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A decision-oriented approach to performance measurement

Providing an insight into the DEA efficiency of banking institutions

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Minh Hanh Le

Within the performance measurement theme, this book contributes a new decision-oriented perspective to evaluate the efficiency of organizations. This perspective defines an efficient organization as the one which attains the rationality in the operating process to generate its desired values. From this angle, the book identifies the pitfalls regarding the input-output specification in bank efficiency assessments using Data Envelopment Analysis (DEA) models. It introduces the Decision-oriented Performance Measurement framework grounded in management rationality concepts as a solution to avoid these pitfalls. For empirical evidence, the book presents a goal-oriented DEA efficiency analysis of German savings bank sector.
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Chapter 6: Final conclusion

Extract



The past two decades witnessed significant developments in performance measurement practices and researches. Performance measurement is argued to be beyond “measuring” and encompasses “monitoring” as well as “influencing” decisions and behaviors (Franco-Santos et al. 2007). The global trend of such developments to date is facilitating a multi-dimensional perspective to reflect multiple decision making criteria of economic actors involved in the measurement process. In modern management practices, these actors include not only business owners and top managers but also operating managers as well as employees. Furthermore, both internal organizational members and external stakeholders should be taken into account. Among researchers, there is also a broad consensus on the two key roles of performance measurement as “decision-facilitating” and “decision-influencing” (Demski and Feltham 1976; Grafton et al. 2010; van Veen-Dirks 2010).

Against the background literature, this research is proposed in an attempt to shed the light of the decision-oriented approach to tackle the on-going debate on bank performance criteria in DEA empirical analyses. The decision-oriented approach reveals the drawback of the use of input and output factors as performance criteria and provides an insight into DEA efficiency of banking institutions. To solve the issue, this research also contributes a methodological framework to integrate decision making criteria into performance measurement. The framework directly addresses the concern on rationality orientation suggested by Broadbent and Laughlin (2009) and Schäffer and Weber (2004) when molding the nature of performance measurement system as a management control mechanism. Additionally, empirical framework and evidence on...

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