Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Article
  • Accounting Review

The Impact of Forward-Looking Metrics on Employee Decision-Making: The Case of Customer Lifetime Value

By: Pablo Casas-Arce, Asis Martinez Jerez and V.G. Narayanan
  • Format:Print
ShareBar

Abstract

This paper analyzes the effects of forward-looking metrics on employee decision-making. We use data from a bank that started providing branch managers with the customer lifetime value (CLV)—an estimate of the future value of the customer relationship—of mortgage applicants. The data allow us to gauge the effects of enriching the employees' information set in an environment where explicit incentives and decision rights remained unchanged. On average, customer value increased 5 percent after the metric's introduction. The metric's availability resulted in a significant shift in attention toward more profitable client segments and some improvement in cross-selling. However, the use of CLV did not negatively impact pricing or default risk, as the literature predicts. Finally, branch managers with shorter tenure displayed a stronger response, consistent with information substituting for experience.

Keywords

Customer Lifetime Value; Forward-looking Metrics; Employees; Decision Making; Information; Customer Value and Value Chain; Banks and Banking; Mortgages; Outcome or Result

Citation

Casas-Arce, Pablo, Asis Martinez Jerez, and V.G. Narayanan. "The Impact of Forward-Looking Metrics on Employee Decision-Making: The Case of Customer Lifetime Value." Accounting Review 92, no. 3 (May 2017): 31–56.
  • Find it at Harvard

About The Author

V.G. Narayanan

Accounting and Management
→More Publications

More from the Authors

    • January 2022
    • Faculty Research

    Assistant Professor Dawn Jorgensen Navigates the Hybrid Classroom

    By: V.G. Narayanan
    • January 2022
    • Faculty Research

    Hybrid Classroom - an Opportunity or a Threat?

    By: V.G. Narayanan
    • June 2021
    • Faculty Research

    One Family Textiles: Stepping Back to Move Forward?

    By: V.G. Narayanan, Alpana Thapar and Fares Khrais
More from the Authors
  • Assistant Professor Dawn Jorgensen Navigates the Hybrid Classroom By: V.G. Narayanan
  • Hybrid Classroom - an Opportunity or a Threat? By: V.G. Narayanan
  • One Family Textiles: Stepping Back to Move Forward? By: V.G. Narayanan, Alpana Thapar and Fares Khrais
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College