Wednesday, March 22, 2006

March Madness Inc.




Once some harmless fun amongst friends, NCAA basketball tournament betting pools have become a big business. CBS, who owns the tournament’s broadcasting rights, is in the midst of an 11-year, $60 billion dollar contract, whose size is likely related to the amount of betting interest in the tournament. But, down at the ground level, March Madness (or Bracketogy, or the Big Dance) has gripped American life, especially at the office. The “play-in” game Tuesday night may have started on-the-court action, but the real games began at 6pm ET on Selection Sunday when the brackets were announced.

According to Challenger, Gray, & Christmas, a Chicago-based consulting firm, about 58 million workers will fill out brackets for office pools, and the total cost of the tournament to employers could be nearly $3.8 billion in lost productivity. NCAAsports.com’s partnership with cbs.sportsline.com to provide free access to TV broadcasts of the first three rounds (56 games) won’t help matters at all. So, what are companies doing to prevent this productivity-sapping behavior?

Not a thing. According to Challenger, office pools help boost morale and many employers are taking an active role in the office pool biz. Office pools get people throughout the company involved, even those who work remotely or travel frequently. Some office pools require small buy-ins (under $10) and are winner take-all, others offer gift certificates to the winners, and still others offer days off and free meals. Employees at the Motley Fool investing site use the tournament brackets to create a fun new economy based upon basketball outcomes. All-in-all, Challenger encourages employers to take advantage of their employees’ excitement over the tournament and use that energy to offset the productivity lost due to following the games.

In the NCAA tournament, you catch a glimpse of the classic tradeoff employers face as they seek to maximize long-run value by balancing lost productivity during the tournament with the bolstering of employees' spirits and camaraderie, which will hopefully translate into long-run profitability.

1. An "efficiency wage" is an above-market wage that employers post in order to encourage workers to be more productive. In what way is employers' indulgence of workers goofing off watching basketball a form of an efficiency wage?

2. Is there an optimal quantity of distraction in any office environment? How can firms go about finding that quantity?

Topics: Efficiency, March Madness, Motley Fool

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