Name: Dr Gajendra Singh

Candidate ID: 0000046956

The Question:
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In the case Appex Corporation, analyze the influence of organizational structure (specific elements like hierarchy,
formalization and centralization) on the behavior of people. Please do your analysis specifically for (a) Hierarchical
Structure, and (b) Divisional Structure, as described in the case. Support your answer with illustrations where
necessary.

Response:
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Initial Stage was having following characteristics:
• Employees had a lot of autonomy and hence lack of control and structure. Hiring of people was sporadic.
The Key executives made all the decisions. Job descriptions were nonexistent. People did not have a clear
job description, so everyone did everything
• There was no financial planning, which lead to rapid loss of money. Appex was spending cash quickly and
not monitoring its expenses. There was only “fire-fighting” and no long-term planning. The company couldn’t
handle increasing demand. Company’s ability to bring products to the market quickly and Boyle’s innovative
technical solutions enabled the company to compete against established players. The market growth was
defining the growth of the Company.
• Poor customer service, because it was no one's primary job. Apex started to fall behind schedule and miss
installation dates. Product development suffered because of poor flow of information
• The atmosphere was changing from entrepreneurial to chaotic as the company grew.

Circular Structure: It was a series of synchronized circle expanding out from a middle circle. The Innermost circle
contained the Senior Executives with next circular layers of function of manager and the employees. In the
surroundings around the circles were the “Customers”. The intention was to create a non-tiered organization in
which information flowed uninterruptedly and easily. The information flow was free within the organization as
well as between the organization and its environment.

There were certain issues with this structure as employees could not relate well it to it. New employees did not
understand how to fit in organization as they were expecting a more traditional and hierarchical organizational
chart. They were also not sure about performance evaluation. Ghosh assumed that circular structure is leading to
an environment where “Customers were thought to be enemies”. Planning also got affected due to circular
structure. Ghosh’s creative notions of network, nonhierarchical, team-oriented structures had blown out of the
window.

Functional Structure: In Feb 1989, it was introduced as Ghosh wanted the least hierarchical model. Informal titles
did not work well as people cared about titles a lot. Politics had crept in as desk locations became important. The
team structure succeeded in focusing the company on completing the tasks. The heads of each team showed a
natural tendency to create sub – functions. The Sales and Marketing function got subdivided into Sales, Marketing
and Product Management. Each of these functions had a manger and then assistant managers. Later, National
Sales Managers and Regional Sales Manager were appointed. All these changes occurred in 6 months of functional
structure establishment. Organizational Chart grew vertically and horizontally in every 3-4 months.

However, this model has also some issues like more bureaucracy. Also, more products leading to more employees
and resulting in high costs for training new people. Customer focus reduced. Employees became less concerned
with meeting company-wide financial goals. Shift happened from “everybody was doing everything” to “lot of
process and where things were not getting done". It has own problems like there was no system that specified
who had the authority to make decisions. Also, product teams did not know where their authority ended. There
was also the issue of resource allocation problems. The teams started to become polarized. Operations and
Engineering started to define distinctive structures and limiting the roles which made Appex spend more money
on system development and operations. The role of “personalities” became more pronounced. Standards were
being set by individuals than by company policy. The source of authority became functional and not managerial
expertise as head of engineering was the best engineer. The people hired from outside who had managerial
expertise were not respected enough. Managerial competence was never valued traditionally in the organization.

Divisional Structure: In August 1990, it was implemented through establishing two broad divisions: Inter Carrier
Services (ICS) and Cellular Management information Systems (IS). A third division of Operations was created to
service these two main divisions. Each division had one head and all the heads reported to Ghosh. The fourth
division of Finance and Administration and director of HR also reported to Ghosh. This structure improved
accountability, planning and budgeting. Employees focused on meeting financial targets. Few business
procedures, formal procedures seemed unnecessary. The company structure was very informal and fluid.
Employees were focused, committed and hardworking. Company was responsive and effective at getting things
done quickly. The company was project-based. The number of projects increased hence people worked more and
the company hired more people and it resulted in high costs.
The ley issue left was resource allocation as Divisions wanted the control over all resources and not want to share
resources. The divisions were not cooperating within each other. The divisions began to act like small companies.
The divisions began to “play games” with their financial statements to meet financial objectives. Accurate sense
of financial status of the company was getting difficult to ascertain.