What is the correlation in Silicon Valley between companies that provide free lunch to employees and value? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.

Answer by Stan Hanks, CTO of Columbia Ventures Corp, on Quora:

Back in the rising crest of the dot-com stock bubble, while I was still at Enron Broadband, I was working closely with a number of VC firms in the Bay Area. I was trying to sell my worldview, to get the hardware made that needed to happen in the next three or so years. In the process of that, I wound up being asked to meet with a vast number of their portfolio companies, mostly in the Bay Area, but some in the Route 128 corridor and some in NYC.

They were all the same. I'd show up first thing in the morning, get a deeper dive in the tech, usually ask embarrassing questions, send people scurrying for answers, and around lunch time, we'd sort of wander into a community space and grab lunch before resuming in the afternoon and diving into financials and markets.

On one of the first of those occasions, I asked the VC that I was traveling with "so is this something they set up because we were having a meeting today?" having seen that before, but usually in the board room where the meetings were happening. The answer was no, it was what they did every day. And my companion went on to say "And we require this from all of our portfolio companies."

That made me think about it. What are the economics that make that work out?

And then I thought back to some of the other corporate environments I'd seen. Major oil companies with subsidized on-site food courts. Aviation giants with subsidized cafeterias. Even my own situation, where we were sitting directly on top of a restaurant, and had 15 different take-out places within a block.

It's about time leverage.

If I have an environment where employees are expecting to take an outside lunch break, they start thinking about lunch sometime before noon, disrupting their flow. Then they depart - usually in groups - in search of sustenance, and don't come back for at least an hour, by which time they're completely off-track from where they were at say 10:30AM. Maybe by 2:00PM or so, they're back in the swing - if they didn't eat something that's making them feel like they need a nap.

So by having people have to think about lunch, and then execute lunch, I blow about a three hour hole in the middle of their day. Times as many employees as I have, times every working day.

That's ... seriously expensive. In a shop with, say, 10 developers and 10 BD/marketing/support staff, I just "ate" 15,ooo hours of time. At minimum. If I'm paying an average of $50 an hour (likely low), that's $750k per year - an insane amount of money. (assumption: 20 people, 50 weeks/year, 5 days a week, 3 hours lost productivity per day).

On the other hand, if I make a smart deal with a catering group, I can feed everyone for an average of $15 a day, making my total cost about $75k in food.

That's an order of magnitude difference in cost, and possibly an insane productivity boost due to no one having to think about and execute lunch.

What's not to like?

Now before you get all carried away with this logic, note the following: programming, engineering, writing copy, and crafting deals are all fundamentally creative activities. You can't do that non-stop. You have to break that up, or you get the functional equivalent of writer's block, which is even more costly.

So you also have to supplement the free lunches with "diverting stuff to do". That can be letting people play MMORPGs, watch Netflix, have a little yoga area, maybe a stationary bike or two, pool table--something. Because it's not about squeezing the maximum number of hours out of people; it's about getting the maximum amount of productivity out of them.

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Published on: Jul 1, 2016