Appex Corporation provided management information systems and

intercarrier network services to cellular telephone companies. It was

formed by the merger of Appex,Inc., and Lunayach Communications
Consultants. The cellular telephone industry in U.S.A. grew at the rate of
107% and is expected to reach approximately 7.5 million subscribers by
the end of 1991. Being in an industry with high growth, Appex Corporation
was a rapidly growing business and to cater to this high growth, the
company had developed and tried several organisational structures in the
last three years.
Shikhar Ghosh worked for BCG as a consultant before joining Appex. He
was recruited as COO in May 1988 as investors believed that Ghosh could
turn over the rapid loss of money the firm faced. At BCG, Ghoshs
specialty was organizational structure.
1) After joining Appex, Ghosh faced following challenges in the
organization.
As Appex grew with swift pace, employees were now working on
more than one project at a time. The environment started becoming
chaotic and the company was spending cash quickly without
monitoring its expenses.
The atmosphere at Appex had changed from entrepreneurial to
chaotic because of structural issues due to quick expansion of
Appex
The focus was more on battling current issues and no planning was
done for future agendas. Even anything a week away had no
priority.
As the atmosphere became chaotic, nobody had time to plan
schedules and meetings. This resulted in inefficiency in executing
the basic tasks and employees who could not withstand chaos, quit.
The firm had difficulty coping up with the increase in demand.
Customer complaints were not addressed as there was no track on
records. Few customers got service on time and for the rest it was
delayed.
Due to failure in planning, Appex started to fall behind schedule and
miss installation dates. This further led to dissatisfaction among
customers.
The financial planning was poor and all planning seemed useless.
For example, the forecast and actual growth in number of
employees varied significantly.
Due to lack of coordination, one developer was not aware about
other developers job. As a result, there were clashes in the product
development process. Information flow in general was becoming
more difficult.
The firm lacked project orientation and the operations were
unproductive. The accountability and responsibility of employees
was not clearly defined

To overcome these challenges, Ghosh believed that Appex needed to

address both long term and short term planning issues and define areas of
responsibilities. He realized this could be achieved through structuring of
organization.
And with that same thought, Ghosh introduced three broad structures in
Appex, each addressing different issues, but incidentally creating newer
problems of its own.
2) A. Innovative Structures
This model was successful in the Japanese scenario largely because of
its circular and non-hierarchical structure. This lead to the creation of a
flat organisation wherein job identification and accountability was
higher.
Problems Addressed: It facilitated a free flow of information in the
organisation both internally and externally.
Problems Created: The employees of the organisation could not
adapt very well to the newer circular structure since they were
accustomed to a more traditional hierarchical set up. And due to the
lack of the same, employees had problems in reaching out or
identifying the decision makers. Performance evaluation systems also
suffered and an incorrect notion of assigning blame to customer was
propagated within this system. Thus overall, it led to lack of motivation
and interest in the employees.
B. Hierarchical, Functional Structure
Functional Teams were introduced to shift focus to roles and
responsibilities of employees. Appropriate departments were set up to
look after finance, sales and other business verticals. This structure
was very significant in that it could be used for efficient scaling up of
the organisation in the future.
Problems Addressed: The structure ensured greater clarity on
individual responsibility of employees belonging to a particular
function. It also led to more emphasis on task completion than before.
Problems Created: Due to well-defined segregation, titles and the
perks that came with them, became a matter of contention within the
organisation. Employees started festering negative tendencies towards
one another with regards to something as small as desk locations. This
led to office politics and unnecessary polarisation of teams causing
friction and dysfunctional units. Another problem this system had was,
leads of departments were people with technical expertise and not
necessarily managerial experience.
Product Teams were introduced by Ghosh to co-exist with functional
teams to overcome the problems created by the latter, through
focusing on singular products independently. It was important to have a

team with product, and not roles, as a focus to aid employees from
various backgrounds to effectively contribute towards the companys
goals.
Problems Addressed: Employees from different function could
interface better with one another and could work to make a better
product. This structure also ensured a higher degree of planning and
forecasting.
Problems Created: Authority and accountability was not clearly
defined in this structure which lead to financial goals of the company
taking a backseat. A lot of time and energy was invested in resolving
internal issues, to a point where customer focus was eventually lost.
C. Divisional Structure
The structure was able to instantiate multi-divisional, multi-functional
teams and because of this fresh ideas and new perspectives could be
easily brought up by the employees. This fostered a greater degree of
cooperation and enabled employees to focus on financial targets as
well.
Problems Addressed: This structure improved accountability,
budgeting and planning functions of the organisation. And it reduced
the dependency on Ghosh while equally distributing his load on fellow
employees. This lead to smaller teams and multi-levelled hierarchies to
be formed with a view to facilitate better information and focus on
product development.
Problems Created: Divisions got too competitive and started vying
with each other for companys resources. This lead to resource
allocation being a major issue. Senior managements decisions were
perceived to be not equitable by those divisions who had to lose their
share of resources for another division. Communication was hindered
and innovation was not prioritised.
3) Owning to frequent changes in the structure of the company, Mr. Ghosh
was not able to identify the suitable structure for the company. First he
introduced circular structure which had issues with accountability and
did not sustain in the long run. Then, horizontal structure has issues
like employees did not respond enthusiastically.
For smooth functioning of an organization, it is important to have a
structure that has definitive job responsibilities, enable clear feedback
mechanisms and authority to its managers. The best suitable structure
hence might be the classic top-down hierarchy which should have been
incorporated at the earliest stage. It seems like this time-tested structure
is what Appex Corporation needs as it has been growing too fast and
becoming too large and complex to operate efficiently in any of the above
mentioned structures.

Although this might not allow the employees of Appex Corporation to

operate in the unstructured way they did at the beginning but the
employees had already slipped out of the productive mode long before Mr.
Ghosh joined the company. Although they began as a cohesive group,
given the rapid growth and hiring, cohesion became impossible to sustain
and had become chaotic by 1988.
When a company, already very large and getting even larger, wants to
achieve a goal then it needs to clearly project their goal and needs in front
of their employees so they can constructively work towards achieving it.
Top-down hierarchy can also incorporate teams into the structure which
might result in efficient work process. To take advantage of Appexs good
employee team history it can still appoint teams of employees who have
proven to work well as teams to jobs that are appropriate for that format.
Also at this point a top-down hierarchy with a clear chain of command is
the only way to go as it has the clearest communication lines. This can
work well because each and every employee is aware of who to report to
and what the job description is. It provides a clear view of itself which is
very important to a stake holder or the board members because it is very
hard to distinguish what is going on from outside the company when the
structure is comprised of many separate groups working on their own
projects. A clear CEO on down the line structure project the needs and
goals in front of people just below him in the hierarchy who then sends the
appropriate instructions down the line. As the company grows larger it
would truly be impossible to maintain the same structure that worked in
the beginning.