How would you test the hypothesis that transparency is a more effective means of control than top-down rules? That’s the question a group of midlevel managers in a global pharma company asked themselves during a workshop led by one of our colleagues.

The first step was to look for a Byzantine policy that was widely regarded as a pain in the ass. As you might suspect, they had plenty of candidates, but the company’s irksome travel policies seemed a particularly juicy target. In an attempt to rein in a corporate travel budget of roughly $500 million per year, the finance function had developed a maze of niggling rules. There were strict guidelines on who could travel, for what purposes, on which airlines, and in which class of service. Hotel and rental-car choices were similarly constrained…

The experiment, modeled on the company’s methodology for drug trials, involved two pairs of treatment and control groups—one pair at head office and the other in an operating unit. The experiment was designed to test the hypothesis that increased autonomy and transparency would (1) simplify travel planning, (2) reduce frustration, and (3) not raise costs. Fifty people were recruited for each group, for a sample of two hundred individuals. The treatment groups were told that for the next ninety days, they’d be able to make their own travel arrangements with no pre-trip authorizations or post-trip audits. The catch: all their travel expenses would be posted online for everyone to see.

At the end of the trial, the team analyzed the results. A large majority of those in the two treatment groups—74 percent and 87 percent— reported that the new process was less time consuming than the old one. What was more surprising was that 45 percent of the participants said the simple rule change had increased their overall job satisfaction. The researchers had expected travel costs to edge up slightly, and were prepared to argue this was a price worth paying for a more time-efficient process, but in the end, travel costs fell for the treatment groups while remaining essentially unchanged for the control groups.

Don't guess; ask them. Not surprisingly, our clients then realize that their company is getting business from the operating segments that it is optimized for, whether or not the clients fully understand their own optimization and design choices. When their customers fall into another operating segment (e.g., when these same customers need something done fast), the work goes to someone else. Many people use the U.S. Postal Service regularly for routine mail, but when they need guaranteed, mistake-free delivery, they'll pay a serious premium for FedEx. Same people, two operating segments.

Transparency matters when it comes to pricing — it's part of the palatability calculus — and it matters even more if you're competing on a straight-up, no-frills, adult-to-adult relation-

ship with your customers. Palatable pricing depends heavily on the deal you're making with your customers. At US Airways, the expectations for customer care are much higher than at a discount carrier, mainly because the ticket price is higher. As a result, bag fees are a source of incessant complaints.

Walmart executives aren't likely to be shocked to learn that their stores are harshly lit environments with sporadic sales support. These choices reduce the cost of operations, which gives the stores the flexibility to charge customers less for a wide range of products. These choices funded the company's excellence in other, more important dimensions. Walmart had the stomach to let its customers solve their own problems in an uninspired setting in exchange for "always low prices," a deal their customers were happy to make.

Don't guess; ask them. Not surprisingly, our clients then realize that their company is getting business from the operating segments that it is optimized for, whether or not the clients fully understand their own optimization and design choices. When their customers fall into another operating segment (e.g., when these same customers need something done fast), the work goes to someone else. Many people use the U.S. Postal Service regularly for routine mail, but when they need guaranteed, mistake-free delivery, they'll pay a serious premium for FedEx. Same people, two operating segments.