Report Appex Corporation Ans PDF

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

Answer 

From the beginning the company started with organic structures. It promoted the flexibility required for any entrepreneurial organization at the nascent stage, so people initiated change as per market demand & adapted quickly to changing conditions. “As Appex’s CEO, Boyle instituted few business procedures; formal procedures seemed unnecessary, given the relatively small size of the company. The key executives made all decisions, and all other employees were involved in developing and selling products”. This looseness and chaos is the first and foremost challenge Ghosh had to face immediately after joining.

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“Atmosphere at Appex was changing from “entrepreneurial” to chaotic. People arrived at work and would react to whatever crisis the company happened to face that day. There was only “fire-fighting” and no development of an underlying planning structure. Anything a week away had no priority” Employees coordinated with each other on mutual Adjustment, relying on contact mode of face-to-face for task coordination and working on unpredictable work setting. So people resorted to firefighting and only concentrated around the task at hand.

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“As Boyle stated: “People had particular expertise, but everybody did anything.” This is a classic example of Joint Specialization, where every employee is expert of every organizational task and coordinates in person for task performing.

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“Ted Baker, presently Vice-President of Operations and Service Management, described the culture ‘If you were interested in something, you just did it. Nobody had any sense of what their job description was.” Organic structures were characteristically decentralized, so decision making authority was distributed to possibly every employee. Also, as there was no clear hierarchy, so every employee was empowered to act on any task as required by organizational need, and decide upon his own understanding.

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“The company’s ability to bring products to the market quickly and Boyle’s innovative technical solutions enabled the company to compete against established firms” The core competence of initial days was the flexibility, and mutual adjustment. Decentralisation and joint specialisation created a unique core competence of providing quick solution to customer problems. Responsiveness to the customer wants was their principal advantage over competitors. “While ACT was busy planning how to address the need, Boyle created a solution and installed it in the market”

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“Appex was spending cash quickly and not monitoring its expenses.” “There was no financial planning, and all planning seemed useless”. In absence of vertical differentiation and clear authority, top management was involved in the day to day business, just like any other employees. Hence the key top management role of strategic planning and long term orientation was lost to mundane affairs.

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“The company was project-based, meaning work was organized around projects.” Task forces and teams are the major integrating mechanisms.

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Each person performs all tasks, performing all 5 five basic functions e.g. support, production, managerial, adaptive and maintenance functions. The result is joint specialization and increased productivity. Employees from different functions work together to solve problems; they become involved in one another’s activities.

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“One developer would not know what another developer was doing. So, developers, working on the same system, would develop software codes that clashed, causing the system to crash”. When the size of company was small, limited employees made it possible for communicating and controlling each other’s activity. However, with growth of company and inducement of increasing employees, the face to face integration was becoming obsolete. Newer employees were unable to fit in the norms, and resultantly employees preferred to work in groups. So the flexible project team’s setup turned out to be rigid sub-unit. As there was no central integrating authority, in any form, so there were problems caused by differences in sub-unit orientation. This was because the different product groups’ activities were often incompatible and serving cross-purposes

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There was absolute lack of differentiation, both vertical and horizontal. "People worked on more and more projects at once” . Distribution of authority over any task and decision making was lacking (vertical differentiation). Also there was no decision of labour (horizontal differentiation). So organization were lagged behind in terms of project delivery timing, losing value. Employees were too generalised, couldn’t develop skill and abilities in any specialised field. The company’s core competence was deteriorating at faster rate.

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Standardization was lacking throughout the organization. There were no wellestablished rules and standards to act on, for any given situation. All the response was haphazard and spontaneous, too much induvial based. So it was both difficult for employee to deliver higher value to customers, and for the customers it was impossible to get quality responsive in time. “Customers began to complain too. One customer claimed to have called 150 times before he received a response. Appex could not address all the technical assistance requests of customers”

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“The chief financial officer of one of our customers told me of an incident he experienced at Appex. He arrived at 8:00 a.m. to find few employees present. He waited for two hours. The Appex group was playing basketball at a court nearby,

and showed up at 10:00 a.m. Sweaty, and in their athletic clothes, they greeted him. Needless to say, we lost that account. Subsequent to the nature of flexibility and mutual adjustment, Apex employees develop a specific norm of behavior. The looseness, decentralisation, joint working, shifting role as per the immediate need etc., all became internalized into the employee norms and newly hired employees often couldn’t relate to this absence of structure. “People who could not withstand the chaos quit”

