1. Understanding Organizational Structure
Appex Corporation
Understanding Organizational Structure

2. Company Background
Founded in May 1986 by merger of Appex Inc. and Lunayach Communication Consultants (LCC).
Headquartered in Waltham, Massachusetts.
Provided MIS and Inter Carrier network services to Cellular Telephone Companies.
Appex Employed 172 people of whom 153 were salaried and 19 were compensated on an hourly basis.

3. The Merger Appex Inc. was founded in 1984 by Brian.E. Boyle.
It focused on MIS for the cellular industry and credit scoring system for financial services companies.
LCC specialized in the design and engineering of cellular radio networks
The consolidated company was named Appex Lunayach Systems Corporation Ltd. (ALS)
This company integrated LCC’s engineering expertise and Appex Inc’s business and systems expertise.
In May1989 ALS changed its name to Appex Corporation.

4. Revenue in Million $ Year Amount in Million $ 1987 1.0 1988 2.3 1989
6.8
1990
16.6

5. Growth in No. of Employees
Year End
June 1988 Forecast
Nov 1988 Forecast
Aug Forecast
Actual
1988 36 45 26
1989 55 75 79
103
1990 66
112
176
180
1991 72
130
265 -
1992 77
134
369
1993 83
145
480
1994
159
586
1995
675

6. The US Cell Phone Industry
Began in 1982 with guidelines of Federal commission of communication.
Providing high quality mobile telephone service with vehicle installed or hand held device.
The Cellular services worked through MTSO ( Mobile Telephone Switching Office)
Roaming was also available at a higher mark up to regular per- minute rates.
The cellular telephone industry in the USA had grown from 92,000 subscribers at the end of 1984 to 3.5 million at the end of 1989.
Further Exponential growth was expected in the Cell Phone market.
International Markets were expected to expand greatly , particularly in Europe , Latin America and Asia.

7. Appex Products and Services
The service allowed the consumers to manage their customers in “home” and “roam” territories.
ICS ( Inter Carrier Service) primary service included : online national verification system , a national financial clearinghouse for settlement of roamer charges , a national location and call forwarding system for automatically locating roamers.
IS (Information Systems) included customer information , billing information , accounts receivable ,credit and collection information.
IS contributed 40 % of the total company revenues.

8. Appex Market Reach As of April 1990 , Appex had 75 customers.
The customers included the likes of Bellsouth , Cellular Communications Inc. And Southwestern Bell.
Contracts with customers were multi- market , multi – product, multi – year service agreements
The contracts ranged from $ 100,000 to over $ 2 Million.
Appex served 250 markets in the United States and 34 markets in Canada.
The company marketed its services directly to cellular carriers primarily through trade and industry publications.

9. The Start Up Stage The Key executives made all the decisions.
Job descriptions were non Existent.
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.
Hiring of people was sporadic.
Appex was spending cash quickly and not monitoring its expenses.

10. About Shikhar Ghosh Ghosh was recruited in May 1988 by Appex.
A graduate from Harvard Business School.
Eight years of consulting experience in BCG.
Ghosh was hired to bring in more control to the Company.
At BCG Ghosh’s specialty was Organizational Structure.
Ghosh was efficient at creating a rapid – response organization.
Ghosh was eager to experiment with new ideas in Appex.

11. Appex Corporation in May 1988
Appex was a relatively small company.
The Company was Entrepreneurial in nature.
It was technologically driven and loosely structured.
It was losing cash rapidly.
The Venture Capitalist’s were hoping that Ghosh will be able to turn it around.

12. Ghosh’s Realization
Appex was changing from “Entrepreneurial” to chaotic.
People arrived at work and would react to a crisis.
There was only – fire fighting and no development of an underlying planning structure.
It became difficult to accomplish basic tasks.
Customers were complaining for Non responsiveness.
The volumes of customers had increased.
Appex had to fall behind schedule and to miss crucial installation.
The company experienced failures in Product Development.
Flow of information was in jeopardy.
The project – orientation and structural looseness did not work.
Immediate and Long Term issues needed effective attention.
A structure was required.

13. Circular Structure
A circular structure were a series of concurrent circle expanding out from a middle circle.
The Innermost circle contained the Senior Executives.
The next circular layers out included the managers function and the employees in the functions.
In the environs around the circles were the “Customers”.
The intention was to create a non – hierarchical organization in which information flowed continuously and freely.
The information to flow freely within the organization.
The information to flow freely between the organization and its environment.

