Business Networking Costs the U.S. $240 Billion in Lost Productivity Each Year

In prior entries, I have discussed the cost that business networking imposes on individuals (e.g., the loss of meaningful relationships in favor of useful ones, the inability of highly qualified job candidates to compete against well-networked candidates, and so forth), but it also imposes a huge economic cost on society. To illustrate this point, let's consider the U.S. economy.

Question 1: How many Americans are employed?

According to the U.S. Bureau of Labor Statistics' May 7, 2010 report [see http://www.bls.gov/news.release/empsit.nr0.htm], in April 2010, 15.3 million Americans were unemployed, and that resulted in an unemployment rate of 9.9%. That 15.3 million is 9.9% of 152 million, so the total U.S. workforce must be 152 million. The employed work force is 152 million minus the 15.3 million unemployed workers, giving us a total workforce of 137 million.

Question 2: What is the average American worker's salary?

In 2006, the median income per household member over the age of 14 (including those not working) was $26,036 and in 2007, the average houshold income was $50,233 [see http://en.wikipedia.org/wiki/Household_income_in_the_United_States]. The average working American's income must be somewhere between those two numbers. To make the point in this article, we do not need to be perfectly accurate, so let's estimate the average worker's income at $35,000.

Question 3: How many hours does the average American work in a year?

I am going to assume that the average American works 250 days per year for 8 hours per day. Admittedly, I have no source for this assumption, but it seems reasonable. Consequently, the average American works 2000 hours per year.

Question 4: How much money does the average American make per hour worked?

To arrive at this answer, we simply divide annual salary of $35,000 by 2000 hours worked, and arrive at an hourly rate of: $17.50.

Question 5: How much time does the average American spend each year on business networking?

For purposes of this article, let's assume that the average American spends about 2 hours per week networking. Admittedly, low-salary emplyees (e.g., fast food cashiers) probably spend almost no time networking, while high-salary rain-makers (e.g., attorneys and CEOs) might spend a quarter of their time networking. For simplicity, we will just say about 2 hours per week, or 100 hours per year.

Question 6: How much does this networking cost society, in terms of lost productive capacity?

This calculation is: number of workers x hourly salary x annual hours spent networking. In numbers, that is: 137 million x 100 x $17.50 = $239,750,000,000. Our conclusion, therefore, is that Americans waste about $240 billion of productive capacity on business networking each year.

I anticipate that business networking advocates will say that this time is not "wasted." They might argue that the relationships they create through networking contribute real value to society. But it is not reasonable to believe that they create $240 billion of value. Much of networking is a competition among networkers. Person A tries to schmooze his/her way into a new business relationship while Person B tries to schmooze his/her way into the same relationship. They are competing against each other. Someone would have gotten the contract even in the absence of networking (in fact, the outcome would probably be better without networking - i.e., it would be more likely that the most qualified person/company would get the contract uner those conditions). For society, therefore, the time spent on networking is a complete waste.

Note also that my calculation is pretty conservative. I apply the average hourly wage of $17.50 to my calculation, even though networking is probably weighted toward high-income earners (e.g., CEO's spend more time networking than janitors do). And I am looking here only at lost working hours; I am not accounting for the cost of business lunches, golf games, and assorted bribes.

The bottom line: Business networking costs Americans a lot of money in lost productivity. While networking might be in the best interest of an individual business or employee, it is decidedly not in the best interest of society as a whole.

Sources

" Employment Situation Summary ." U.S. Bureau of Labor Statistics. N.p., n.d. Web. 1 June 2010. .

"Household income in the United States - Wikipedia, the free encyclopedia." Wikipedia, the free encyclopedia. N.p., n.d. Web. 1 June 2010.