Robert G. Dyson

Pitfalls and protocols in DEA

Abstract The practical application of data envelopment analysis (DEA) presents a range of procedural issues to be examined and resolved including those relating to the homogeneity of the units under assessment, the input/output set selected, the measurement of those selected variables and the weights attributed to them. Each of these issues can present difficulties in practice. The purpose of this paper is to highlight some of the pitfalls that have been identified in application papers under each of these headings and to suggest protocols to avoid the pitfalls and guide the application of the methodology.

Applied data envelopment analysis

Abstract Data envelopment analysis (DEA) is a linear programming based technique for measuring the relative performance of organisational units where the presence of multiple inputs and outputs makes comparison difficult. This paper introduces the technique and focuses on some of the key issues that arise in applying DEA in practice.

Strategic development and SWOT analysis at the University of Warwick

Abstract SWOT analysis is an established method for assisting the formulation of strategy. An application to strategy formulation and its incorporation into the strategic development process at the University of Warwick is described. The application links SWOT analysis to resource-based planning, illustrates it as an iterative rather than a linear process and embeds it within the overall planning process. Lessons are drawn both for the University and for the strategy formulation process itself.

Estimating preferred target input-output levels using data envelopment analysis

Abstract This paper develops models which can be used to estimate alternative input-output target levels to render relatively inefficient organisational units efficient. The models can incorporate preferences over potential improvements to individual input output levels so that the resultant target levels reflect the users preferences over alternative paths to efficiency. The paper illustrates the practical usefulness of the models developed and highlights the alternative measures of relative efficiency implicit in the models developed.

Cost efficiency measurement with price uncertainty: a DEA application to bank branch assessments

This paper enhances cost efficiency measurement methods to account for different scenarios relating to input price information. These consist of situations where prices are known exactly at each decision making unit (DMU) and situations with incomplete price information. The main contribution of this paper consists of the development of a method for the estimation of upper and lower bounds for the cost efficiency (CE) measure in situations of price uncertainty, where only the maximal and minimal bounds of input prices can be estimated for each DMU. The bounds of the CE measure are obtained from assessments in the light of the most favourable price scenario (optimistic perspective) and the least favourable price scenario (pessimistic perspective). The assessments under price uncertainty are based on extensions to the Data Envelopment Analysis (DEA) model that incorporate weight restrictions of the form of input cone assurance regions. The applicability of the models developed is illustrated in the context of the analysis of bank branch performance. The results obtained in the case study showed that the DEA models can provide robust estimates of cost efficiency even in situations of price uncertainty.

Restricting virtual weights in data envelopment analysis

Abstract The consequences of the use of absolute weights restrictions (i.e. restricting the multipliers) on the efficiency score and targets of a DEA model have been explored elsewhere, the same is not true for the use of restrictions on the virtuals (i.e. the product of the input/output factor by its multiplier). In this paper, a reflection on the uses of virtual weights restrictions is presented. The reasons for using virtual weights restrictions instead of absolute weights restrictions, in particular cases, are explained. Following a critique of Wong and Beasleys [J. Oper. Res. Soc. 41 (1990) 829] first proposed method for constraining the virtuals in DEA, a new classification scheme for virtual weights restrictions is presented, which brings the concept of assurance regions into virtual weights restrictions. It is shown that the use of simple virtual restrictions and virtual assurance regions are preferable to the use of the more generally advocated WBs proportional virtual weights restrictions. In recognition of levels of decision making at the unit, and external to the unit, the use of the terms unit of assessment (UOA) and controller is proposed. It is concluded that the use of virtual assurance regions applying to the target UOA can be a natural representation of preference structures and translate established patterns between the input–output divide. Also, the meaning of the efficiency score and targets in this approach most approximate traditional DEA. Alternatives to using virtual weights restrictions are considered, namely using absolute weights restrictions with a virtual meaning. Finally, an empirical example is offered.

A comparison of data envelopment analysis and ratio analysis as tools for performance assessment

This paper compares data envelopment analysis (DEA) and ratio analysis as alternative tools for assessing the performance of organisational units such as bank branches and schools. Such units typically use one or more resources to secure one or more outputs, the inputs and/or outputs being possibly incommensurate. The assessment of District Health Authorities in England on the provision of perinatal care is used as a vehicle for comparing the two methods. The comparison focuses on how well the two methods agree on the performance of a unit relative to that of other units, and on the estimates of targets each method provides for improving the performance of units. It is found that provided the performance indicators capture all variables used in the DEA assessment the two methods agree reasonably closely on the performance of the units as a whole, though this depends on the way the performance indicators are combined into a summary figure of performance. The two methods can disagree substantially on the relative performance of individual units. Ratio analysis, unlike DEA, is not found to be suitable for setting targets so that units can become more efficient. This is mainly due to the fact that DEA takes simultaneous account of all resources and outputs in assessing performance while ratio analysis relates only one resource to one output at a time. However, the two methods can support each other if used jointly. Ratios do provide useful information on the performance of a unit on specific aspects and they can support the communication of DEA results to non-specialists when the two methods agree on performance.

Exploring output quality targets in the provision of perinatal care in England using data envelopment analysis

Abstract This paper explores the use of Data Envelopment Analysis (DEA) to assess units providing perinatal care in England and estimate performance targets for them. DEA is a modelling methodology for deriving the relative efficiency of units where there are multiple incommensurate inputs and outputs. The paper proposes a plausible set of inputs and outputs for perinatal care in which the output set incorporates both activity levels and quality measures. The incorporation of quality measures into the input-output set leads to a requirement for extensions to the basic DEA models to allow for weight restrictions and varying preferences over potential improvements to different quality measures. The paper illustrates the use of such models using realistic data on perinatal care provision in England.

Using DEA for planning in UK universities—an institutional perspective

This paper is focused on the process of performance measurement undertaken by different stakeholders in the UK higher education sector, focusing on the institutional perspective. Different classes of stakeholders have different motivations to measure performance. Institutions will be affected on the one hand by the state evaluation of them, and on the other by the applicants. The contribution of Data Envelopment Analysis (DEA) to inform management is explored and illustrated in an application to the University of Warwick, using concepts from a technique to support strategic option formulation, the Boston Consulting Group (BCG) matrix.

Strategy, performance and operational research

This paper explores the nature of operational research and its interactions with performance measurement and strategy. It is argued that operational research (OR) is well fitted to handle strategic issues as the modelling approach of OR facilitates understanding and learning, and the evaluation of strategies prior to action. The development of problem structuring methods is also a key aid to strategy and policy formulation. OR is also beginning to play a role in performance measurement and there is an opportunity for OR to lead in the improvement of performance measurement systems.