Appex Corporation
After being a partner at Boston Consulting Group for six months, Shikhar Ghosh joined Appex
Corporation in May 1988 as Chief operating officer. Appex Corporation, provided information
system and intercarrier network service to cellular telephone companies which was founded in
1986. Apex was still a small firm when Ghosh joined. Employees lacked structure and discipline,
which had a negative effect on the company. Ghosh saw that the company need order and
structure. Ghosh was going to assist the company put up an organizational structure using his
expertise and insights on organizational structure.
Appex provided service to cellular carriers to allow them to manage their customers in their
“home” and “roam” territories. Appex’s products and services could be divided into two
different categories: Intercarrier Services (ICS) and Cellular Management Information Systems
(IS). ICS was involved in providing transaction processing services. IS consisted of an
integrated software system designed to manage the primary functions of a cellular carrier. The
industry was growing rapidly. This indicated a higher growth possibility for appex.
Prof Kajari Mukherjee/ OB&HRM
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Appex corporation : Start Up Phase
In the start-up phase CEO Brian Boyle instituted less procedures in company, because it
was unnecessary for such a small company. The key executive made all the decisions and
other employees were involved in developing and selling products. Employees were not
assigned to do any specific tasks. The organizational structure was informal and fluid
Problems
• Company started to fall behind schedule and miss installation dates.
• Customers started to complain. Even Customer complaints were not addressed.
• No body had time to plan schedules and meetings
• There was no financial planning
Prof Kajari Mukherjee/ OB&HRM
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Circular structure
The first structure he implemented was a circular one like what he had seen being used
by Japanese companies. He implemented circular structure to create a non-hierarchical
organization where information can flow freely.
Problems
• Employees were unfamiliar to this structure.
• The new hires, who were not accustomed to Appex’s culture, could not understand
how they were meant to fit into the organization.
• The structure focused on responsiveness and not on planning. Hence the tasks that
required planning were not Performed.
Prof Kajari Mukherjee/ OB&HRM
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Horizontal Structure
Problem:
• Employees did not respond enthusiastically.
For instance, when Paul Gudonis, Senior Vice President of Sales, and Marketing, called a
meeting of his new direct reports on the first day the horizontal structure was
implemented, nobody showed up for the meeting.
Prof Kajari Mukherjee/ OB&HRM
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Hierarchical, Functional Structure
Problem:
• Employee were dissatisfied since they cared about their Title.
• The team heads showed a natural tendency of creating sub functions within the
functions
• The personality of the people started to affect organizational processes. Standards
were set by individuals rather than company policy.
• The new managers found it hard to gain trust of the new team as they knew less about
the existing products and teams
Paul Gudonis, the vice president of sales and marketing, proposed creating separate
product teams for each product. Each team will have a representative from different
functions. The product team manager was to write the product plan for a product and
integrate the functions represented in the product team (see Exhibit 1).
Prof Kajari Mukherjee/ OB&HRM
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Hierarchical, Functional Structure
Problem with Product Team:
• The product teams did not know where their authority started and ended
• Issues with resource allocation within and among product teams
• Every product team wanted the senior most person from the functional, in the hope that
person would influence their functional team.
To solve these problems Business team was Introduced who acted as the intermediary
between product team and functional teams. Business team had the authority to make the
decisions.
• Increased products resulted in increased layers of management
• As new unexperienced peoples were recruited, the training cost increased
• Infrastructure cost increase
Prof Kajari Mukherjee/ OB&HRM
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Divisional structure
In August 1990, Ghosh implemented divisional structure. He established two broad
divisions (businesses). The two divisions were Intercarrier service (ICS) and cellular
management information system (IS). He created a third division named operations which
included utility functions that serviced two businesses.
Problem:
• The problem of resource allocation among divisions
• Lack of communication among the divisions
• Due to lack of communication among divisions less new products were developed
• Each division started to work as separate small Companies, and faced same problem
which was faced by Appex at the start up phase
Prof Kajari Mukherjee/ OB&HRM
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Exhibit 1: Paul Gudonis's Organizational Audit (March 1989)
Observations about functional structure:
1. There is no business/operational plan, just fire-fighting and multitudes of projects.
There are no financial forecasts.
2. Nobody, except the president, is acting as “integrator” with responsibility for products
and projects across departments.
3. The company’s growth has out-stripped the management capabilities of certain
personnel.
4. There is no “checks and balances” system among departments.
5. No one has responsibility for the system architecture, capacity planning, and the
integrity of the network.
6. There is limited senior management teamwork.
Prof Kajari Mukherjee/ OB&HRM
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Exhibit 1: Paul Gudonis's Organizational Audit (March 1989)
7. There is a lack of accountability, unclear job definitions, and people do not know who
is responsible for what.
8. There is a lack of tactical planning, and scheduling of meetings and trips. Meetings are
called at last minute.
9. The culture permits laxity in meeting commitments. People take a “who cares”
attitude.
10. There are staffing delays because of recruiting problems. There is no evaluation about
why we are not getting the people we need.
11. The technical culture implies an “it’s good enough” attitude rather than an effort to
truly meet customers’ needs.
Prof Kajari Mukherjee/ OB&HRM
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Exhibit 1: Paul Gudonis's Organizational Audit (March 1989)
Recommendations
1. A “3-page business plan” should be created for each product line (CMIS, ABS, PRV, ISS, RoamAmerica).
The plan should include financial information, quarterly tasks and milestones, departmental tasks, and
staffing requirements.
2. There should be product managers responsible for product teams. The role of product managers
should be announced to the company. Product team members should be appointed from the
functions. Product managers should be coached about how to do their job.
3. The company should reduce the scope of management responsibilities, and hire product managers
from the outside.
4. A product team organizational chart should be diagrammed. The chart should product team and
between the product teams and senior management.
5. There should be regular meetings to review the progress of the structure.
6. Clear job descriptions should be written, and people should be told what their responsibilities are.
7. Everybody should be required to write four-week advance plans.
8. Senior management should lead the way by setting an example of good managerial practices.
Prof Kajari Mukherjee/ OB&HRM
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Exhibit 1: Paul Gudonis's Organizational Audit (March 1989)
Example for Product team Structure for RoamAmerica
Prof Kajari Mukherjee/ OB&HRM
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