Heinz Ahn

Measuring the relative balance of DMUs

In basic Data Envelopment Analysis (DEA) models, the weights of performance criteria are endogenously determined, assigning to each decision-making unit (DMU) its best possible efficiency score. This property is widely considered to be a major strength of the method, but it is also a source of considerable problems concerning performance assessment and performance control. Such problems result from the possibility of zero-value weights that exclude criteria from the evaluation. Unlike approaches that deal with this issue by incorporating value judgments into the analysis, we suggest a complementary balance score that is derived from the given data set. This score evaluates the extent to which a DMU avoids concentration on only some of the crucial performance criteria. One of the possible decisions resulting from a balance analysis is to reduce the set of DMUs considered to serve as benchmarks. For this case, a modified CCR–O model is presented.

Generalized DEA: an approach for supporting input/output factor determination in DEA

Purpose The determination of input and output factors is a well-known source of pitfalls when applying data envelopment analysis (DEA). The purpose of this paper is to contribute to overcome the respective problems of input/output factor determination related to factor selection, dual-role factors and undesirable factors. Design/methodology/approach The problems of input/output factor determination are discussed from a goal-oriented perspective, shedding a new light on the role of input/output factors in DEA. This is exemplified by the case of measuring pharmacy stores’ efficiency concerning their goal of customer retention. Findings The findings suggest to applying a generalized DEA (GDEA). The three steps of this approach include the development of a system of objectives, the derivation of corresponding performance criteria as well as the construction of cost and benefit functions. These functions build the basis for GDEA models, of which one is exemplarily described and applied to the customer retention case. Research limitations/implications While traditional DEA implicitly assumes linear cost and benefit functions, GDEA requires to explicitly specifying these functions. In doing so, the approach contributes to solve the problem of factor selection, the problem of dual-role factors and the problem of undesirable factors. Practical implications For determining input/output factors in a consistent and transparent manner, it is recommended to apply GDEA in practical benchmarking studies. Originality/value GDEA integrates well-known concepts of multi-criteria decision making into traditional DEA. The new approach helps to cope with the challenges of input/output factor determination in DEA.

The decoy effect in relative performance evaluation and the debiasing role of DEA

There is overwhelming evidence that performance ratings and evaluations are context dependent. A special case of such context effects is the decoy effect, which implies that the inclusion of a dominated alternative can influence the preference for non-dominated alternatives. Adapting the well-known experimental setting from the area of consumer behavior to the performance evaluation context of Data Envelopment Analysis (DEA), an experiment was conducted. The results show that adding a dominated decision making unit (DMU) to the set of DMUs augments the attractiveness of certain dominating DMUs and that DEA efficiency scores discriminating between efficient and inefficient DMUs serve as an appropriate debiasing procedure. The mention of the existence of slacks for distinguishing between strong and weak efficient DMUs also contributes to reducing the decoy effect, but it is also associated to other unexpected effects.

A DEA-based incentives system for centrally managed multi-unit organisations

In multi-unit organisations such as a bank and its branches or a national body delivering publicly funded health or education services through local operating units, the need arises to incentivize the units to operate efficiently. In such instances, it is generally accepted that units found to be inefficient can be encouraged to make efficiency savings. However, units which are found to be efficient need to be incentivized in a different manner. It has been suggested that efficient units could be incentivized by some reward compatible with the level to which their attainment exceeds that of the best of the rest, normally referred to as “super-efficiency”. A recent approach to this issue (Varmaz et. al. 2013) has used Data Envelopment Analysis (DEA) models to measure the super-efficiency of the whole system of operating units with and without the involvement of each unit in turn in order to provide incentives. We identify shortcomings in this approach and use it as a starting point to develop a new DEA-based system for incentivizing operating units to operate efficiently for the benefit of the aggregate system of units. Data from a small German retail bank is used to illustrate our method.

Developing selective proportionality on the FDH models: new insight on the proportionality axiom

In many cases of DEA-based efficiency measurement systems, only a set of outputs has to be assumed to be proportional to a set of inputs. The assumption of constant returns to scale (CRS) is required with respect to the selected sets of inputs and outputs, preserving the variable returns to scale (VRS) assumption for the remaining factors. In such situations, neither CRS nor VRS-based models can provide valid results. In contrast to that, the selective proportionality axiom allows applying any desired combination of CRS and VRS. This paper proposes free disposal hull (FDH) technologies which incorporate the selective proportionality axiom. The considered technologies do not restrict themselves to convex technologies and are built solely on minimal axioms of non-emptiness and free disposability. The resulting FDH models are formulated as linear programming problems which are not only simple to solve but also provide an intuitive interpretation corresponding to the results. An illustrative numerical example is presented to explain the properties and features of the suggested FDH models.

