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Robust approach for efficiency measurement of employee performance under profit sharing system

Author

Listed:
  • Umi Mahmudah
  • Muhamad Safiih Lola

    (Universiti Malaysia Terengganu, Trengganu
    Universiti Malaysia Terengganu, Trengganu)

Abstract

This study estimates the efficiency of employees’ performances under profit sharing system using data envelopment analysis (DEA). This method is one of the most common methods used in efficiency measurement analysis. However, a robust approach is used to deal with the complexity of the traditional DEA estimators. Robust Data Envelopment Analysis (RDEA) is very useful when outliers contaminate the data. The sample includes five divisions which cover as many as 102 employees of a shipping company in Malaysia are analyzed by using R program. The results reveal that the initial DEA efficiency is an over-estimate of the true efficiency. RDEA provides better accuracy of the results. Further, the robust approach is appropriate to be used in the measurement of the efficiency of company divisions under profit sharing program.

Suggested Citation

  • Umi Mahmudah & Muhamad Safiih Lola, 2018. "Robust approach for efficiency measurement of employee performance under profit sharing system," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(1), pages 1-7, April.
    • Handle: RePEc:uii:journl:v:10:y:2018:i:1:p:1-7
    DOI: 10.20885/ejem.vol10.iss1.art1
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    References listed on IDEAS

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    1. William Cooper & Zhimin Huang & Vedran Lelas & Susan Li & Ole Olesen, 1998. "Chance Constrained Programming Formulations for Stochastic Characterizations of Efficiency and Dominance in DEA," Journal of Productivity Analysis, Springer, vol. 9(1), pages 53-79, January.
    2. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
    3. Dieter Gstach, 1998. "Another Approach to Data Envelopment Analysis in Noisy Environments: DEA+," Journal of Productivity Analysis, Springer, vol. 9(2), pages 161-176, March.
    4. Léopold Simar & Paul W. Wilson, 1998. "Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models," Management Science, INFORMS, vol. 44(1), pages 49-61, January.
    5. Zbranek, Peter, 2013. "Data Envelopment Analysis as a Tool for Evaluation of Employees’ Performance," Acta Oeconomica et Informatica, Faculty of Economics and Management, Slovak Agricultural University in Nitra (FEM SPU), vol. 16(1), pages 1-10, February.
    6. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
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    More about this item

    Keywords

    DEA; DMUs; profit sharing; robust; shipping;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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