The Tragedy of the Business Commons

A widely known term, at least in academia, is “the tragedy of the commons.” The term “commons” describes a resource that everyone can use at no cost, such as air. Professor of Law at Harvard Law School Lawrence Lessig explains that the tragedy is that when there is a limited amount of a commons, the competition over it causes its depletion because people work out of self-interest, whereas if they were considerate, everyone would have enough.

This doesn’t just apply to natural resources. It happens in business, too. It often starts with small things. For example, employees can walk by an unstable door latch and ignore it for weeks without getting a screwdriver and tightening the screws or reporting it to someone so it doesn’t break. When asked why it wasn’t reported, they might say, “It’s not my job” or “I didn’t think I was supposed to touch it.” It’s not even that they’re being negligent or insincere. They genuinely feel it is not their responsibility or their right to deal with anything other than the specifics of their job.

It also manifests in bigger ways, that impact the health of the company overall. Consider how departments utilize budgets because the policy is “use it or lose it”. Or consume internal resources on department-specific projects and activities, rather than sharing those resources so another team can accomplish their goals. We frequently operate in a mindset of self-interest, where our team, department, or group will compete for limited “commons”, even if it’s to the detriment of the company’s big picture needs.

There are usually two reasons why this occurs. First is incentives and culture. If a team’s success is measured solely on what they and they alone accomplish, their incentive to help others is diminished. This fosters internal rivalry for resources and gamesmanship where one department consistently claims its needs are more important than others in the organization. Second is the lack of common goals. While departments have activities they need to accomplish independently, they must tie directly to the bigger picture objectives of the organization. More importantly, everyone in the organization must understand how they connect.

For example, getting a marketing campaign launched, or upgrading an old software platform are important components of an individual department’s function. But the marketing campaign and the software upgrade by themselves don’t achieve the bigger objectives of the organization. Those bigger objectives, such as increasing revenue or reducing costs – the department activities are only a means to reach them. And the diversity of those activities – the combination of the right activities – is what truly achieves the organization’s objectives. Only marketing campaigns or only software upgrades won’t make it happen. But in the concept of “tragedy of the business commons”, departments inherently try to consume more and more organizational resources for their area, expanding their scope and influence further and further until it becomes the dominant function in the company.

This isn’t a mark of success. It’s a sign of overconsumption of the “commons” and not considering the resources of the organization in the context of its bigger goal – growth, and survival. Think about a department in your own organization that’s overgrown its space – that becomes the center of company gravity, where it consumes a preponderance of resources and unintentionally kills the productivity of other departments. While this happens frequently, it shouldn’t.

Remember that the tragedy of the business commons is that there’s a finite amount of organizational resources and bandwidth to make the company flourish. And the objective isn’t to consume it but to share and leverage it for the best outcomes for the company. Otherwise, you may not have a company (or planet) that will survive.

Andrea Olsen
Andrea Olsen

About the Author:

Andrea Belk Olson is a keynote speaker, author, differentiation strategist, behavioral scientist, and customer-centricity expert. As the CEO of Pragmadik, she helps organizations of all sizes, from small businesses to Fortune 500, and has served as an outside consultant for EY and McKinsey. Andrea is the author of The Customer Mission: Why it’s time to cut the $*&% and get back to the business of understanding customers, No Disruptions: The future for mid-market manufacturing, and her upcoming book, What To Ask, coming in June 2022.

She is a 4-time ADDY® award winner and host of the popular Customer Mission podcast. Her thoughts have been continually featured in news sources such as Chief Executive Magazine, Entrepreneur Magazine, Harvard Business Review, Rotman Magazine, and more. Andrea is a sought-after speaker at conferences and corporate events throughout the world. She is a visiting lecturer and startup coach at the University of Iowa, a TEDx presenter, and TEDx speaker coach. She is also an instructor at the University of Iowa Venture School.

More information is also available on www.pragmadik.com and www.andreabelkolson.com.

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