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4. The index hierarchy of the customer perspective

The index hierarchy of the customer perspective

Diagram 5: The index hierarchy of the customer perspective

The index hierarchy of the customer perspective illustrates the determination of the customer profit contribution. First, all applicable incurred sales deductions are deducted from turnover, than all direct customer-specific and indirect costs are subtracted to obtain the customer profit contribution. To receive the customer cash flow, the customer profit contribution is reduced by possible customer relevant investments and increased by payment ineffective customer costs. Afterwards the customer cash flow can flow into the calculation of the shareholder value as a business segment value.

5. Combining the shareholder value and the balanced scorecard

The index hierarchy of the customer perspective represents the link between the BSC perspectives and the created shareholder value. If one regards the individual BSC perspectives as business segments of a company, it becomes apparent that the sum of the projected cash flows forms the basis for calculating the shareholder value comprised according to Rappaport as follows:

Cash value of projected company cash flows


Cash value of the declining balance


Market value of bonds traded on the stock exchange

Company value


Market value of outside capital

Shareholder value

Diagram 6: Calculation of shareholder value according to Rappaport.

Calculating the shareholder value16 alone does not affect an enhanced value of the company. In fact, it is aimed with the help of the balanced scorecard to actively and systematically structure the process of strategy finding, strategy formulation and strategy application17 in order to implement such strategies successfully, and thus to enhance the value of the company. This requires that the effects of strategic decisions on the company value are quantitatively portrayed. The calculation of quantitative measures for each perspective, here reproduced based on the customer perspective, allows the value-enhancing or value-destroying factors of the shareholder value to be identified. As soon as the problem area is identified, a detailed study about its cause can be undertaken within the corresponding index hierarchy, and, via the value-influencing (cost) factors, corrective measures can be taken.

6. Conclusion and outlook

The balanced scorecard as an integral management system enables the simultaneous and balanced use of monetary and non-monetary indices and indicators, which application provides the management with a comprehensive managing and control system. One of the most significant aspects of the balanced scorecard is the "communication of strategy", in a way that the formulated strategies may be implemented into a concrete agenda as well as concrete measures. Controlling using the balanced scorecard is more efficient, the more relationships are built between the perspectives and if the missing link criticized in literature, is established. At this point the shown approach applies, which illustrates the perspectives and creates calculative links, using internal and external accounting methods and instruments. Through the linking of the shareholder value approach with the balanced scorecard concept, the shareholder value index is supplemented but also expanded to form a complete value model. So, the integration of the shareholder value notion in all aspects of the balanced scorecard is enabled and thus a consequent alignment of all activities to the financial value enhancement of the company is achieved. The company places the value-determining sectors in the foreground. The actual value-creating sectors (employees, customers) are directly involved in financial evaluation.

The aim of this study was to develop a closed index system for the customer perspective and thus to illustrate the possibility of quantifying customer relationships. Using methods and instruments of internal and external accountancy and financial mathematics, a "customer" value was determined, which ultimately forms a value component of the entire company value. Through the extra polarization of aggregated, discounted customer values, both the future potential of business relationships and also the survival chances of a company become obvious. Furthermore, the division of the customer value in its customer-specific revenue and cost components offers the possibility of a detailed cause study and problem elimination. In that way the index hierarchy can be consequently adjusted for analysis, planning and controlling requirements of a company, branch, etc.

Today, a single method of success measurement by using "classic" indices is no longer sufficient. Current publications show that further "new" indices, which for example measure the qualifications of employees or their creation of value, are in the focus of interest and require a further study. Exactly these so-called intangible assets, such as employee potential and customer value, are those that account for the sustainability of a company. Therefore, an adequate reference to these values in reporting and a consequent regard of them in the company planning and controlling is of imperative necessity.

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