The term “The Tragedy of the Commons” refers to a dilemma of limited resource sharing. It’s very important to our heavily populated world and crucially important to your business during an economic downturn.

When many people have access to a limited resource without incentive to conserve or penalty for over consuming, they will act in their own interest and collectively deplete the resource. The example most often cited is that of commercial fishing. As a commercial fisherman, the more fish I catch, the more money I make. Without regulation, there is no incentive for me to leave fish in the water for you. Even worse, there is no incentive for me to leave fish in the water for the future. This leads (led) to overfishing.

The same situation happened with logging in the Northwestern United States. As congress threatened to curtail logging, the rate of logging increased. Of course it would. That lag time between considering and implementing logging control led to clear-cutting of vast land tracts.

But let’s look at how this tragedy of the commons can do serious damage to your business.

Businesses are divided into departments. This happens no matter how seamless you believe your business operates. There are departments. People defend territories. Deny that and you are ignoring a critical reality.

Should your business experience a downturn, you will likely implement cost-cutting facilities. If not skillfully planned, you’ll trigger a tragedy of the commons at your business. Once started, the cycle is very hard to break.

For example, let’s say you are a benevolent, democratic leader. A nice guy. You simply let it be known that it is necessary to tighten the proverbial belt. Immediately the people of your organization begin to compete for what they see as diminishing resources. People change when they feel someone else is competing against them for limited resources. Tension rises. Departments feel the need to prove their worth not only as departments, but as departments of greater value to the company than other departments.

Sales will see their function, and rightly so, as the sole means of company income. Marketing, however, will see their function as necessary to the survival of sales! Manufacturing knows that sales are of little value if you cannot get finished goods out the door.

Each department will make the case for sustaining the minimal cut because of the company’s dependence on their particular function.

This will happen even if the company issues clearly defined communications on how cuts will be made. There will be immediate resentment and competition for limited resources. Morale slides. Tension rises. Productivity falls. A very vicious cycle commences. A “who gets in the lifeboat” mentality erupts.

How can this tragedy be avoided? After all, when business slows down, there have to be budget cuts. Isn’t it best to make the cuts clear to all?

Yes, but there is a better way to implement cuts than by fiat.

A crisis should be a time to rally together, not a time to compete for survival. Bring management together and discuss collaborative means of correcting or dealing with the situation at hand. It is very, very important to get people in the same room. It is important to openly discuss the situation.

The more often people meet inside the lifeboat, the more they will pull together for common survival.

Look, it’s the same old story. If people feel like they are being heard, if they feel their input matters, they will make the sacrifices needed to preserve the business. If they feel unimportant, they will stop caring. They will coast. Your best people will seek other opportunities.

All of this writing to say this: If you treat people with respect, which means listening to what they have to contribute, you might avoid a fatal disaster. I have seen many businesses fail because ownership refused to listen to their people.

Come on. It is not that hard or costly to listen.

Chris Reich,