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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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2 Conceptual framework for performance evaluation based on DEA

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2 Conceptual framework for performance evaluation based on DEA

Organizational performance as well as its measurement and management have already been attracting significant interest both from scientists and practitioners for several decades.12 However, this rather results in ambitious and eclectic concepts, instead of a commonly accepted general theory on performance management and measurement. Against this background, the aim of this chapter is to provide an integrated concept of performance management that clearly differentiates between performance measurement, performance evaluation, and performance management. Moreover, since performance evaluation is detected as the core element of performance management, particular emphasis is given to the development of an adaptable, comprehensive, and systematic framework for performance evaluation. For this purpose, data envelopment analysis (DEA) – an analytic technique capable of covering the complexity of modern organizations and their numerous performance measures, on the one hand, and facilitating managerial decision making by suggesting ways for future performance improvement, on the other – is incorporated into the process of performance evaluation. Finally, in order to advance the use of the proposed framework in practice, three issues of managerial relevance within the developed framework are uncovered, promoting methodological developments of DEA, which allow a multidimensional point of view on the evaluation of organizational performance.

This chapter is organized as follows. Section 2.1 introduces the key concepts and terms. It starts with performance, differentiates between performance measurement and performance evaluation, and presents a comprehensive and systematic process of performance management, in which performance evaluation is shown an essential...

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