Cost Model and ThroughPut Model

The Cost Model doesnt work for Organization Benefit.

Key criteria to make decisions on Project resources and budget is if the net impact on the Organization's Overall  goal is positive or negative. Cost Model doesnt provide the correct answers in terms of What is the best for the Organization. It doesnt help to clearly distinguish project choices to decide which projects are of top priorities. In this model, People who are not being billed have the risk of being laid off.

On the other hand, The throuput model suggests the number one focus should be on the throughput which is essential for long term health. The definition of Throughput is based on Dr Eli Goldratts Theory of Constraints Model. In a FOR PROFIT organization, Throughput is the money collected from the Customers minus the money paid to external vendors to produce products or services.  The Throughput is not recognized until money is collected from customers. Therefore throughput is not a fantasy benefit of the project rather money generated by the project.  By focusing on Organizations throughput as a top priority any expenditure that doesnt help to generate throughput in the organization is a waste. This provides ways and means to identify and eliminate waste from system.

Three primary measurements for any project - THROUGHPUT (T), INVESTMENT (I) AND OPERATING EXPENSE (OE) . If a  project has to have a Positive effect on Organization Goals It must do one/all of the following

1. Increase Throughput (T) 2. Reduce Investment  (I) 3. Reduce Operating Expense (OE)

Cost vs Throughput Model

One big differnce between Cost and Through put model is in the understanding the dependencies that exist between elements of cost and Through put.

In the Cost Model, the project manager looks at eliminating elements of Project cost as inherently good.  The impact on throughput is not visualized. Each element of cost is not considered in light of its dependency or relationship to throughput.

In the Throughput Model, the relationship between T, I, OE is constantly visualized, For example in a R and D project, if Product Development cost is reduced in the R & D idea, it will not deliver to the  needs identified to the market research or it will not deliver in time for sales to meet goals. This cost reduction has a negative Impact

“Throughput model ensures the organization chooses the right mix of projects, with sufficient projects so as to meet the organization goals.”

Source :  PG : 59, 60 Advanced project portfolio management and the PMO

 By Gerald I. Kendall, Steven C. Rollins

Manager must possess vision one step ahead than an eagle. He must have vision for coming future and can smell the up and downs of the forth coming hardcore circumstances. Before Recruiting Employees, the picture must be very Clear in his mind regarding Future Controversies, at the same time if circumstances come for Layoff then He must use his valuable Business Relations in the Market to Set his Employees in those Different Companies. This will create value for the Company and its Manager at the same time Employees will feel safe as they are Placed well through their Shelves. For this, he must start working well before, with vision and Planning so that at the time of Fire he do not requires to Dig a well. He can well Settle those Employees who were going to be laid off due to lack in Business, Global Recession or Due to Seasonal Recession without any Stress and Grievances. But, it is not Everyone's Cup of Tea.

How come no one is looking at the legal question? India is supposed to be arcane in its labour laws - which means it should have stringent penalties / rules to prevent companies from a "hire and fire" policy. Interestingly, rumor maybe, I've heard that ALL layoffs that have happened in India are legally "resignations".

Why is there a silence from all the legal luminaries on this? Please ...

An organisation is not the name on the billboard , or a p&l summary statement.  The most important insignia and soul of an organisation are it's employees , whether in good times or bad.

Given this situation , for any sensible (and long term centric organisation) , it should not be just the law and/or corporate whim that should decide such actions. Formally speaking , a 3 months basic salary is the norm for such separation , but for an employee who has to start afresh in times of uncertainty , he would be taken care for some time if the organisation can do it's best to protect the financial interests.

Also , in such situations , options of work on part time and / or reduced wages should be looked at as first option.

We can not avoid layoffs in companies. Companies will come up and they will grow and at some point of time it may go down, thats the reality of free economy. But what we can do is create a condition suitable for new companies to come up, new innovative ideas to grow. And which will create more jobs and so layoffs will not a big issue as it is today in India. Government policies make a huge part in job creation, by building infrastructure, roads, rails etc. and making the environment and laws to create new and innovative industries to grow.

And also what we can do is make things fair, both for employers as well as the employees. When sales go down, company will have to cut their workforce. We can not stop it. But what we can do is treat the laid-off employees with dignity and fairness. Employees should be given the right severance. Also companies should stop portraying their employees as under performed and all those BS. First of all company is under performing. Thats why they are laying off. So stop blaming your own employees, instead blame your top executves who take the business decisions, who create company strategies. The low level employees are just following what they are told to do. So layoff is due to underperformance of the company.. PERIOD