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Extended Performance Evaluation Based on DEA

A Multidimensional Point of View

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Ludmila Neumann

This study introduces new methodological developments of Data Envelopment Analysis (DEA) that satisfy the demands of business practice and provide a multidimensional point of view on the evaluation of organizational performance. The author extends the focus of performance evaluation based on DEA, which is originally placed on efficiency, to effectiveness and balance. Such a multidimensional point of view provides different insights into organizational performance, which by complementing each other have several implications for managerial decision making.

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1 Introduction

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1 Introduction

1.1 Motivation and contribution of the dissertation

Organizations are under continuous pressure to improve their and their subunits’ performance in order to operate successfully in today’s rapidly changing and highly competitive business environment. Before any organization is able to reveal potential for performance improvement, it needs to measure and evaluate the actual level of its organizational performance.1 Therefore, the attention of organizations’ management started to focus on measuring and monitoring systems that collect, generate, and analyze relevant data on performance. Most of such systems capture solely the financial aspects of performance, since financial data is already available from management accounting systems.2 In order to draw a more comprehensive picture of the organizational performance, non-financial aspects of performance, such as customer satisfaction and product quality, should be considered as well.3 The challenge herein lies in a set of performance measures defined in different units of measurement, which make it difficult to assess the overall performance.

Against this background, an analytic technique capable of taking into account numerous performance measures gained considerable interest of academic research in the field of performance measurement and management: data envelopment analysis (DEA). The attractiveness of DEA lies in its ability to evaluate the relative performance of comparable organizations or organizational subunits by aggregating all relevant performance measures – independent of their units of measurement – into a single comprehensive efficiency score. Moreover, for each underperforming – inefficient – unit, DEA suggests an individual path to improve its efficiency through detecting appropriate benchmarks...

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