"IMPROVING PRODUCTIVITY OF SERVICE BUSINESSES WITH A NEW EFFICIENCY EVALUATION TECHNIQUE" by

How can a manager evaluate the productivity of a bank branch, a hospital, or other service organization? A bank branch may have outstanding profit performance based on a measure of the revenues earned on funds less the costs of funds generated, and less the operating costs. This measure does not, however. Indicate whether the branch Is using Its resources efficiently or whether It could reduce Its operating costs and further Increase profitability. Similarly, If one hospital provides patient care at a cost of $300 per day and another provides patient care at $350 per day, can a manager draw any conclusions about their relative productivity without further considering the mix and nature of patient care provided? Measuring the productivity of these and other service businesses requires techniques that are more sensitive than accounting and ratio type measures and which can explicitly consider the mix of service outputs produced. This article explains how to apply a recently developed method for measuring and improving the efficiency of service businesses. The technique, referred to as Date Envelopment Analysis, has thus far been applied to banks, hospitals, computer manufacturer field service organizations, and educational institutions, as well as other service organizations.