Performance measurement objectively of employees at senior levels has always posed a problem to most organizations. Compare the return on the investment (ROI) on of each senior employee has not been an easy task particularly managers are placed in various departments that are amenable to varying degrees of quantification. For example how do you compare the output of production manager, with maintenance manager with that of a personnel manager or finance manager or a manager in-charge of security or town administration etc. has not been an easier task? TVRLS has come up with a methodology to assess the input costs (I in ROI or Investment made by the company) of managers which can be compared with a reasonable degree of objectivity. The CTC (cost to the Company) of the individual is taken as the “I” on that individual employee or manager. Thus if a general manager gets a salary of Rs. 6 lakhs per annum excluding the house and other benefits and community facilities his CTC may come to be Rs. 12 lakhs in Public sector. This estimate is normally based on the housing costs, community facilities like the schools, hospitals and other welfare expenditure etc.

KTR International  Ltd. (KTRIL)

KTR International  Ltd. (KTRIL) is a construction company involved in infrastructure projects.  It is currently having Rs. 10 Billion turn over and intends to multiply five times in the next three years. Its people costs are estimated at Rs. One Billion. The General Manger heading the Cement unit carries a CTC of Rs. One Million. There are eight HODs who are Deputy General Managers reporting to him looking after Materials, Quality, Maintenance, Marketing, Personnel, Finance, IT & Logistics, and Planning. Each of the DGMs is in the salary bracket of Rs. 6,00,000  and being the private sector made investments on community services and the CTC of the DGMs is calculated to be Rs. 8 Lakhs. The company prescribed 2000 working hours to be put in by each employee in a year as the managers all follow a five day week. Every manager gets 25 days off in a year if he punches in 2000 hours of work in that year.


Exercise 1

 Please calculate the following:

1. How much is the opportunity cost of a one hour meeting if the GM decides to convene a meeting of all HODs to  discuss whether tea should be served on the tables or at common place?

Your Answer: 8x 400+500= Rs. 3700
O COT = 37,000

2. What is the cost of a 15 minute Telephone conversation between the GM and his DGM marketing?

Your Answer: Rs. 225 (+ telephone cost)
O-COT = 2,250

3. If the GM has a habit of coming 30 minutes late for the production meeting and all the HODs are on time and wait for his arrival he is wasting how much of the company’s money and with what  opportunity cost?


Your Answer: 8x 200 =  Rs. 1600
O-COT = Rs. 16,000


4. What is the annual cost of  interactions between two GMs for an hour a day? And Opportunity cost?

Your Answer : Rs. 2,50,000
Opp. cost = 2.5 lakhs x 10= 25,00,000 (twent five lakhs)

5. If two  of the HODs do not get along well with each other and they have been found to send notes to each other on even trivial matters and often the GM had to intervene. In one year it has been found that there were 800 such e-mail transactions recorded between them. Assuming that on an average each mail takes 15 minutes to compose and send  it what is the cost to the company?

 Your Answer: (200 hours x 4,00) Rs. 80,000/- per year
Opp Cost = 8, 00,000 (+ GMs time)

6. It was felt by the GM and DGM HR that if two of their HODs (DGM Marketing  and DGM Production)  would fully benefit and their conflicts will reduce if they attend a program on conflict management together. If they are to be sponsored a Training program in Conflict Management at IIM Ahmedabad  for five days and the program fee is Rs. 20,000 and the travel cost for each of them is Rs. 10,000. After how many weeks does the company start getting its return on  Training Investment or costs, assuming that the conflict is reduced by 50% after the program. (Returns will begin after the costs are recovered)?

Your Answer: Cost =  2x 40 x 400 = Rs. 32,000

Program cost = 20,000
Travel = 10,000
Total = Rs 62,000
Opp cost = 6,20,000

7. The Opportunity cost of the daily production meetings if the plant has a record of meeting every day on an average for 90 minutes and the plant is shut down in a year only for two weeks for annual maintenance during which period the production meetings are not held?

Your Answer:

How to calculate Cost of Time (COT) using TVRLS methodology

Step 1: Calculate your CTC. (all direct costs in terms of salaries and perks + indirect costs incurred by the company for getting you, your maintenance, socialization, guidance and development + investments made or likely to be made to enable you to perform your current role or future likely roles well). Let this be figure X (sum of x1+ x2+ x3)

Step 2: Estimate the number of hours you are expected to work or you normally work in a year. (No. of working days (after deducting the number of holidays and leaves you are formally eligible annually) x number of hours per day on an average you are likely to work excluding your travel time to and from work). This may range any where between 2000 to 2,400 hours. Let this be figure T.

