APPEX CORPORATION

ORGANIZATIONAL BEHAVIOUR - II

GROUP CASE WRITE-UP 1

GROUP 4
0198/56 - Isha Mittal
0200/56 - Neil Dmello
0206/56 - Pooja Yadav
0219/56 - Saket Ganeriwala
0220/56 - Sanjana Arun
0233/56 - Udit Miglani
Overview of Appex Corporation
Appex Corporation was founded in May 1986 from the merger of Appex Inc. and Lunayach
Communications Consultants (LCC). In 1990 Appex was the fastest growing (1600% revenue growth in FY
1987 and FY 1990) high technology company in the United States. The company was expected to grow
rapidly and so; it added ten new people every month.

In May 1988 Shikhar Ghosh decided to accept as the Chief Operating Officer (COO) of Appex Corporation.
Appex at that time was a small company with 25 employees and $2 million in revenue. Appex was
entrepreneurial, technology-driven and loosely structured and they were losing money very rapidly. The
venture capitalist who had invested in the firm was hoping that Ghosh would be able to turn it around.

In October 1990, Electronic Data Systems (EDS), a $6 billion information systems management company
owned by General Motors, acquired Appex.

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

No financial planning which led to rapid loss of money

Poor customer service as there was no accountability

Poor performance due to lack of planning and it fell behind on its

schedule

Product development suffered since there was lack of communication

"Fire-fighting" attitude instead of proactive approach

Lack of clarity on responsibilities of each employee

Shikhar Ghosh joined Appex in 1988, 2 years after its founding from the merger of Appex, Inc. and
Lunayach Communications Consultants (LCC). It was growing at a fast rate however it was losing money
rapidly. The firm was inherently entrepreneurial, technology-driven and loosely structured. People at the
firm chose what they wanted to do and did it when they wanted to, this drastically deteriorated customer
experience and quality of work, leading to loss of clients, hence rapid bleeding of revenues.
The firm was struggling with structural challenges, everyone did everything i.e. there were no job
descriptions. This hence led to a lack of accountability which also meant that the employees’ attitude
towards the firm and its customers was care-free leading to cultural challenges.
When Ghosh was hired, he identified that the firm had transformed from being “entrepreneurial” to chaotic.
The firm had strategic challenges such as no vision and was dealing with each day as it came, this led to
reduced focus on enhancing the product, no new demand could be managed and importantly even basic
tasks each day were hard to manage. Furthermore, product enhancement became difficult due to
operational challenges like, lack of information flow between the members of the same team leading to
unwarranted failures.
The lack of structure lead to lack of visibility and people worked on multiple projects at the same time, the
increasing workload increased hiring, this happened haphazardly as there was no defined process or control
leading to financial challenges such as mounting unmonitored expenses.
The transformation of the firm can be credited to the unstructured growth of the organisation which
expanded from 36 to 103 employees within a year. Appex was a thriving organisation receiving multiple
projects simultaneously and hence had to expand its workforce. This expansion happened without any
forethought which can be attributed as one of the major reasons the organization struggled to keep up with
the rising demand.

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

Problems Importance of
Structure Problems Created
Addressed Structure
• Overcome the • Employees were demotivated • Better at designating
difficulties faced in due to absence of incentive to tasks to employees
the circular structure go the extra mile than circular method;
• Management loses control and well-defined
Horizontal responsibilities for
Structure fails to establish authority in the
absence of middle managers employees; generally
• Majority of the management's easier to manage
time is gone in meeting
employees.
• Free flow of • Employees failed to see a • Employees can be
information within traditional organization chart empowered through
Circular the organization and • They were not aware of the additional
Structure between the power structure and who had responsibilities and
organization and its authority to make which roles which they are
environment decisions assigned
 • Encourages viewing • No knowledge of performance • Relives burden on
the various divisions evaluation of employees the core circle for
as a part of the whole • Developed mentality that decision making for
customer was the enemy less important
• Not geared towards planning functions through
decentralization
• It is easier to add
more people at
various levels as the
organization expands
• Functions were • Politics came into existence • People can learn
organized as teams • People became concerned with most efficient
• Company focused on desk locations techniques from one
completing tasks • Teams became polarized another
• Accountability • Inhibition of a working • Promotes
increased relationship across teams specialization &
• Natural tendency to • Standards were set by division of labour –
Hierarchical, create sub-functions individuals rather than company source of increased
Functional within their team policy effectiveness
Structure • Areas of • Source of authority was • People with common
responsibility were functional, not managerial, skills can supervise
clearly defined – expertise and control one
Division of labour another’s behavior
• It became difficult to measure
• Hired people with managerial competence • In the long term, the
broader managerial team members’
expertise commitment to their
work
• Team heads regularly • Authority to make decisions • Increased focus on
reported to CEO within teams was unspecified the needs of one
through the product • Battles among functional product
team manager who representatives in the product • Decision making
Product Team improved teams authority for each
Structure accountability. • Product teams generated product is
resource allocation problems decentralized
• Corporate management faced • Increased horizontal
with new allocation decisions and vertical
integration
 • Resource allocation • Newly hired employees were
problems solved inexperienced
Product • Better Managerial • Training& infrastructure costs
Team/Business expertise existed were high
Team Structure along with functional • Customer focus diminished
expertise • No system of profit and loss
accountability
• It helped to improve • Costs shot up as each division • It helps to create
accountability, began duplicated work & accountability as
budgeting, and pooling of common resources positions of
planning. became difficult. responsibility within
• Intra-divisional co- • The divisions had high walls of the structures
operation also communication. Innovation also • It also increases the
Divisional increased. went down as the divisions level of independence
Structure • Shikhar Ghosh was didn’t look at brand extensions present within the
relieved of his beyond their confines. structures.
administering day to • The divisions became • It allows for logical
day activities, and the increasingly complex segmentation of
company didn’t individually. activities according to
depend as much on the objectives of the
him products.

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

The Divisional structure is a good starting point for a large organization like Appex especially after the
acquisition by Electronic Data Systems. However, as time progresses it is inevitable that issues within the
organization arise and hence it is necessary to carry out dynamic changes to the structure to ensure these
issues do not impact the performance of the company.
Shikhar suggested changing organizational structure every 6 months. Below are some of the issues we believe
should be taken into consideration:

• Lack of clarity on performance evaluation

• Uncertainty about future and hence the employees do not have a clear idea of where they will be or
how their career is going to progress within the organisation
• Lack of development of team belongingness and bonding with team members
• Inability of employees in developing a comfort zone with the designated supervisor and hence being
more open in terms of having inhibitions in sharing ideas and developing thought processes

Problems Solution

Allocation of resources Group Opportunities: After the integration with GM, the company
between the divisions - no one can isolate all non-product specific functions and group them
was willing to share the together under a separate division that is compliant with the
resources methods already being used in GM.

Communication barriers and Inter-divisional Brainstorming: The company can have bi-monthly
lack of cross-pollination of sessions where R&D personnel from across divisions will meet to
ideas come up with new product ideas irrespective of the division.

Uncertainty caused by Predefined targets that creates a sense of certainty

frequent structural changes