外文翻译
原文
Performance Evaluations of Commercial Bank Branches Using Data
Envelopment Analysis
Material Source: California State University, Dominguez Hills
Author: Dorothy M. Fisher
Considerable research has been devoted to using multiple criteria to measure the performance of business units such as bank branches. However, bank managers continue to use traditional methods to evaluate their branch offices. In general, subjective weights for various criteria are used to arrive at a weighted average score to measure the performance of a bank branch. Potential deficiencies in an existing set of weights include bias and inconsistency with organizational objectives. This paper employs Data Envelopment Analysis (DEA) to evaluate the operational performance of a bank branch relative to the performance of its peer branches. Utilizing data from 31 branches of a major bank located in Southern California, the use of DEA yields the following: 1) rankings of bank branches using efficiency scores, 2) identification of areas of deficiency and 3) establishment of the reference group against which a branch is evaluated. Twenty-two of the 31 branches were found to be in need of improvements in various areas. In addition to identifying best-practice branches and those that are out-of-line with the best practice branches, DEA also points to the specific changes that must be made in the less productive branches in order for them to catch up with their best-practice peer group. The findings of this study should help management in identifying the strengths and weaknesses of their bank branches.
This study introduces and applies a framework for evaluating the operational performance of a bank branch network to assist bank managers in appraising bank branches. This framework is a linear-programming-based method called Data Envelopment Analysis (DEA) (Charnes, Cooper, Huang, Sx Sun, 1990). DEA is a nonparametric method that can serve as a decision support tool for guiding bank managers as well as validating and interpreting their appraisal results.
In this study, DEA is used to evaluate a bank branch's production operation relative to its peer group in a multiple-output, multiple-input setting. Inputs are cost related, while outputs are revenue or service related. From observed values of the inputs and outputs for all branches, DEA develops an \frontier\with which each individual branch is compared. In other words, each branch is evaluated relative to its peer group among the best-practice branches. This paper addresses the question: Which branch(es) are more efficient in converting inputs into outputs?
The results of this study are predicted to help bank managers understand the relative strengths and weaknesses of their respective bank branches. The model proposed here underscores the importance of achieving efficiency to remain viable in an increasingly competitive financial services industry and of discriminating between strong and weak performers within the banking industry. The bank branch evaluation undertaken in this paper extends a previous analysis reported both in terms of inclusion of more bank branches (data) as well as by expanding the list of inputs and outputs (Fisher & Yavas, 2002). The first section of the paper briefly examines the evolution of commercial banking as part of a larger financial services industry. The second section discusses issues related to assessing the operational efficiency of bank branches and provides the rationale for using the DEA model to evaluate the performance of bank branches. The third section presents the data and criteria used in evaluating bank branches and follows with an empirical study of performance evaluations of these branches using the DEA model. section four concludes the paper with summary remarks.
Evolution of the Commercial Banking Industry
The pressures of globalization, changing and unstable market dynamics, and the increased competition from non-banking financial institutions combine to greatly transform the once-stable banking industry. One of the main factors responsible for the industry's dramatic change is the burgeoning Information Technology (IT) business sector. Banks have heavily invested in information-based industry, and this relatively recent focus has facilitated innovations in delivery systems as well as in financial products.
Parallel to developments in technology, government regulations have also undergone dramatic changes, driven partly by information technology innovations. In 1982, deposit interest rate ceilings were removed, followed by a lifting of state restrictions on intrastate and interstate branching. In the early 1990s, nationwide branching was allowed. Later, banks began to engage in new areas such as insurance
and securities. With the Gramm-Leach-BIiley Act of 2000, the full affiliation of commercial banks and other financial services became a reality. The result of these changes has been a shift from traditional banking to the provision of an array of financial services such as insurance, brokerage, and other non-traditional services. For example, in the 1960s and the 1970s, finance companies were predominantly small firms specializing in small consumer loans. Today, finance company business lending is more than half that of US depository institutions (Marquis, 2001). In this new era of competition, inefficient firms formerly protected by government regulation had to change, be acquired, or fail. Not surprisingly, a tremendous increase in merger activity followed deregulation, resulting in more than a 40 percent decline in the number of US banks (Furlong, 2001). Banks also began to introduce new, less labor intensive systems for providing services. The proliferation of automated teller machines (ATMs) as well as the increasing use of point-of-sales transactions may also be offered as supporting evidence for the increase in banking restructuring. Along with these developments in the industry, banks have become customer-centric. The issue of \value to service\has assumed greater importance among bank managers who are striving for excellence. As the competition in the financial services industry has intensified, banks have increasingly engaged in pro-active efforts to differentiate themselves from their competitors. Some examples of such a strategy include development of interpersonal relationships to improve customer loyalty and creation of innovative products to better serve customer needs.
