APPEX CORPORATION

OB-II CASE STUDY

ANKIT MEHTA 0237/55 | ASHRIT TANDON 0239/55 | SURAJ KHOT 0255/55

PARNIL SINGH 0265/55 PRANAY JAIN 0267/55 | PRERNA AJITSARIA 0268/55
GROUP NUMBER 4
Q1. What were the challenges Shikhar Ghosh faced when he joined Appex?
 There was no long term planning or vision. Employees were swamped with work and focussed on
fulfilling immediate requirements. There was no vision for the firm.
 There were production issues as Appex was unable to meet increasing demand leading to increased
complaints. It also started missing installation dates and could not address technical assistance
requests of all customers.
 The firm faced crucial organizational design challenges. There was no functional structure, roles were
not defined and there was no job description. Employees were engaged in fire-fighting with existing
operations and there was no product development or focus on innovation.
 Information flow started becoming difficult, there were clashes in the product development process
and coordination and integration started falling apart. Overall the company environment was chaotic
 The firm had poor financial planning, and was spending cash quickly and not monitoring its expenses.
The firm’s also had poor forecasting mechanisms, as it could not anticipate the increase in number of
employees

Q2. Evaluate the importance of each of the structural chages Shikhar Ghosh
implemented. How important were they? What problems did each new
structure address? What problems, in turn, did it create?

Types of structures

1. Innovative Structures
The first structure Ghosh created had a concentric circular structure. The purpose was to maintain a
non-hierarchical organisation and free flow of information within the organisation and between the
organisation and its environment.
Problems Created:
1. New hires could not understand the culture.
2. The existing employees were familiar with the traditional structure only.
3. There was no accountability.
4. The mentality that customer was our enemy was developed.

2. Hierarchical and functional structure

Problems Addressed:

1. Development of skills - People with similar skill set started working together which led to
mutual learning and specialisation. Functions were organized as different teams on the basis
of their common expertise.
2. Control by Supervisor & increased accountability- Different team heads led their teams and
reported to Ghosh which increased accountability. This streamlined the focus of the teams on
completing tasks. People got defined roles as per their capabilities.
3. Initial focus on task completion - As functions were created, individual functions could focus
on their tasks and worked towards the task completion. This improved the capabilities of the
firm to produce outputs.
Problems Created:

1. Creation of functional structure divided organization into teams. People started caring about
their designation and politics came into existence.
2. Constrained ability to provide adequate functional support with growth (Control problems) -
As the business grew, it became difficult for the centralized functional team to handle the
nuances of each of product. This is the reason why Paul Gudonis recommended setting up of
separate product teams for each of Apex’s main products.
3. Organisational culture - Management experience people hired but managerial competence
was not appreciated by the employees who respected the traditional, culture and appreciated
functional knowledge. Also, different skill sets are required in small and large companies. So
it became difficult to adapt to new culture.
4. Authority problems - As the product teams were formed, ambiguity increased on the authority
of decision making on factors such as price of the product. Multiple people were working on
one task but no progress was being made as they did not have decision making authority. As
a result, senior executives were asked to attend the meetings. But, this solution was sub-
optimal as it led to high involvement from senior executives who needed time for their other
responsibilities.
5. Communication problems - Different functions were working in silos. For example - the
marketing department and the operations team didn’t know details about the products that
were being developed. This was also a result of the authority problem highlighted earlier.
6. Resource allocation issues emerged due to lack of set priorities between and among teams.
7. Measurement problems - The measurement issues related to evaluation of performance of
involved functions caused deviation from the company-wide financial goals. Since there was
no team responsible for the overall delivery of a task, a collection of information to assess
individual team’s contribution became a herculean task. This led to profits and loss statements
not meeting their targets.
8. Infrastructure cost problems - Infrastructure costs increased as more employees were hired.
Time was being spent on internal meetings and less in productivity.
9. Customer problems - Employees became engrossed with internal complexities that customers
became secondary. Moreover, as new customer groups would have been added with
increasing product variety and complexity, the ability of central function teams to cater to the
new customer groups would have been limited.
10. Strategic problems - As senior management and the team got more involved in solving
authority and communication issues, the focus from long-term strategy reduced. The
bandwidth was being spent on solving internal issues and fire-fighting production issues
rather than creating long-term strategic goals. Apart from the measurement issues, as
highlighted above, which caused deviation from the company-wide financial goals
11. Lack of clarity on the number of teams to be created also emerged as product teams were
created and each product team started requesting for their own sales and marketing team.
Further, it was not clear whether to have a separate sales and marketing team or to combine
them.

