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

Abstract

This paper analyzes the effects of providing forward-looking metrics on employee decision making. We use data from a southern European bank that, in April 2002, started providing its branch managers with customer lifetime value (CLV) information about mortgage applicants. The data allows us to gauge the effects of enriching the information set of these employees in an environment where incentives and the allocation of decision rights remained unchanged. We find that CLV availability resulted in a significant shift in attention towards the more profitable client segments (the weight of the top segment in the portfolio of customers increases from 26% to 34%), but we do not find evidence of improved cross-selling (except for an increase in the sale of insurance products). Moreover, the use of CLV information did not have a negative impact on pricing, as some of the literature suggests, nor on default risk, indicating that managers increased sales to more profitable customers by providing better customer service. * We thank Bob Gibbons, Krishna Palepu, José M. Vidal-Sanz, and seminar participants at the Harvard Accounting and Management Brown Bag, IESE, JEI Madrid

Performance feedback and productivity: Evidence from a field experiment

“…Because we are conducting hypothesis testing for multiple treatment groups, we need to account for the fact that we may reject more null hypotheses than we should (Floyd & List, 2016; Young, 2019). To address this potential concern, we follow previous work (Casas‐Arce et al., 2017) and first test the joint significance of the three treatment coefficients using an F test. The results are reported at the bottom of Table 2 and reveal that the main treatment variables are jointly statistically significant at a 10% level in Model 2, but not in Model 3.…”

“…Regarding the characteristics of the feedback, researchers have considered how the effects of feedback vary depending on its level of detail (Casas‐Arce et al., 2017; Hannan et al., 2008), the frequency with which it is given (Casas‐Arce et al., 2017) and whether it is provided in a private or public way (Casas‐Arce et al forthcoming; Hannan et al., 2013; Tafkov, 2013). Scholars have also explored how the effects of feedback vary with the context in which it is given.…”

“…Feedback interventions that shift the locus of attention toward the task should have stronger effects than those that shift attention away from it and toward the self. More recently, accounting scholars have theorized and found that the performance consequences of feedback vary with the characteristics of the feedback (e.g., Casas‐Arce et al., 2017; Hannan et al., 2008), the context in which it is given (e.g., Hannan et al., 2013; Tafkov, 2013) and the characteristics of the receiver (e.g., Lourenço et al., 2018). Most closely related to our paper, researchers have also explored the role played by the “content” of the information (e.g., Casas‐Arce & Martinez‐Jerez, 2009, Kolstad, 2013, Lourenço et al., 2018), that is, the specific information received by each employee 3…”

CEO International Experience in Advanced Market Economies and Firm Investment Horizon in a Transitioning Economy

“…Second, international experience in advanced market economies helps CEOs develop predictions about future market-oriented environmental conditions, allowing them to better assess the potential payoffs of longer-term investments, and enhancing their knowledge base for formulating long-term plans. According to Casas-Arce, Martínez-Jerez, and Narayanan (2017), managers often struggle to identify relevant payoff information for evaluating their long-term investments, and their prior business experience helps them judge which investments are more financially feasible in the long term. When CEOs’ experience in advanced market economies enables them to better construe the future, they are more willing to devote their cognitive resources to those long-term plans that promise better investment returns (Opper & Burt, 2021).…”

Customer Relationship Management in New Business Models

“…However, that is really surprising, studies, dealing with customer relationship management from a risk-oriented managerial accounting perspective, are scare. This field regularly considers on empirical questions [1][2][3][4][5][6] and not on a methodological approach. In most cases, the design and recommendations of production classification are given independently [7][8][9].…”