14. Circular Structure Customers Customer Service People Customers
Customer Service Manager
( Beverly Watts)
Customers
Operations
People
Operations Manager
( Bill Pistorino)
Sales People
Sales Manager
( Denise Allen)
CEO COO
(Brian (Shikhar
Boyle) Ghosh)
Admin
( Mark Lohr)
Customers
Engineering Manager
( Michael Perfit)
Admin
People
Customers
Engineering People
Customers

15. Failure of Circular Structure
The Employees could not relate to the structure for its unfamiliarity.
The new hires did not understand how to fit in the organization.
Employees expected to see hierarchical chart to get defined authority structure.
Employees did not know how the performance was evaluated.
Ghosh thought that Circular structure was creating an atmosphere where “Customers were thought to be enemies”.
Planning got affected due to Circular Structure.
Ghosh’s creative notions of network ,non hierarchical, team oriented structures had blown out of the window.

16. Functional Structure
In Feb 1989, Functional Structure was introduced into Appex.
Ghosh wanted the functional chart to look in a least hierarchical manner.
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 various functions that organization dispersed itself into were :-
a) Sales and Marketing
b) Finance, Administration and Human Resources
c) Operations
d) Software Development and Services
e) Engineering and Technology

17. Functional Structure SALES & MARKETING Paul Gudonis
Information Systems Marketing , Billing Service, Network Product Management
FINANCE , ADMIN & HUMAN RESOURCES
Bob Lentz
Finance/General Accounting , Facilities , Word Processing, Human Resource Administration
CHIEF EXECUTIVE OFFICER
Shikhar Ghosh
OPERATIONS
Ted Baker
AB+ ISS, Computer Ops , AB+ Client Support, Technical Support , N/W Implementation etc.
SOFTWARE DEVELOPMENT & SERVICES
Jim Driscoll
S/W Dev, Product Support Services , Client Support
ENGINEERING & TECHNOLOGY
Paul Senn
Roaming America Dev, NPD , N/w Engg, S/W Dev

18. Functional Structure
The heads of each team showed a natural tendency to create sub – functions.
The Sales and Marketing function got subdivided into :-
a) Sales
b) Marketing
c) Product Management
Each of these functions had a manger and then assistant managers
Soon National Sales Managers and Regional Sales Manager were appointed.
All these changes in Sales team occurred in 6 months of Functional structure establishment.
After every three to four months the Organizational Chart grew vertically and horizontally.
The Sales and Marketing Organizational structure was the classical example of the situation as described in the next slide.

19. Sales and Mktg. Organizational Structure – Aug 1989
Paul Gudonis
Sales & Marketing
Denise Allen
V..P Sales and A/C Management
Tom Wetmore
Director Information
Systems Mktg.
Kathy Adams
Project Director
International
Greg Hillman
Director
Billing Service
Bruce Linton
National Sales Manager
Kim Obremski
Mktg. Communication
Manager
National A/c Managers
Responsible for all APEX accounts
Pam Joy
Team Leader
Product Mgmt.
Kieth Lietke
Director
N/W Serv. Mktg.
Regional A/c Managers
Responsible for all Regional Accounts
Henry Kowalczyk
Director
Industry Marketing
Product Team

20. Problems with the Functional Structure
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.
Ghosh found that measuring Managerial Competence was difficult.

21. Problems of Expansion
Ghosh needed people with broader functional expertise.
The employees with skills in a smaller company did not fit a larger organization.
Ghosh adapted to the expanding demands by reshuffling people, hiring new people , and promoting new people.
The Company in general had to learn to value new types of aptitudes and to adjust the changes.

22. Introduction of Product Team Structure
Paul Gudonis suggested the importance of Product Teams.
Each product team to be comprised of Product Team Manager and representatives from the functional areas.
The Product Team wrote the business plans and integrate the functions represented in the Product Teams.
An Example of the structure and the functions of the Product Team of “Roam America” is displayed on the NEXT SLIDE.