3. DIVISIONAL STRUCTURE
Problems addressed:

1. In a divisional structure, Ghosh had to spend less time on daily activities and had more time
to devote on strategic planning. He wanted to reach a point where the company could
function without him.
 2. As the responsibilities were distributed into different divisions, it improved the employee
accountability and improved the budgeting and planning process.
3. The clear segregation of roles led to divisional heads focusing efficiently on their operations
and help in alignment of the division’s goals with the long-term vision of the firm. It helped
employees to get more clarity about their roles and responsibilities, and to focus on their
division’s objectives and financial targets.

Problems Created:

1. The resource allocation decisions taken by the senior executives were perceived as being non-
equitable among various employees.
2. Each division wanted to control all of their resources and Ghosh felt that he had to separately
invest in the resources for each of the division as the coordination for sharing the resources
was too difficult.
3. It increased the cooperation within the group, however, it created a communication barrier
between divisions. This led to a reduction in the development of new ideas & products due to
employees focusing narrowly on their own divisions.
4. The divisions started to act like small independent companies and started following their own
procedures and practices. This was specifically difficult as it was impossible to accommodate
the demands of every division to have their own technical platform. It was hence difficult for
the organisation to accommodate all their practises under one common goal.
5. As the divisions had the power to prepare their own financial statements, they started
manipulating or hiding crucial information to meet their financial objectives. It became
increasingly difficult for the senior executives to keep this in checks and get an accurate
picture of the financial status of the company as the divisions sub-divided further.

Q3. What would you have done in Shekhar’s place? Were all the changes and
structures necessary? How would you address the challenges Shikhar is facing
towards the end of the case?

Shikhar’s Critique

1. Lack of long term vision - Rapid and quick succession of changes in organization design were
implemented. To keep up with the high pace of organization, a strong focus on future outlook
would have helped in keeping a check on the alterations.
2. High frequency of changes - Changes in structure were implemented very frequently.
Organization was growing at a high pace, so the focus on teams in completing their immediate
tasks and reduced the alterations in the structure.
3. Abrupt changes - Significant changes at organizational level caused confusion amongst
employees. Employees required significant amount of time to adjust to large changes in the
organizational structure. This might have negated increase in productivity by implementation
of new structure.
4. No evaluation of structure - Shikhar did not evaluate previous structure before implementing
a new structure. Structural changes seemed haphazard. Lack of evaluation might lose some
of the advantages of the previous structure which might be missing in the new one.
Matrix Structure:

To deal with the challenges discussed above, a matrix structure seems to be the most optimal one.
This ensures efficient mapping of each team member to functional and product heads.

Advantages:

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.
3. The continuous movement of specialized employees from product to product in a matrix structure
enables the organization to effectively use the skills.
4. Functional team takes care of the cost whereas product team takes care of the quality.
 Post-Acquisition by EDS

Diagnosing the Organization

Ghosh should first understand the current organizational structure, products and systems of both EDS and Appex. The
diagnosis should involve collection of information from employees as well as outsiders like suppliers and customers. This
is important to understand the potential synergies which can be used for the newly formed organization post
acquisition.

Determining the Desired Future State

Next, Ghosh should determine a concrete future state of the organization. To do this, he has to envision a structure to
incorporate the synergies between the organization. This means that the best functions and practices of Appex and EDS
are used across both organizations. This will create shared services that serve both organizations. There should also be a
sharing of management expertise across the organizations. This should ideally lead to increased profits for Appex as it
gets access to the products, services and expertise of EDS.

Implementing Action
Diffusion of systems - Ghosh should sync the functional planning systems, resource allocation systems and
administrative system with EDS which would increase the efficiency of the organisation. This step will also require
intensive training of the employees.
Diffusion of common functions between Appex and EDS - To utilize the synergy between two organisations Ghosh
should combine the common functions which will serve the divisions of both EDs and Appex. This change will help in
sharing of best practices and help in easy flow of ideas. This should be the second step since it will involve large scale
change in the organization structure of Appex.

Evaluating Action
Measurement of profits and profitability can give Ghosh an idea about employee productivity.
Ghosh should conduct a survey to evaluate satisfaction of employees who came from Appex to EDS. Employee turnover
rate could be another metric to evaluate this
Reference:
[1] Gareth R. Jones and Mary Mathew. 2013. Organization Theory, Design and Change, 7th Edition.
Delhi: Pearson Education