Multicomponent efficiency measurement in banking

Abstract

There is a growing need to view performance in organizations in a more disaggregated sense, paying specific attention to different components of the operation. In this chapter we present models for deriving aggregate measures of bank-branch performance, with accompanying component measures that make up that aggregate value. The technical difficulty surrounding the development of an appropriate model is the presence of shared resources on the input side and mechanisms for allocating such resources to the individual components. The chapter presents both a conventional radial model as well as an additive model for handling multiple components in an organization. The models are applied to data for a set of bank branches.