Although I’m an accountant, contrary to popular belief, I’m not anti-social. I have no objection to spending time with other people.
But because I’m an accountant, I’m always wondering if we can do something better, or more efficiently. So despite the superficial benefits of “getting everyone together”, the way most meetings are run in practice makes them an appallingly ineffective way of communicating just about anything.
Here I’m not referring just to the proportion of information that people can recall at the end of the meeting…although that tends to be pretty poor too. I’m talking about the cost of the meeting…and more importantly the opportunity cost of the meeting.
As far as the cost of the meeting is concerned, I’m sure we’ve all done that thing in the middle of a long and particularly boring meeting, where we estimate the hourly rate of everyone sat round the table and note frustratingly that it’s costing £2,000 per hour, or whatever, just for the privilege of being bored out of our skulls.
That’s significant, but usually the direct cost in salary time is by far the smallest part of the total cost of holding a meeting. The opportunity cost tends to be much more significant.
Opportunity cost just refers to what you could be doing instead of whatever you’re doing now. Think of it like this – if you’re currently doing a task that earns £50 per hour, and you could be doing a task worth £100 per hour, you’re not making £50 per hour, you’re losing £50 per hour (the £100 you could earning, less the £50 you actually do earn).
With very rare exceptions, meetings aren’t about earning anything. Just about all of them represent a cost to the business. So straight away, almost anything else you could be doing, even if it only earned £1 for the business, would be a better use of your time.
Now, there are some meetings required by law or which are at least a reasonable idea and probably just needs to be accepted as a cost of doing business. Paying taxes or adhering to minimum wage legislation, for example, represent costs that the business just needs to take on the chin.
Under Company Law in the UK, businesses are required to have an annual shareholder meeting to approve the accounts and conduct a number of other statutory tasks. Irrespective of the cost of those meetings, you are legally required to have one in return for the benefits that limited liability status confers. So just accept that, book the cost, and don’t spend too much time worrying about it.
I can also accept that a monthly review meeting where key managers, or team members, get together to go over what happened in the last month and what’s in the plan for next month is probably a good idea. It keeps people on track and fully informed about activities that they might not come across often in their day-to-day roles.
Spending a couple of hours once a month to do that is probably advisable, and just a cost of doing business that any reputable organisation will see some benefit to doing.
With that in mind, take a look through your diary for the last month. Quickly tot up the number of meetings you had which fitted into either of those two categories – the legally required or the monthly review categories.
If you’re like most people, that will be a tiny proportion of your month’s diary hours. But your diary will be full of all sorts of other things, many of them questionable at best in terms of their positive impact on your ability to achieve the objectives of your role.
And this is where the biggest element of opportunity cost in terms of meetings comes along.
Let me illustrate with an example.
I used to work at a university. Universities are fabulous places in many ways, but they chase reasons to have meetings as eagerly as a drug addict chases another high. There was a never-ending clamour to hold another meeting about some topic or another.
My whole diary Monday to Friday, 9 to 5, was filled with this sort of activity. Culturally you had to attend, but progress on any topic was non-existent to slow and only rarely did anything have a positive impact on my ability to achieve my personal objectives. In effect I was paid a salary to achieve absolutely nothing but sit in meetings 8 hours a day, 5 days a week.
Now, in practice I put in the hours outside the 9-5 to make at least some progress on my personal objectives. Most days I worked at least a 10-hour day, of which 8 hours were taken up with meetings which were largely non-value-adding in terms of my own objectives…or, to the best of my knowledge, anybody else’s.
In other words, I spent only about 20% of my time doing the value-adding things I was in theory paid to do…almost none of it within the confines of the theoretical 40-hour week I was contracted to work.
This is where the opportunity cost really kicks in.
You see, an hour spent in a meeting instead of doing some value-adding activity wasn’t worth an hour of my time based on a straight proportion of my salary. For most of my working week, the only thing I’d have been doing instead was sit in another non-value adding meeting instead. The opportunity cost between two similarly non-value adding meetings is pretty close to zero.
But if I’m only spending 20% of my time on value-adding activities, let’s say 5 hours a week based on a minimum 50 hour week, every hour I can convert from non-value adding meetings into added value activity is worth, as a minimum 5x my hourly rate. And it could be worth a lot more – some of the tasks I was engaged with could bring in 100x or more the cost of an hour of my time.
The value I added by bringing in multi-million pound contracts in the course of a few external meetings and presentations was many multiples of my hourly rate.
But even if we just go with the 5x multiple based on the time I spent on value-adding activities each week, you can see that the “cost” of the meeting in terms of people’s hourly rates is a small fraction of the total cost of that meeting.
Unless there are people around the meeting table who do so little value-adding activity that they might as well spend their time in non-value adding meetings as anywhere else (and if there are, you might want to think about a business restructuring of some sort), odds are the real cost of that meeting is some multiple of everyone’s salary cost.
It’s likely that multiple is at least 2-3x, but when, for example, you’ve got the sales team off the road for the day, the cost of that meeting is easily 100x the mathematical hourly rate of the attendees as each meeting with a potential client should bring in a substantial amount of new business over time.
That’s why, with a limited number of exceptions noted above, I don’t like meetings.
If we started reckoning the cost, and opportunity cost, of our meetings and input that information into our decision-making process, most businesses would have a lot fewer meetings.
In my time at the university, 30 senior managers sat together for an afternoon probably cost about £5,000 in straight salary cost, perhaps £15-20,000 in opportunity cost.
The question businesses should always ask themselves, once they understand the calculations, is whether the activity they’re trying to carry out within the meeting is going to generate £5,000 to cover the cost of holding the meeting, or £20,000 to cover the opportunity costs of the meeting.
Once you start to think like this, you’ll quickly work out that it’s rarely a good idea to spend somewhere between £5,000 and £20,000 to “solve” a problem which only costs the business, say £1,000 per year…if indeed it ever solves anything. My own experience is that meetings only rarely “solve” anything anyway.
So think carefully next time someone says “let’s have a meeting to discuss x”. Unless “x” is worth many times the hourly rate of the attendees, including opportunity costs, the economically correct answer is to find something better to do with your time.