Literature Review
The structural changes summarized above (competition, deregulation, and advances in IT technology) have changed banks' demands for inputs, particularly for labor. Banks must now hire more skilled staff than ever before because of the changing mix of banking services and of the knowledge set required for selling these new services. With an increasingly more productive and higher-paid work force, banks have improved the organization of their production processes and provided higher levels of service. In an effort to establish the connection between banking services provided and profits, some recent studies have focused on the strategies employed by service organizations and have investigated the links between service quality and performance (Berger & Humphrey, 1997). Soteriou and Zenios (1999) argue that without thorough consideration of the design of the operating system, attempts to establish such a linkage would fail.
Another focus of research parallel to the efforts to identify performance drivers has taken place in benchmarking the efficiency of commercial banks (Berger & Humphrey, 1997). Benchmarking and best practice approaches have already been used by managers to evaluate multi-unit organizations having the main goal of improving operational efficiency. Examples may be found in a variety of industries, both in manufacturing and services (eg Ford Motor Company, Emerson Electric, General Electric, GMAC, and Merrill Lynch). Studies of operational efficiency within banking typically utilize the resources of a bank (eg, human, technology, space, etc.) as inputs, and services provided (such as number of loans or other transactions serviced) as outputs (Soteriou & Zenios, 1999). This is especially the case for service organizations whose operations may be too complex to allow correct identification of benchmarks and best practices since many service organizations typically have hundreds or thousands of sites where services are delivered (Metiers et al., 1999). Both the volume and dispersion of sites create managerial difficulties in measuring performance.
In addition, many common performance measures used by manufacturing firms may have drawbacks when used in service organizations. Consider the case of a multibranch bank that provides financial services. Unlike a manufacturing operation, a bank clearly has many subjective factors that affect its long-term success. These include, but are not limited to, customer needs, skills and judgments of service providers, and the mix of services provided. If we consider the question of what measures banks use to track such factors, we often note a disconnect between the goals and the measures used to track whether or not the goals are being achieved. For example, banks typically use such measures as ratios, transaction per teller, cost per transaction, and loans generated per employee to measure their outputs. However, since branch location may be the most important factor driving these ratios, it is conceivable that small branches located near major business centers could generate high profits, and that large branches located in residential areas could generate smaller profits because they handle more of the less profitable transactions such as numerous small deposits.
Therefore, considerable debate exists among retail bank managers regarding the usefulness of bank branch profitability statements in evaluating bank branch performance (Metiers et al., 1999). Even if profils could be accurately measured, branches may have different missions that would alone make comparisons based on the bottom line inadequate (Sherman & Ladino, 1995).
Data
Given the above changes in the banking business, the purpose of this paper is to develop a framework for performance appraisal (DEA) and apply it to a multi-branch bank. Data utilized in this study came from 31 branches of a large national bank. These branches are located in the Los Angeles metropolitan and Orange County areas of Southern California. With the main objective of adapting to the changing environment in the financial services marketplace, the bank has undergone a recent merger, which resulted in a major restructuring of its business, including the mix of services provided. Following the merger, the bank began making the transition from a product orientation to a customer orientation. he managers of the bank were interested in streamlining operations without losing profitable customers and in finding an objective way to compare branch performance for the purpose of improving banking efficiency.
Empirical Study
Data used in this study was drawn from a survey conducted internally to evaluate the performance of 31 selected branches of a large national bank located in the Los Angeles metropolitan and Orange County areas of Southern California. To maintain anonymity, each branch has been assigned a letter, A through AE.
Various environmental factors affect the operational efficiency of a given bank branch. For example, of the 31 branches, three are in-store branches located in supermarkets. Traffic near some of the branches is extremely heavy and makes access to the branches difficult. Branch A is located closest to downtown Los Angeles and is open on Saturdays. However, it has rather limited parking during peak hours.
Branches E and F also suffer from limited parking, and extensive construction near branch F affects access to the branch. Branch G lacks visibility outside of the immediate communities in which it is located. The location of Branch J offers high visibility of the branch and access to it. Branch L has recently moved to a new location. Branch M is in the heart of a major developing area, soon expected to be a hot spot, while Branch N is already well-established with a strong connection to the Laguna Beach community.
Branch T is the result of consolidating five branches into one; Branch V was currently relocated; Branch X is in the heart of a very busy street; the locations of Y and Z offer good visibility, but higher local competition. Branch AB is a recently opened branch, while Branch AC has a parking problem, but it occupies a central
商业银行分支机构利用DEA的业绩评估【外文翻译】
