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 always wonder if it’s possible to do something better, or more efficiently.
Which brings me to meetings…generally a poor way to communicate anything at all…and usually a really expensive way of not communicating it into the bargain.
Despite the superficial benefits of “getting everyone together”, the way most meetings are run in practice makes them an extraordinarily 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, but also the meeting dynamics.
We all recognise the common mistakes made in running business meetings because we’ve seen them so often – the poorly-constructed agendas, the way you know in advance several people are going to deploy an imaginative excuse for not carrying out their actions from last time, the way later items on the agenda are rarely discussed, if at all, and many others.
So many, if not all, meetings don’t score well in the effective communication stakes. But what about cost…and perhaps more importantly the opportunity cost…of holding a meeting?
We’ve probably 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 straight salary cost is by far the smallest part of the total cost of holding a meeting. The opportunity cost tends to be much more significant.
In case you’ve not come across the term before, opportunity cost is how we Finance Directors and CFOs refer to the “lost” benefits you miss out on by doing something less productive or less revenue-enhancing than you could have been doing instead.
Think of it like this – if you’re currently doing a task that earns £50 per hour, but you could be doing a task that would have earned £100 per hour instead, you’re not making £50 per hour…although that’s what your accounting records will tell you.
You’re actually “losing” £50 per hour (the £100 you could be earning instead, less the £50 you do, in fact, earn). The “lost” £50 is your opportunity cost from carrying out the less-valuable activity.
With very rare exceptions, meetings aren’t about earning anything so 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…at least in strictly financial terms.
Now, there are some meetings required by law. Just like paying your taxes or complying with minimum wage legislation, for example, they’re costs the business just needs to take on the chin.
Under Company Law in the UK, for example, businesses are required to have an annual shareholder meeting to approve the accounts and conduct a number of other statutory tasks. Many other jurisdictions have similar provisions.
So, irrespective of the cost of those meetings, you are legally required to have one in return for the benefits that limited liability status confers. Just accept the cost and don’t worry about it too much if having limited liability is important to you.
And I recognise 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 they might not come across in the normal course of 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 benefits from 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, those 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 making a positive impact on your business.
And this is where the biggest element of opportunity cost comes.
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 with all the dogged determination of a drug addict doing whatever it takes to score the next 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 slow to non-existent Only rarely did anything which happened in one of those meetings have a positive impact on my ability to achieve my personal objectives.
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.
Put another way, 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 just 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 was sitting in another non-value adding meeting instead because that was the culture of the organisation. The opportunity cost of the difference between two similarly non-value adding meetings is effectively zero.
Whereas some of the things I could have been doing instead could have brought in 100x or more my hourly salary to the university.
Even bringing in one extra student paying my university’s standard fees represented an income to the institution of around 540x my hourly salary. If I could bring in 5, or 10, or 20 students in that hour instead, the hourly return on investment goes straight off the chart.
That’s why the “cost” of the meeting, that is the total of the hourly rates of the people sat round the table, is a small fraction of its total cost.
Unless the meeting is attended solely by people who have no other value-adding activity they could be doing instead…which, if true, might suggest it’s time for a review of your organisational effectiveness…odds are the real cost of any meeting is some multiple of everyone’s salary cost.
Sometimes, people will just be covering their hourly salary cost…by no means a bad outcome. Sometimes they might earn a multiple of 2-3x the salary cost. And, in most businesses, if you take the sales team off the road for the day to hold a meeting, that’s easily 100x the mathematical hourly rate of the attendees given the sales meetings with clients the attendees could be having instead.
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 factor that into our decisions about whether or not to have a meeting, most businesses would have a lot fewer meetings.
Businesses should always ask themselves, once they understand the calculations, whether the activity they’re trying to carry out within the confines of the meeting stands a reasonable chance of covering at least the salary costs of those attending, and ideally the opportunity costs too.
Once you start to think like this, you’ll quickly work out that it’s rarely a good idea to incur a lot of cost to fix a minor problem…especially when you remember that meetings only rarely “solve” anything anyway. Find another way to deal with those.
I highly recommend hiring good people and giving them the discretion to make sensible decisions – even if they make a mistake now and again, that will still cost less than having dozens of people sat around a meeting room table for a couple of hours to “thrash this problem out”.
So think carefully next time someone says “let’s have a meeting to discuss x”.
Unless fixing “x” is worth at least the hourly salary rate of the meeting attendees, and ideally some multiple of that to cover the opportunity cost of whatever attendees might have been doing with their time instead, the economically correct answer is to find a better way of spending your time than having yet another meeting.