By Bill Leonard

Technology has fundamentally changed how we work and completely transformed how we goof off. High-profile sporting events, like the NCAA Men’s Division 1 Basketball Tournament, illustrate this transformation as millions of workers use their employers’ computer networks to participate in office pools and watch games online—all on company time.

The 2014 NCAA basketball tournament will tip off on March 18, and Turner Sports, CBS Sports and the NCAA’s website will stream more than 160 hours of games and sports commentary. These live video streams of tournament games have been known to eat up a vast amount of Internet bandwidth and sometimes slow online connections to a crawl.

Technology analysts estimate that more than 50 percent of the entire bandwidth capacity in the United States is used for video streaming during peak hours of usage—weekends and evenings, when people watch videos streamed through online providers like HuluPlus, Netflix and Apple TV. The NCAA tournament will most likely increase demand for video streaming, and during the tournament’s most hotly contested games, experts predict, video streams could eat up close to 70 percent of U.S. Internet bandwidth capacity.

In past years many employers fretted about the strain on their IT systems and lost productivity from all the basketball fans who would be watching their favorite teams compete, checking game results or chatting online about the event. Some businesses blocked access to certain websites and limited Internet bandwidth, which can make video streaming slow and unresponsive. Employer attitudes are shifting, though, and a growing number of companies are embracing their employees’ passion for sports.

Attitudes Changing

“More of my clients are definitely considering ways to leverage sporting events like March Madness as a way to engage their employees,” said Jonathan Yarbrough, a partner in the Asheville, N.C., law office of Constangy Brooks & Smith LLC. “One of my clients is planning a basketball-and-barbecue day on a Friday during the tournament. It’s fun for everybody, and it brings employees together and strengthens their ties to the organization.”

Although some businesses may choose to prohibit employees from watching games at work, experts say complete bans are virtually impossible to enforce and, in the long run, may end up costing employers more as IT support and supervisors police their online connections.

Chicago-based consulting group Challenger, Gray & Christmas estimated that workers’ interest in the 2014 NCAA basketball tournament could cost U.S. employers up to $1.2 billion for one hour of lost productivity. This figure was based on a Microsoft survey conducted in 2009, which estimated that 50 million U.S. workers participate in NCAA tournament office pools every year. If all those workers spend one hour on the job filling out or updating their pool brackets, then the loss of productivity is 50 million multiplied by $24.31 (the average hourly wage of U.S. workers, according to the Bureau of Labor Statistics), or $1.22 billion.

The consulting group concluded that the productivity lost from workers’ video streaming could total $660 million. This estimate is based on the demand for video streaming during normal work hours for the 2013 NCAA tournament.

Even so, Challenger Gray & Christmas CEO John Challenger  admitted that these losses will have a negligible effect on most businesses’ profits. “Taking a hard line on office pools and online streaming could have a dramatic impact on the bottom line if it leads to increased turnover and leads employees to become disengaged,” he explained.

Productivity is at Risk

“Of course, as any corporate IT manager will attest, increased Internet traffic resulting from just a handful of employees streaming games will dramatically slow Internet speeds for the entire office,” Challenger noted. “So this means that productivity could be hindered even for those workers not caught up in March Madness.”

Despite all of the potential lost productivity, Challenger and other sources recommended that employers refrain from clamping down too hard on March Madness.

“Some of my clients actually set up TVs in break rooms where employees can watch the action, while others might have something like ‘School Spirit Day,’ when employees are encouraged to wear their favorite team colors, jerseys or sweatshirts,” said Yarbrough.

Although many business leaders now realize that sporting events like March Madness offer employee engagement opportunities, improved technology and faster online connections are also among the reasons employers’ attitudes are shifting. Increased broadband capacities, faster processing speeds and the proliferation of hand-held electronic devices have made video streaming pervasive in the workplace and, thus, more widely accepted.

“It’s no longer a novel concept, and access just keeps growing and improving,” Yarbrough observed. “Employers that don’t acknowledge this and aren’t looking to manage it to their advantage are behind the times.”

Software, too, has improved, so companies can prioritize online traffic and ensure that video streaming doesn’t hamper essential business Internet services.

“This same sort of prioritizing can also be used to make it so that streaming won’t kill a company’s bandwidth,” said Marty Smith, manager of support services at the Society for Human Resource Management (SHRM). “In other words, we can set parameters so that streaming protocol x can’t exceed more than 40 percent of the bandwidth capacity.”

Wireless Internet connections (aka Wi-Fi) have become much more popular and prevalent in U.S. workplaces. Most organizations develop their wireless infrastructure to support their business needs, and video streaming typically isn’t considered a critical need. According to sources familiar with the issue, when usage begins to tax the fastest Wi-Fi, network response times can slow significantly and the quality of live video streams will suffer as images freeze while the system buffers the online feed.

Instead of worrying too much about video streaming and broadband capacities, the bigger concern, during events like March Madness, should be communicating the proper use of your organization’s IT infrastructure, said Todd Oosterveen, network and systems operations manager at SHRM.

“If a company wants to allow their staff to stream video on the Internet and have built the infrastructure to do so, that’s great, and they should communicate that policy,” he said. “However, if a company can’t afford the bandwidth or infrastructure to support much more than their day-to-day operations, then that must be communicated, as well.”

He added that arbitrarily using technology to block access to websites and dictate to employees what they can and can’t do is never a good idea.

“Those directives should come from the leaders and not from the technology behind the scenes,” Oosterveen said.

Bill Leonard is a senior writer for SHRM.