Assignment 1

Organization Behavior –
Appex at its different stages of growth
1. Analyze what were the specific structural changes made and how each of them were
beneficial for Appex at its different stages of growth. (for this you may refer to the
framework of org growth appended. While answering this, refer back to our discussion on
the four design challenges organizations face and the various design options available to
them)

Phase 1 - creativity phase : Start up stage of Appex (1988)

Appex, at the startup stage, was a small company with 25 employees and $2 million revenue.
Because of the small set up, there was no hierarchy. It was entrepreneurial, technology driven
and loosely structured. Everyone used to do what they felt like based on the need. There was no
clear job description. The employees were focused, committed and hardworking and worked in
close interaction with each other. The company was getting work done because of this informal
design and grew rapidly. When workload became overwhelming, they hired more people
without much planning and the cost increased rapidly.

Structural changes that Shikhar Ghosh implemented in the organization

Phase 2 - Direction phase
In this phase, Ghosh tried to bring in more accountability and structures by trying out circular,
horizontal and hierarchical structures. In this phase, the lower-level supervisors are treated more
as functional specialists than as autonomous decision-making managers. There is growth in the
organizational chart and titles and positions grew during this phase.

1] Circular structure
As the new CEO, the first structure that Shikhar Ghosh implemented was a circular structure.
The innermost circle contained senior executives, the next circular layer included managers of
functions and the employees. The purpose of this structure was to create a non hierarchical
organization.
But this did not work well for the company. The employees could not relate to the circular
structure. The power structure was not clear for the employees. Because of this, a mentality
developed that the customer was the enemy. This structure enabled a responsive nature of work
and not that of a planning nature. Hence, the tasks that required planning were not done.
2] Horizontal structure
Ghosh then tried the horizontal structure.
The employees did not take it well and the implementation was not successful.

3] Hierarchical functional structure

In this structure, the functions were organized as teams. The team structure succeeded in
focusing the company on completing tasks. There was a system of accountability.
Employees cared about the titles given to them and because of this, politics came into existence.
The organization chart grew horizontally and vertically. The structure inhibited a working
relationship. Rules were set by individuals and not be the organization. The source of authority
was functional and not managerial expertise.

Phase 3 - Delegation phase

In this phase, there is focus on decentralization. More teams are set up for the effective
functioning. But there is power struggle over resources. Different divisions need control over
resources.

4] Product teams
Each product comprised of a product team manager and representatives from the functional
areas. This system helped in setting up a better communication among teams.
The authority of decision making was not clear. The conflict between product managers and
operations people became more acute. The product teams did not know where the authority
ended. Resource allocation also became a problem.

5] Business teams
Business teams were intermediaries between product teams and management teams. They had
the authority to make decisions. This solved the authority and resource allocation problem.
But lot of people were involved in planning. There were many group meetings and hence the
cost also increased. They became less concerned with meeting company wide financial goals.
Phase 4 - Co ordination
In this phase, decentralized units are merged into groups. In this phase, there is a better balance
of centralization and decentralization. Divisions were set up and that allowed Ghosh to focus on
other important matters regarding the organization and didn’t have to focus on everything.

6] Divisional structure (3 divisions)

Two divisions were established, namely Intercarrier services (IS) and Cellular Management
Information Systems (IS). They also created a third division - operations. It improved
accountability, budgeting and planning. Employees focused on meeting financial targets.
Resource allocation was still a problem. There were little communication flow across divisions.
After a while, the different divisions acted like small companies.

7] Divisional structure (2 divisions)

Here, the operations division was incorporated into the other two divisions. Data processing was
still kept as centralized.

2. Pick ONE organization you work in (or are familiar with) and analyze its
Organization structure. How has the organization managed the 4 design challenges?

Orion Business Innovation was started by S Mehta and his wife along with his co brother in 1994
in the United States in a small office with hardly 30 people. The company’s work was software
development. At the beginning, most of the decisions were made by S Mehta and his wife and
the employees did all the work that came by. The structure was fluid in the beginning.

With in two years they have added more clients into the portfolio and they expand to different
locations with teams having specific job functions . As the company grew, more structures were
set up to ensure that the company functioned effectively. Find below the structure that was
established.
 S Mehta was the CEO and President and his wife was the Admin and Finance. Another layer
was added in the structure with Senior Vice President, Executive Vice President and Director
India Operations. Here differentiation was done and different functions were set up.
This brought in more clarity in the functioning of the organization.

Horizontal and Vertical Differentiation

The organization was again re-structured and more divisions were added. Horizontal
differentiation in roles was more prominent. CFO, Senior Vice President, Executive Vice
President, Director India Operations and Executive Sales were added to the next level. This
differentiation helped people to specialize in a particular area.

Direct reports were added to the 5 functional heads as shown above. This allows for greater
accountability. This form of vertical differentiation gives clarity about the amount of authority at
each level. But as organisation grow these functional departments were replicated in different
parts of the world. This brought lack of communication, and hindrance in information flow
which created the internal problems of increase in cost, and discord among teams. This reduced
employee satisfaction and product quality was reduced with defects, client satisfaction reduced.
Differentiation also led to lack of effective communication among teams.

Balancing integration and differentiation

Hence to solve this challenge, Center of Excellence (COE) teams were set up. The responsibility
of this team was to ensure free flow of information among the teams. This teams included the
functional heads and selected team members across the Globe. COE helped in bringing a balance
between integration and differentiation. The teams were given the authority to take decisions in
their divisions. This allowed the CEO to focus on the most important matters. This is how the
company balanced integration and differentiation.

Balancing centralization and decentralization

In a centralized set up, the decision making is done by higher authority and lower level managers
did not have the authority to take decisions. But in a balanced centralization and decentralization
set up, the higher management takes long term decisions and lower managers take day to day
operations decisions.The Higher management is involved in setting the long term goals and
policy making and also they are adding new client bases. The organic as well as inorganic
growth decision will be taken by the higher management were the decision relating to the
successful implementation of these plans will transferred to individual teams. Individual teams
are treated as profit centers where in they can take decisions including staffing.

Standardization and mutual adjustment

The company works mostly in a standardized manner. There is fixed time for work and dress
code too. But the space for mutual adjustment is too less in the organization. This is an area
where the company needs to work on.