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Analyzing Performance in Service Organizations

How can service businesses measure and manage productivity? They can't always trust intuition about how employees will perform — intuition can be misleading, or just plain wrong.

A growing number of savvy service businesses have been investigating the use of a sophisticated linear programming technique called DEA, or data envelopment analysis. Authors H. David Sherman and Joe Zhu, who call DEA "balanced benchmarking," write that the technique helps companies locate best practices not visible through other management methodologies. It also allows managers to test their assumptions about productivity.

Balanced benchmarking simultaneously considers the multiple resources used to generate multiple services, along with the quality of the services provided. For example, bank branches can use six or more types of resources and provide 20 or more types of services, all of which are considered with balanced benchmarking. By combining this information, balanced benchmarking provides unique insights about best practices and opportunities to improve productivity and profitability.

The technique isn’t just for banks, though. The authors have helped other organizations implement balanced benchmarking to improve their operations, and the authors reviewed dozens of studies in numerous industries. They found that while many companies are awash in data, this doesn't necessarily mean that managers will always have the data they need or desire. Balanced benchmarking, however, can often be performed using information that is readily available.

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