Centralized resource planning and Yardstick competition

Centralized resource planning and Yardstick competition

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Article ID: iaor20125380
Volume: 41
Issue: 1
Start Page Number: 112
End Page Number: 118
Publication Date: Jan 2013
Journal: Omega
Authors: , ,
Keywords: management, finance & banking
Abstract:

Multidivisional and decentralized firms often operate inefficiently. In most cases, central management's instruments to influence its branches' behavior are limited. Although relative performance evaluation has been argued to be of great use in defining incentive mechanisms, such approaches cannot be transferred easily to internal performance management. We approach this issue by changing the perspective of performance evaluation. Based on the recently introduced CRA‐DEA model, we develop a new super‐efficiency measure that enables to establish purposive intra‐organizational incentive mechanisms. By means of a numerical example, analyzing the performance of a German retail bank, the applicability of our measure is shown and compared to standard DEA models. Centralized super‐efficiency seems able to suit the specific needs of intra‐organizational performance management.

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