1. When he joined it was a small organization with 25 employees and 2 million in revenue 2. The company was entrepreneurial, technology-driven structured and loosing cash rapidly

but loosely

3. The organization was not poised well to take advantage of the impending boom in the sector for lack of an effective organizational structure. 4. Customer service was quickly deteriorating and clients leaving. 5. Project wise approach to problem solving. 6.Chaotic environment with no planning and monitoring, job responsibilities were not well defined leading to no accountability.

Question 2

Evaluate the importance of each of the structural changes he implemented. What problems were solved? What new problems did they create?

Answer 1.Ci r cul arSt r uct ur e The circular structure was designed to create a non-hierarchical organization, enabling ease and continuum of information flow both internally and externally. Problems solved by circular Structure

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Funct i onaldesi gnwasi mpl ement ed,e. g.sal esper sonswer eoutundersal es manager ,whor epor t edt ot opmanagement( CEO &COO) . Hor i z ont al and v er t i cal di ffer ent i at i on was cr eat ed, peopl e of same f unct i onal i t yknewwhom t or epor tandwhatwast hei rr ol especi ficat i on.

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Hi er ar chyser ved ast he basi sofdeci si on maki ng and span ofcont r ol .I n addi t i on,di sput es i nsi de f unct i onalar eas wer e channel st o des i gnat ed manager ,andi nt r agr oupcoor di nat i onent r ust edt ot opmanagement .

Problems created by circular Structure

Nodedi cat edchannelf orext er nalcommuni cat i on.Fort hecus t omer s,i twas st i l lt hewhol eofor gani sat i ont oappr oach.Thi scr eat edhaphazar dcust omer r esponse, l ack of s t andar di sat i on. Cus t omer ’ sv al ue was s i gni ficant l y di mi ni shed. Funct i onal di ffer ent i at i onwi t honl yt opmanagerasl i ai sonr ol e,t hat ’ si neffici entf or t heor gani sat i on.Si l oment al i t yact edbet weengr oups ,ands ol ut i onl yi ngi nbet ween boundar yofr espons i bi l i t ywer enotoffer ed.Toomanagementhadt ol ooki nt odai l y mat t er s,coor di nat i ngbet weengr oups,s er vi ngcommonl i ai sonpur pose.Hencel ost f ocusf r om st r at egi cvi si onandl ongt er m pl anni ng.“ Those tasks that required planning did 

not get done”

Bal ancebet weencent r al i sat i onanddecent r al i sat i onwasnotcr eat ed,boundar i es wer enotspeci fied.Asar esul tt hechaosondeci si onmaki ngr emai nedi nt heci r cul ar st r uct ur e.“ They did not know with whom to talk to get things done. They did not know the power structure and who had authority to make which decisions.”

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Ci r cul ars t r uct ur ewascr eat edasperJapanes edesi gn,whi chwasal i ent o bot h ol dt i meer saswel lasnew r ecr ui t s .“ Employees could not relate to the circular structure. They were completely unfamiliar with the structure.”

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I mpor t ance–  Si mul t aneousCi r cl es .  Cent eroft heci r cl ehadt heseni orex ecut i vest henmanageri nt heout erci r cl e f ol l owedbyempl oy ees.  Theenv i r onsar oundt heci r cl ewer eAppex’ scus t omer s.  Ther ewasnohi er ar chyandi nf or mat i onfl owwer ef r eewi t hi nt hecompany andwi t hcus t omer s. Pr obl emsAddr essed–  St r uct ur al i ssuewasaddr ess edt hr ought hei nt r oduct i onofflatst r uct ur e.  Thej obr ol eswer edefined,andt heor gani sat i onal /wor kenvi r onment pl anned.Pl annedappr oacht ochal l engesbet t ercoor di nat i onbet weengr oups l eadi ngt obet t ereffici encyt hanear l i erst r uct ur eandshi f t i ngf r om pr oj ect basedappr oach. Pr obl emsCr eat ed–

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Exi t i ngempl oy eeshaddi fficul t yi nal i gni ngt hems el veswi t ht henewst r uct ur e ast heywer enotf ami l i arwi t ht hest r uct ur e. Newhi r eswer euncer t ai naboutt hei rfit menti nt hes t r uct ur e,per f or mance eval uat i on,powerst r uct ur e. Thest r uct ur egav er i set oat houghtt hatt hecus t omeri st heenemy. Taskswer ecompl et edr eact i vel ywi t houtanypl anni ng. Taskst hatneededpl anni ngwer enotget t i ngdoneori nor di nat el ydel ay ed.

