Beneath the formal hierarchy of every organization lies a powerful 'Hidden Market' — the unwritten system that decides who gets the best projects, leadership attention, and promotion opportunities. Judd Kessler of Wharton argues these systems are often relics of history or convenience, potentially creating structures that reward familiarity over merit. This analysis outlines the leader's role as a 'market designer,' using the Three Es framework (Efficiency, Equity, Ease) to diagnose and redesign these implicit rules. The foundational insights are drawn from the original Wharton article.
Diagnosing Hidden Markets with the Three Es Framework
Leaders can assess and improve their resource allocation systems through three core principles:
- Efficiency: Are resources allocated where they can have the greatest impact?
- Example Question: "Are projects staffed by those best equipped to succeed, or by those who volunteer first?"
- Equity: Are opportunities fairly accessible to all members?
- Example Question: "Does everyone understand how to earn visibility, advancement, or funding, or is there an insider 'playbook'?"
- Ease: Is the system transparent and simple to use?
- Example Question: "Do people spend more time navigating bureaucracy than doing their jobs?"
Case Studies: Market Design Principles in Action
The Three Es framework has proven effective in several large-scale systems.
| System | Previous Problem | Redesign Based on 3Es | Outcome |
|---|---|---|---|
| Wharton MBA Course Registration | Complex multi-round bidding favored strategic gamers | 'Course Match' algorithm allowing honest preference expression | Higher satisfaction, fairer outcomes, drastic reduction in gaming complaints |
| Unilever's Inner Talent Marketplace 'InnerMobility' | Internal mobility reliant on manager referrals/hierarchy | Skills, interests, and goal-based employee-project matching platform | Unlocked 60k+ hours of work, increased employee development & satisfaction (30k employees in 90+ countries) |
| National Resident Matching Program (NRMP) | Inefficient matching due to information asymmetry | Mechanism allowing participants to state true preferences | Enhanced transparency, equitable outcomes replacing luck or favoritism |
Key Takeaways for the C-Suite
- Leaders are Market Designers: Do not accept unwritten rules as immutable truths. You have a responsibility to continuously audit and redesign them. As Judd Kessler notes, "When rules are hidden, those who figure them out first always have an advantage. That’s inherently unfair."
- Transparency is the Foundation of Performance: Explicit, intentional rules build trust and redirect energy from deciphering the game to delivering actual results.
- Technology as Infrastructure for Fair Systems: Algorithms and internal platforms can serve as objective tools to reduce bias and inefficiency. The key is not the technology itself, but the design grounded in the principles of Efficiency, Equity, and Ease. Redesigning your organization's hidden markets is not a one-time process improvement but a cultural innovation that can become a source of sustainable competitive advantage.