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Measuring the performance of hierarchical organizations: an application to bank efficiency at the regional and branch levels

Author

Listed:
  • Aude Deville

    (GRM - Groupe de Recherche en Management - EA 4711 - UNS - Université Nice Sophia Antipolis (1965 - 2019) - IAE Toulon - Institut d'Administration des Entreprises (IAE) - Toulon - UTLN - Université de Toulon)

  • G. Ferrier

    (Department of Economics - University of Arkansas [Fayetteville])

  • H. Leleu

    (UMR CNRS 8179 - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

Abstract

The measurement of performance has long been of central interest to both managers and management accounting researchers. As noted by Otley (1999), performance management is a preoccupation of management control systems researchers. In this study, we are concerned with coherence considered at two levels: (i) between the hierarchical organization and performance evaluation, and (ii) throughout the decision-making process between a hierarchical organization's various levels of decision-making. We do this by developing a system of performance measures from a prescriptive approach and a methodological basis rooted in operational research. Such a system of performance measurement ensures consistency between the different levels of a hierarchical structure. More specifically, we propose a means of measuring performance that captures both the overall performance and the contributions of the separate levels within an organization's hierarchy. The proposed measurement is based on an extension of standard frontier efficiency models to the situation where the "business units" being evaluated consist of two different levels within a hierarchical organization. Generally, the lower-level unit is responsible for "operations," which can be assessed by using a measure of technical efficiency; higher-level units are assumed to make "strategic" decisions, which can be assessed by using a measure of allocative efficiency. We motivate and illustrate our method using data on 1585 branches of a major French bank.

Suggested Citation

  • Aude Deville & G. Ferrier & H. Leleu, 2014. "Measuring the performance of hierarchical organizations: an application to bank efficiency at the regional and branch levels," Post-Print hal-01052603, HAL.
  • Handle: RePEc:hal:journl:hal-01052603
    DOI: 10.1016/j.mar.2013.07.001
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    Citations

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    Cited by:

    1. Ayfer Basar & Özgür Kabak & Y. Ilker Topcu, 2017. "A Decision Support Methodology for Locating Bank Branches: A Case Study in Turkey," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 59-86, January.
    2. Elif Ozturk & Ali Coskun, 2014. "A Strategic Approach to Performance Management in Banks: The Balanced Scorecard," Accounting and Finance Research, Sciedu Press, vol. 3(3), pages 151-151, August.
    3. Ioannis E. Tsolas, 2020. "Financial Performance Assessment of Construction Firms by Means of RAM-Based Composite Indicators," Mathematics, MDPI, vol. 8(8), pages 1-16, August.

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