Forecasting Shareholder Value: The Missing Objective In Balanced Scorecards

Topics:
Balanced Scorecard
Tags:
Balanced Scorecard,
Crystal Ball,
Forecasting,
Individual Metric,
Marketing,
Marketing Research
Source:
Crystal Ball

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Overview: Most for-profit corporations structure their strategy maps with a "Long-term shareholder value" objective at the top. Balanced ScoreCard (BSC) designs then feature, typically, 15-25 related metrics. Individual metrics are any of: performance measure, value driver, and/or performance predictor. A few rare BSC implementations report historical shareholder return. All BSCs found by the author are otherwise absent the express objective. This paper describes an executive information system built around a stochastic model of the enterprise. This derives from forecasting Free Cash Flow (FCF) aggressively obtained, converting to a distribution of Net Present Value (NPV) and calculating the Expected Monetary Value (EMV) (or, better, certainty equivalent), and then factoring EMV to obtain market capitalization (Market Cap = shares × share price).

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Format: PDF | Size: 312KB | Date: Apr 2006 | Pages: 9

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