perceived as equitable, with doubts over use of power in gaining
resource for respective divisions. Wanted control over all their resources, didn’t intend to share
with other divisions
2. Little cooperation between divisions because of which lesser no. of new ideas came out. This
was crucial, considering Appex growth was bolstered by their innovation in technology.
3. Divisions behaved like small companies developing their own business procedures, and being
unaware of their role within the company, considered themselves as a business entity.

These problems can be addressed in the following ways:

1. Since Appex is not independent anymore, it should ensure that it gains help from EDS by
involving Senior Management, since all the organizational structure changes initiated by Appex
did not yield positive results as expected.
2. It should ensure that it’s structure (that of Appex division) isn’t visibly contrast or leading to
downfall, since it impacts that of the entire/parent organization, EDS.
3. Laying out a proper vision and directions for all the employees, so that they are in sync with the
parent company EDS, and it makes them more focused on the overall goal of the company.
4. Provide clarity on the hierarchy and the roles of individuals to have accountability of decisions,
thus reducing role ambiguity and bringing in certain structure required, since Appex is a division
now in a bigger organization.
5. Take decisions wrt Organizational Structures with the help of people with experience, and involve
employees, who would not want to move out of their status quo.
SUMMARY

The report looks at problems Shikhar faced when he was brought into the organization. Then we
discussed about the importance of each organizational structure introduced, and also the
problems that were addressed and the ones created due to the introduction as well. Finally, we
gave our view of what we might have done had we been in his shoes. Analysed his decision
making process, and eventually suggested the way forward for Shikhar, post-acquisition by EDS.

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