Data Envelopment Analysis: The Assessment of Performance

This book aims to introduce the business analyst to a very powerful tool for evaluating the performance of comparable organizational units, whether they are in the public or private sector, and to provide a working understanding of the technique and to assist the technical research analyst to achieve an understanding of the mathematical concepts underpinning DEA and to gain an appreciation of its practical interpretation and application. The authors strongly believe that analytical approaches have an important role to play in attacking strategic problems faced by senior managers. However, it is essential that the issues are carefully researched to ensure that the analysis is properly focused. All too often analytical studies are carried out as backroom research projects divorced from areas of real management concern. Although this book is about an analytical technique, we have placed great emphasis on its place in the context of management information and decision making. In particular, we show how organizational objectives dictate the use of the approach and we describe how the work can lead to management decisions, supported where appropriate by other techniques. The book has been structured to allow the non-technical reader to learn about DEA without the need to wade through detailed mathematics. These have been confined to two specialist Chapters (3 and 5) and the Appendices.

Table of Contents:
Part 1 Performance, efficiency and data envelopment analysis: introduction; performance assessment in the private sector; performance assessment in the public secotr; multifactorial aspects of performance; efficiency, effectiveness and economy; frontier functions of efficiency; the emergence of data envelopment analysis; developments in USA; developments in UK; summary. Part 2 The case study - introduction: management issues; analytical issues; a simple two factor cost efficiency model; the influence of other factors; incorporating an additional factor - a graphical approach. Part 3 Simple mathematical development: the efficiency frontier - general case; the efficiency frontier - an alternative view; the boundaries of the efficiency frontier; the reciprocal formulation; expansion beyond two dimensions; uncontrollable inputs. Part 4 The case study - building and interpreting the dea model: the stepwise approach; factors influencing performance - applying the stepwise approach; interpreting efficiency - specific aspects of performance, trade-off between aspects of performance, areas of efficiency; incorporating the influence of market factors - issues arising, building the models. Part 5 Accommodating returns to scale - simple mathematical development and results: statement of the problem; the revised frontier; efficiency and the most productive scale size; efficiency based on minimizing input; efficiency based on maximizing output; the boundaries of the rontier; the variable returns to scale model applied to market efficiency. Part 6 The case study - further analysis and interpretation: introduction; analytical issues - DEA in relation to other quantitative methods; analytical issues - areas of efficiency revisited; management issues - DEA and corporate objectives; management issues - shop potential and its achievement; management issues - targets and resource allocation. Part 7 Using DEA - the management of complexity: setting up a performance measuring system; defining the role and objectives of units; conducting a pilot exercise; choosing the factors - outputs; choosing the factors - inputs; collecting the data; initial analysis of the data; running the model; management investigation of the results; short term management actions; long term usage of DEA. Part 8 Further case studies: introduction; health service; public utility - water companies; education - central government department; education - local education authority; financial institution (1); government department - property valuation service; financial institution (2). Appendix A Detailed mathematical formulation: the problem; linear programming primal formulation; linear programming dual formulation; slacks; reciprocal formulation; budgets and targets; uncontrollable inputs; variable returns to scale; summary.