The Luenberger indicator and directions of measurement: a bottoms-up approach with an empirical illustration to German savings banks

The Luenberger productivity indicator applies directional distance functions which allow to specifying in what direction (i.e. direction of measurement) the operating units will be evaluated. In the presence of a change in the direction of measurement, the standard components of the existing Luenberger productivity indicator may provide values which are not compatible with reality. In order to eliminate this pitfall, the so-called bottoms-up approach is used to revisit the definition of the indicator and its components. We start with a list of selected sources of productivity change, namely efficiency change, technical change and direction change, then examine the best possible way of measuring each of the sources and combine them to derive a new measure of productivity change. The proposed indicator will be illustrated by means of an empirical application to a panel of 417 German savings banks over the time period 2006–2012. The example explains how the proposed approach is able to properly measure efficiency change, technical change and direction change. The results also provide conclusive evidence about the effect of the change in direction of measurement on the results of the productivity over time in a centralised management scenario.

Praxisorientierte Gegenüberstellung wertorientierter Kennzahlenkonzepte

Die praktische Umsetzung eines wertorientierten Steuerungskonzepts stellt eine grose Herausforderung dar. Zwar mangelt es in der Literatur nicht an Beitragen zu diesem Thema. Allerdings fehlt bislang ein umfassender Uberblick, der uber die Erorterung von Starken und Schwachen einzelner Kennzahlen hinaus auch auf deren Zusammenspiel abstellt. Vor diesem Hintergrund verfolgt dieser Beitrag das Ziel, eine Orientierungshilfe bei der Auswahl eines Kennzahlensystems zu geben, verstanden als kompatibles Bundel einer absoluten und relativen Periodengrose sowie einer Mehrperiodengrose. Anhand praxisorientierter Bewertungskriterien werden drei reprasentative Kennzahlensysteme gegenubergestellt und so weit wie moglich kontextunabhangig beurteilt.

Decision-oriented Performance Measurement Framework – An Emphasis on Rationality

Our study proposes the Decision-oriented Performance Measurement (DPM) framework in an attempt to incorporate multiple decision making criteria into the assessment of organizational performance. The decision making criteria are referred to as relevant goal systems which direct how the decisions should be made. It is the nature of performance that calls for the incorporation of decision making criteria into the measurement process. In its true sense, performance is never objective (Lebas 1995). Even performance criteria are not externally derived, but result from a choice which is inherently subjective. Consequently, organizational performance depends on how relevant parties define it.

Multi-period productivity measurement under centralized management with an empirical illustration to German saving banks

In this paper, we revisit the structure of the centralized Malmquist indices which apply inter-temporal benchmark technologies coupled with a relaxed assumption that the technology remains unchanged between the start and the end of the analysis. From a theoretical point of view as well as with an empirical application to a panel of German savings banks over the time period 2006–2012, we discuss this premise as the technology—which is naturally under the influence of different external and internal conditions—can change over time. This may hence result in an inappropriate estimate of the benchmark technology, generate questionable sets of common-weights and lead accordingly to misleading results and managerial conclusions. To eliminate this pitfall, we propose a new centralized framework in which individual characteristics of the technology, represented by different contemporaneous technology sets over time, can be preserved and later traced in measuring productivity change. Details of our empirical results, determined by the proposed Malmquist index, reveal that the productivity of the group of German savings banks has always been increasing during the whole period analyzed. The positive rates of growth highlight the fact that this group had a stable financial system even when the financial crisis hit the international monetary and financial market. The best practice change component of the suggested Malmquist index also verifies the significant effect of change in the technology on the performance of these banks over time. Although the group of German savings banks reduced its fixed assets over time, our analysis of productivity change shows how successfully these banks could improve even in a highly customized and growing digital business environment. However, looking at the slowdown in the growth of productivity between 2011 and 2012, captured by our results, it seems advisable that they accelerate the adaptation of their business strategy, e.g., by investing more in high-quality and diverse internet-based products and services to catch up with the rapid developments in information technologies.

Performance evaluation of teaching in higher education: a gap model and its application

Our paper presents a new performance evaluation tool for teaching, which concentrates on the interaction between the teacher and his students. The elements which enable this interaction are disclosed based on concepts and research results from educational sciences. These elements are structured by means of the gap model developed by Parasuraman et al. (1985), which provides the basis for revealing existing gaps in the interaction between a teacher and his students. To measure these gaps, a mixed method approach - consisting of interview, observation, survey, and document analyses - is proposed. The resulting information is structured with the help of a gap matrix. In order to analyse the particular information, a gap profile can be derived, which offers concrete indications for a critical reflection on a course. The practical benefits of the approach are demonstrated with the help of an exploratory analysis of teacher-specific and course-specific gap profiles.