The Economics of a Free Lunch

by Krishna on December 26, 2006

Recently, I was talking with a friend whose IT career had previously taken him through a dot-com company which later went bust. Among other things, he said that the company used to provide free lunch to all employees. He cynically attributed this practice to the company trying to save money by keeping the employees indoors instead of any desire to motivate the employees.

Well, we cannot dig into someone’s heart to find out what their intentions were, but I thought about this topic after the meeting. Would a company benefit financially by offering free lunch? And if so, how much? Here is how it would probably turn out.

A typical employee would take an hour’s break to go and get lunch. That equals an hour’s billing. Now you can consider the direct expense which could be internal cost per hour, which includ

es salary + benefits or the opportunity cost of revenue generated per employee per hour. Let us say that lunch eaten at the office would typically consume half an hour.

It looks like there is a half-hour savings, but that evaporates if the employee leaves 30 minutes early by taking this into account. Or they continue to stay in the office till their usual leaving time, but they have nothing productive to do with the remaining 30 minutes. They may have completed their work for the day and be reluctant to start something that they have to start afresh the next day, or more likely, they use the remaining time of the day to stretch out the current work they are doing. (Parkinson’s Law)

In an IT (information technology) company, especially a startup focusing on newer technologies, there is likely to be a higher proportion of developers whose daily life consists of work, more work, some food and sleep when tired. They are so much in love with what they are doing that everything else is a distraction – including the process of ordering or making food. I know because I used to work like that.

Such an environment will gain significant returns on organizing and providing free lunches. The programmer is free to concentrate on the highly technical work while his or her lunch is delivered to their desk. Any time not spent on activities around obtaining food directly goes into productive work. In fact, by not providing this service, you provide a mental distraction to the developer, who has to focus on a different problem than what the organization wants him or her to solve.

The motivational factor is also considerable. More than money or material possessions, programmers crave respect. By showing that you look after their well being, you massage their ego giving them the additional mental energy to tackle tough problems and utilize their full faculties.

So, I guess the bottom line is that if your team is already passionate in their work, providing free food is great economics, boosting morale and motivation, and removing constraints to help in effective utilization of time.

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