News From Challenger, Gray & Christmas

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Monday, March 8, 2010

MARCH MADNESS REPORT: Tourney Could Cost Employers $1.8 Billion

It is March once again, and like the swallows returning to Capistrano, basketball fans across the country will return to their favorite sports websites to research every one of the 64 teams playing in the NCAA men’s basketball championship tournament, fill out tournament brackets and enter one or more betting pools in what has become an annual rite of spring as sacred as green beer on St. Patrick’s Day.

For the nation’s employers, the men’s college basketball tournament, better known as March Madness, marks the arrival of several other annual rituals: employee-organized office pools, a potential dip in productivity and a marked decline in Internet speed, as workers soak up bandwidth watching live streaming broadcasts of the tournament games during office hours.

“March Madness and the subsequent office pools have been going on long enough, that employers can no longer claim to be caught off guard by the annual event. Some have tried to squash these pools, most simply ignore them and others have found ways to embrace the tournament as a team-building and morale-boosting opportunity,” said John Challenger, chief executive officer of Challenger, Gray & Christmas, Inc., the global outplacement consultancy that each year attempts to predict the tournament’s impact on workplace productivity.

This year, armed with an assortment of statistics from various sources, the firm estimates that workers distracted by March Madness could cost employers as much as $1.8 billion in unproductive wages during the first week of the tournament, alone, based on 20 minutes of daily time wasting.

“Keep in mind that it is nearly impossible to gauge the impact of March Madness on productivity in an information-based economy where workers possess portable technology that allows them to work from anywhere and any time. This estimate is probably about as accurate as the point spreads computed by Las Vegas bookmakers,” Challenger acknowledged.

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.

A 2009 Microsoft/MSN survey found that 45 percent of Americans planned to enter at least one college basketball pool last year. Assuming that at least that many plan to participate in pools this year, Challenger applied that percentage to total payroll employment in February (129,526,000) to approximate that as many as 58.3 million workers could participate in office pools this year (45% of the total non-farm workforce).

According to the latest available data on average weekly earnings from the Bureau of Labor Statistics, these workers earn $748 per week or about $18.70 per hour (based on 40-hour work week). That breaks down further to earnings of about $6.23 every 20 minutes.

So, among the 58.3 million office pool participants, every 20 minutes of unproductive work time costs employers roughly $363.2 million (58.2 million X $6.23). It is conceivable that workers participating in pools could waste an average of at least 20 minutes per day the week between Selection Sunday (March 14) and the end of the first round (March 19), when March Madness-related activity is at its height as people research teams, put together their brackets and watch games online during work hours.

“By the end of that first week, employers across the country may pay unproductive workers a total of $1.8 billion,” said Challenger, multiplying the $363.2 million by five.

“As the tournament moves beyond the first and second round, the impact on the employer decreases, since few games are played during office hours and workers can no longer make adjustments to their brackets, thus eliminating the need to research teams,” Challenger added.

“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."

During the first two days of the Tournament (Thursday, March 18 and Friday, March 19), approximately half of the 32 games are played during business hours. Fans on the west coast may be able to begin watching games as early as 9:00 AM.

CBS Sports and the NCAA teamed up a few years ago to begin offering March Madness on Demand web streaming service, which provides streaming webcasts of every game in every round of the tournament. Last year, it attracted 7.52 million unique visitors, up 75 percent from 4.92 million in 2008. According to Nielson web ratings data, 92 percent of fans who watched games online during the 2008 March Madness tournament did so from work computers.

Despite the potential impact, most companies see no reason to establish special March Madness policies. Two-thirds of employers do not have policies regarding office pools, fantasy sports leagues, or gambling in the workplace, according to a 2010 survey by the Society for Human Resource Management (SHRM). And, the majority of employers still do not block access to all video streaming sites.

“In the end, employers may or may not see a significant impact. Even if they do, few are compelled to go out of their way to ban March Madness related activities. Especially in this economy, when many employees are already anxious about their jobs, there is no reason for employers to make a big deal about what amounts to a blip on the productivity radar,” said Challenger.

“In fact, with worker stress and anxiety heightened, a little distraction could be just what the doctor ordered. The key for companies is finding a way to maximize the positive aspects of March Madness so that they outweigh any potential negatives,” Challenger noted.

“Companies can use this event as a way to build morale and camaraderie. This could mean putting televisions in the break room, so employees have somewhere to watch the games other than the Internet. Employers might consider organizing a company-wide pool, which should have no entry fee in order to avoid ethical and/or legal questions,” Challenger suggested.