March Madness will cost business $1.7 Billion
March 10, 2008
• Lost productivity blamed on mesmerizing basketball
• ‘A couple of hours of low or lost productivity can make a difference’
With as many as 37.3 million workers participating in March Madness office pools and up to 1.5 million watching games online from their desks, it is a wonder that any meaningful work is actually completed during the last two weeks of March, when the NCAA holds its men’s college basketball championship tournament, says outplacement firm Challenger, Gray & Christmas Inc.
According to its annual estimate, the annual distraction could cost employers as much as $1.7 billion in wasted work time over the 16 business days of the tournament, starting the Monday after the teams and brackets are selected (March 17) through its conclusion on Monday, April 7, in San Antonio, Texas.
The Challenger estimate is based on the number of people expected to participate in office pools, the amount of money they earn and the amount of work-time wasted on March Madness related activities, whether it is trash talking at the water cooler or watching live videos of the games during business hours.
It’s estimated that anywhere from 28.6 million to 37.3 million Americans will participate in March Madness office pools. A 2006 Harris poll found that 13 percent of Americans aged 18 and older (28.6 million people) planned to take part in a March Madness office pool. But others, including the American Gaming Association, cite a 2005 NCAA survey that put the number of March Madness office pool participants at 30 million.
The most recent estimate comes from the online recruiting site, Vault.com, whose 2007 Office Betting Pools Survey found that 27 percent or 37.3 million of the nation’s workers have participated in March Madness office pools.
According to the latest available data from the Bureau of Labor Statistics, average weekly earnings among all full-time workers in the fourth quarter of 2007 were $700 or about $17.50 per hour (based on a 40-hour work week).
“The final piece to this lost productivity puzzle is the amount of time employees waste putting together their brackets, researching teams, watching games online, etc. This, of course, is the hard part since most people are not keeping a detailed time sheet on minutes wasted during the work day,” says John Challenger, chief executive officer of Challenger, Gray & Christmas.
Instead of trying to estimate the total number of hours spent by employees on March Madness-related work versus work-related work, the firm’s estimate is based on the amount of money paid to employees for every 10 minutes of unproductive work time.
Using average hourly earnings of $17.50, Challenger calculates that workers earn an average of $2.92 every 10 minutes ($17.50 ÷ 6). So, for every 10 minutes of work time the 37.3 million March Madness office pool participants spend focused on the Tournament instead of their job responsibilities, employers will lose $108.9 million ($2.92 × 37.3 million).
Even if these workers waste just 10 minutes per day on March Madness, starting the day after selection Sunday, the cumulative outcome is a loss of $1.7 billion ($108.9 × 16) in unproductive wages.
“There are many reasons companies would want to limit the distraction caused by March Madness, especially in the current economy. For public companies whose performance is judged on a quarterly basis, a couple of hours of low or lost productivity can make a difference. For professional service firms billing clients by the hour, 10 or 15 unproductive minutes out of an hour can be costly to a firm,” says Mr. Challenger.
“The other issue is the impact that watching games online could have on the speed of the company’s computer network. Streaming video uses a large portion of bandwidth, which is prompting more and more employers to block access to any video sites, whether it’s YouTube or March Madness On Demand,” he says, referring to the free service, initiated in 2006 by NCAAsports.com in conjunction with CBS Sports (it was offered in 2005 but at a cost of $20) that gives fans the opportunity to watch the first four rounds of the tournament on the Internet.
According to statistics from CBSSports.com, nearly 1.4 million unique users visited the site in 2007, watching a total of 2.6 million hours of live video. That is an average of 1.9 hours per user.
“While there are no figures on how much of the online viewership occurred from the office, it is safe to assume that much of it did. The fact that the March Madness On Demand window features a “Boss” button, which brings up a fake spreadsheet when pressed, indicates that this service is targeting those who are at work and cannot watch the games on television,” says Mr. Challenger.
During the first two days of the tournament (Thursday, March 20 and Friday, March 21), approximately half of the 32 games are played during traditional business hours. Fans on the west coast may be able to begin watching games as early as 9:00 AM.
“This year, CBSSports.com is boasting that the video player will feature a wider screen and additional features such as live scoreboards. This undoubtedly sounds great to the college basketball fan, but to the company information technology manager it, of course, sounds like a busy day troubleshooting Internet crashes and network delays,” says Mr. Challenger.
“Those who insist there will be no impact are kidding themselves. It might be a slight drop in output or it could be slow Internet connections as bandwidth is sapped by employees watching streaming feeds of the games,” he says.
But Mr. Challenger is not a grump. He does see some benefit to the diversion.
“With worker stress on the rise as job security declines, a little distraction could be just what the doctor ordered,” he says. “The key for companies is finding a way to maximize the positive aspects of March Madness so that they outweigh the negatives.”
Companies can use the event as a way to build morale and camaraderie, he suggests. “This could mean putting televisions in the break room, so employees have somewhere to watch the games other than the Internet. Employers could also offset productivity losses by using the Tournament to boost morale. Employers might consider organizing a company-wide pool, which should have no entry fee in order to avoid ethical and/or legal questions,” Mr. Challenger says.
“Last year, one company we surveyed allowed workers to wear their favorite team’s apparel for a small fee, which was then donated to a local charity. Another held a free office pool, with the top four going to lunch and the overall winner receiving a gift certificate,” he says.