2.Hor i z ont al St r uct ur e Mr. Ghosh then designed Apex a horizontal organisaiton structure, in which organsiaiotn was dividedn into 5 breaod funnsaitonal heads and employyes from multiple departments were attached. Mostly designed on funcaiotnal strruture, nut in innovative horizontal manner. It was tried to retain the intitial flexble srture, while intruding some amount of control and authority.

Problems solved by horizontal Structure

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Funct i onaldesi gn wi t h mor es peci al i sat i on wasi mpl ement ed.Peopl ef or m si mi l ar ski l l gr ouped t oget her under one depar t ment ,t hen put under f unct i onal l ys i mi l ardi vi si onal head. Hor i z ont aldi ffer ent i at i onwassomehowcr eat ed. Cont r ol ofCEO wast hr oughdi r ectr epar t ees ,i . e.5heads

Problems created by horizontal Structure 

Ther e wasno cl eardefined aut hor i t yand r es ponsi l i bi t ymat r i x .Lackof v er t i caldi ffer ent i ai ot n was pr i nci palr eas on behi nd t hi s.Peopl e wer e cof ui sed,aboutt hec hai nofr epor t i ngandr ol es peci ficat i ons.“ when Paul Gudonis, Senior Vice- President of Sales and Marketing, called a meeting of his new direct reports the first day the horizontal structure was implemented, nobody showed up for the meeting.”

Hor i z ont aldi ffer ent i aoonwasbas edongener al i sedt askr equi r ement ,e. g.cl i ent suppor t ,sof t war edev el opmentet c.Notsui t abl ef orenhanci ngf unct i onalabi l i t i t es ofempl yy es sandbui l di ngor gani sai t onakocr ecompet ence. Ther e was l ot s ofconfl i ct i ng r ol es ,e. g.cl i entsuppor tbot hi ns er vi ces and oper at i ons ,t hr ought heboundar i eswer enotwel l demar kat ed.Thi smayl eadt o l ossofor gani sai t onal effici enci es. Absence ofr espons i l bi t i es and deci si on ki ang aut hor i t i es,k eptt he cont r ol I first needed control, and the way to get it was through a pr obl em unaddr essed.“ traditional, hierarchical structure. After I achieved a minimal threshold of control, I could begin to break down the structure.”

I nt er gwoupandnt r agr woul i ai s onr ol el i edt oCEO hi msel f ,whi chwasi neffect i v e. Dec i sonmaki ng became s l ow and cumber some,and or gani sai t on l ostk ey st r at egi cf ocus ,al ongt emrpl anni ngandor i ent si on. 

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I mpor t ance–  Thet r adi t i onal ,v er t i cal or gani zat i onchar tt ur nedoni t ssi de.I twasanet wor k basednonhi er ar chi cal ,t eamor i ent edst r uct ur e. Pr obl emsAddr essed–  Ast heoneaddr es sedi nt heci r cul arst r uct ur ebei ngs t r uct ur al i ssues,Job defini t i onandov er al l maki ngt heor gani sat i oneffect i v eandeffic i enti nt he ar easofser vi cedel i v er yandnewpr oductdev el opment . Pr obl emsCr eat ed–  Thest r uct ur el ack edt heaspectofcont r ol wi t ht heseni ormanagement l eadi ngt oempl oy eesbei ngunr esponsi v et odi r ect i onsf r om t heseni or management .

