Data Envelopment Analysis in the Financial Services Industry by Joseph C. Paradi H. David Sherman & Fai Keung Tam

Author:Joseph C. Paradi, H. David Sherman & Fai Keung Tam
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

Phase 1: raise quality

Phase 2: increase profitability

Number of branches

Average quality rating

Profitability ranking

Number of branches

Average quality rating

Profitability ranking

Best practice

60

90.5

2

46

92.1

2

Less productive

133

89.1

3

175

90

3

Low quality/high productivity

32

80.7

1

8

77.4

1

Total

225

229

Reproduced with permission from Sherman and Zhu (2006)

Average quality scores in Phase 2 increased relative to Phase 1. Note that the best practice branches were more efficient, more profitable (partly due to efficiency) and had higher average quality than the less productive branches. The low quality/high productivity branches had the lowest average quality but were also the most profitable, possibly because personnel resources were not sufficient to provide high quality service.

For each branch, the following information was generated: the DEA rating, the target resource savings, the benchmark branches that comprised its DEA efficient reference set , and the weight assigned to each branch. This is similar to the information in Table 11.7. The Q-DEA results identified 46 best-practice high quality/high productivity branches, 8 low quality/high productivity branches and 175 branches with DEA ratings less than 1.0 that had potential to reduce costs by adopting best practice operating methods. Of the 175 branches with some inefficiencies, 147 had DEA ratings at or below 0.9 (see Table 11.10).Table 11.10Q-DEA benchmarking distribution of productivity ratings in Phase 2 in the US bank application

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