Step 3: Divide X by T. This will give you the real cost per hour of your time. Let this be real Cost of Time R-COT per hour = X/T

Step 4: Opportunity Cost Factor for the Company: opportunity cost is the returns you are expected to give to the company as a result of its investments on time. While these vary from job to job and expectations may hike them up, there is a crude way of calculating the same. For the same take the annual turn over of the company in financial terms as targeted for the current year (AT). Also find out the annual estimated people costs (salaries + perks+ all other people costs including welfare costs etc.). Your HR department or Finance department will give you an approximate figure. The previous year’s balance sheet will give you some idea. Normally divide the annual turn over (top line targeted) by the company by the annual people costs estimated for the year. You will get a factor Opportunity Cost factor or OCF = AT/ACTC or OCF = AT/∑X. normally in manufacturing set up the OCF varies from 8 to 10. In IT firms and consulting companies it may be around 3 to 4.

Step 5: Your opportunity cost (O-COT) is arrived at by multiplying your R-COT by the OCF. I.e. if your R-COT is Rs. 1,000 per hour and the OCF is 3 your Opportunity cost for the company O-COT =  Rs. 3,000 or if the OCF is 10 then your O- COT is Rs. 10,000. Per hour.

Note: R-COT and O-COT are always expressed in terms of rupee costs per hour.

 Examples: A Senior Vice President HR is working in an IT firm having a CTC of Rs 25 Lakhs. He is expected to give about 2,000 hours of work. His R-COT is 25,00,000/2,000 = Rs. 1,250 and per day cost therefore is Rs. 10,000 if he is expected to work for about 8 hours a day and 250 days in a year. If the firm’s OCF is 3 then his R-COT is Rs. 3,750 per hour or Rs 30,000 per day.

In a manufacturing set up a senior Vice president may have a CTC of  Rs. 24 lakhs and is expected to work only 200 hours in a month his R-COT is 24,00,000/2,400 = Rs. 1000 per hour. His O-COT is Rs. 8,000 per hour if OCF of that company is 8. 


Exercise 2:

An Executive   Vice-President Operations of a Machine Tools company holds weekly meetings of all his HODs. Each meeting lasts for two hours. There are six HODs who attend the meeting. Two of the HODs (VP Manufacturing and VP systems) come from two different plants located outside the HO. Their travel time is one hour from HO. Four others sit in the same building as the EVP operations. The CTC of various HODs is given below. Calculate the opportunity R-COT and O-COT for the meeting and give your rating of the appropriateness of each of the following agenda items given in Table 1 below.

EVP-Operations (R-COT = Rs. 2000)

VP- HR  ( R-COT = Rs. 1000)

VP- Marketing and Corporate Affairs ( R-COT = Rs 1250)

VP- Logistics and  Systems (R-COT = Rs. 1500)

VP- Manufacturing (R-COT = Rs. 1250)

VP- Finance (R-COT = Rs. 1,000)

VP- Sales and Distribution ( R-COT = Rs 1500)

Answer: R-COT of the meeting = Rs. (9,500 + 2750) x 2  = Rs. 24,500/-

If the OCF of the company is 8, the O-COT = Rs. 1,96,000/-

Table 1

Evaluate which of the agenda items are worth taking up in this meeting:

Use the following scale:

4= Very appropriate, take it up

3 = Useful, take it up

2 = Can be postponed or some one lese can take this

1 = Not appropriate. Drop it from this meeting and use other methods like delegation etc.

Exercise 3

Evaluate your R-COT and O-COT?

Determine how much it costs you to accompany your spouse for buying vegetables? Or for your spouse to pick up your child from the school or school bus?

What is the cost you have to pay if you don’t do the above? Short term cost? Long term Costs?


Everything can’t be reduced to cost. Many of them are investments. They are  investments which may have returns in the very purpose for which we earn money.. Happiness, good life.. Healthy living etc.  There are many things we should keep investing on to have a good life. Particularly relationships that build our future and bring happiness or those that take us close to achieve the purpose of life?



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