3. Hi er ar chi cal ,f unct i onalst r uct ur e–St age1( Funct i onbasedappr oach) After failure of the innovative structures, Mr. Ghosh implemented a functional structure in February 1989. It was designed so that, people with common skill and expertise were put into common functional departments. It was primarily important to implement the bedrock of horizontal differentiation. As Apex corp. was lacking basic control and authority structures, the vertical differentiation was very much needed at that point. Besides, it would increase the effectiveness of functions with which it would strive to achieve achieves its principal goal: providing customers with high-quality products at competitive prices. With specialised functions, employee will internally benchmark and improve their functional competence, which would provide ultimate core competence that Apex needed. Further moving ahead with the functional organisational structure, Ghosh hired outsiders with high skill of managing quality that enhanced the notions of increased core competence. Problems solved by Functional Structure “The team structure succeeded in focusing the company on completing tasks. The sales people now focused on sales. The financial people did financial planning. The structure improved the company’s basic capabilities.” Functional structure allows for mutual learning and development, so ultimately the organisation becomes more specialised and competitive. Another advantage of the functional structure is that people with same skillset supervise each other and ultimately this peer review improves functional capabilities of Apex. Peer supervision was especially important for Apex, as it was developing solutions in the comparatively new field, so outside review was inadequate. Finally, people working in same function, developed norms and behaviours, for performing best tasks. “ The heads of each team displayed a natural tendency to create sub-functions within their team. For example, the sales team divided into sales and marketing, and then into sales, marketing, and product management”. Problems further created by Functional Structure

Control Problems: With the increase of functional capabilities, it was more and more difficult to control the highly skilled employees from outside. They were only obeyed own groups norms. With the growth of business, the ability of employees to provide wide variety of solution too wide customers base was challenged. As an organization’s skills and competences increaseand it becomes able to produce a wider variety of goods or services, its ability to provide adequate functional support for its growing product line is stretched. “Another ramification of the functional structure which proved problematic was that the source of authority was functional, not managerial, expertise “ COMMUNICATION PROBLEMS The more the skilled functions, the more away they were form one another. Specific sub unit orientation appeared between different functions, which ultimately lead to communication problems. Transfer pricing Problems between functional department started to grow based on the transfer price—the price at which one function provides a component to next function. Every department wanted to maximise their return, hence demanded a high transfer price, at the cost of penalising other functional departments. “want its product to be the highest priority of the engineering department” “each product team wanted a strong marketing department” CUSTOMER PROBLEMS With increased customer base, customer expectation grew significantly. But the functional department were specialised on improving the functional capabilities, bothered little to customise as per the customer requirements. Interest of any particular customer group were some grey areas, kept out of the box of each functional areas. Ultimately customer focus were somehow lost. “Moreover, customer focus diminished. People became more concerned with internal processes and issues than with meeting customers’ needs.” STRATEGIC PROBLEMS For solving the transfer pricing problems, each functional department wanted senior manager as liaison role. As a result, top managers were increasingly attending daily meeting, and provided little time for long term strategic planning, that were required from them. “the head of operations spent over 40 hours per week in product team meetings”

The functions were organized as teams: there was a sales/marketing team, a software development and services team, an engineering and technology team, an operations team, and a finance, human resource, and administrative team How many distinct functional teams should he create structure in a way that minimized the sense of hierarchy He illustrated the functions as reporting to him in a horizontal fashion. This displeased the board of directors that wanted Ghosh to present a traditional diagram of a hierarchical organizational structure At first, titles were given out rather informally. Soon it became apparent that people cared a great deal about what titles they were given. For example, someone wanted to be called senior vice-

president, not vice-president. Also, people became concerned with desk locations, i.e. who sat where.

The heads of each team displayed a natural tendency to create sub-functions within their team. For example, the sales team divided into sales and marketing, and then into sales, marketing, and product management. Every three to four months after the functional structure was originally established, the organizational chart grew vertically and horizontally; more layers were added and more sub-functions created.

Over time, the teams became polarized. For example, in the past, Appex had an engineering department run by one person. The distinction between engineering and operations, that is building a system and operating it, did not exist. After an operations team was established, the operations people proceeded to clearly define their area of responsibility and to restrict engineering’s involvement in operations’ functions. The structure inhibited a working relationship, and Appex ended up having to spend more money on system development and operation than previously.

The role of “personalities” became more pronounced. Standards were set by individuals rather than company policy Another ramification of the functional structure which proved problematic was that the source of authority was functional, not managerial, expertise. The head of engineering was the best engineer. The same held true f...