23. Example of Product Team Structure for “Roam America”
12 month Business Plan
Master Project Schedule
Integrate The function
Product’s Functional Speculations
Marketing Details
Product Manager
“Roam America”
Operations Representative
Development Representative
Financial Representative
Cust. Service
Representative
Sales
Representative
Development Speculation
Time Table
Resources
Testing
Systems Requirement
Operations
Plan
Procedures
Staffing
Operational
Reporting
Capacity
Planning
Financial
Forecasts
Capacity
Planning
P&L Reporting Vs
Plan Contract Administration
Cust Service Plan
Staffing
Procedures
Training CSR’s
Training Customers
Sales Plan
Sales Forecast
Sales Training
Proposal Sample

24. Problems with Multi-Functional Product Teams
Who had the right to decide a product’s feature?
Should Sales people be allowed to decide discounts?
Should the Product Manager be allowed to tell Engineering what its priorities should be?
The Product Teams became larger and larger and the question of authority became more troublesome.
There were constant battles among the functional representatives in the product teams.
Each Product Team wanted the best of functional team on its team.
The Product Team also generated more resource allocation problems.

25. Product Team / Business Team Structure
Ghosh created Business Teams in response to authority and resource allocation problems.
Business Teams acted as intermediaries between the Product Teams and the Corporate Teams and had the authority to make decisions .
The Business team took decisions on Resource Allocation , regarding the products.
The Business Team included representatives from Senior Management.
The Product teams that operated on the same Network and shared the same customer base reported to one business team.
The Organizational Structure looked as per the diagram in the following slide.

26. Product Team / Business Team Structure
General Management
Team
Business Teams
Product Teams
Inter Carrier Services
Paul Senn , Denise Allen
Pam Joy
PRV/IS41
ISS , Quick Collect,
Roaming America
General Management Team
Information Services
Art Zamkoff, Tom Wetmore, Jim Driscoll, Jose Quintana
Pam Joy
CMIS , AB+
S. Ghosh
B. Lentz
P . Gludonis
T. Baker
Roamer Rating , National
Accounts , N/w Mgmt,
International , JV’s
New Products / Markets
Mark Lohr , Denise Allen
Paul Senn , Jim Driscoll
Overall Biz Plan and Strategy
Functional Strength
Capital / Resource Allocation
Investor/ Board Issues
Functional Coordination
Execution of Plans
Product Development
Product Line Strategy
Annual Operating Plan
Investment Priorities
Actual Vs Planned Results
Key Customer Relationships

27. Shortcomings of Product Team/ Business Team Structure
This structure increased the number of people who were counting and planning rather than tackling customer issues etc.
Layers of Management increased with this structure as well as number of meetings.
The training costs went high as number of new employees increased.
The Customer Focus diminished.
Employees became less interested in meeting the company wide financial goals.
Another major Structural Change was imminent.

28. Divisional Structure
In August 1990 , Ghosh implemented a Divisional Structure.
He established 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.
The diagram of the Divisional Structure is on the following slide.

29. Divisional Structure Chief Executive Officer Shikhar Ghosh
Inter Carrier Service (ICS)
Division
Paul Gudonis
Information Systems (IS)
Division
Bob Lentz
Operations
Ted Baker
Finance & HR
Mark Lohr
Catherine Latham
Customer Services Data Center and Network Services for
Businesses
Administrative
Support
P&L Responsibility for ICS Business
ICS Marketing
P&L Responsibility for IS
Business
IS Marketing

30. Challenges of the Divisional Structure
Resource Allocation still existed as the problem in the Divisional Structure.
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.

31. Ghosh’s Structural Philosophy
Ghosh believed that Appex’s structure should be altered regularly ,app six months.
He believed if company had grown 50% , it is time to change.
Ghosh was surprised at the behavioral changes occur in reaction to structural changes.
Ted Baker suggested to disband Operations division in the two major divisions of ICS and IS.
Ghosh believed that the anxiety created by structural changes was necessary and warned the people “Whatever you are sure of will Change”
Ghosh believed changing the structure involved more than cosmetic
changes to the organizational structure.

32. Post EDS Acquisition
EDS (Electronic Data Systems) a $6 billion company took over Appex.
Appex had to follow EDS’s requirements , such as financial planning systems , resource allocations and administrative procedures.
Appex’s challenge was to work out its own divisional structure.
The structural change in the context of its role as a division of a larger bureaucratic organization.
Ghosh’s role changed and he spend his time dealing with EDS and planning the strategic direction of Appex within EDS.