Models for performance benchmarking: measuring the effect of e-business activities on banking performance

The current paper presents mathematical programming models for use in benchmarking where multiple performance measures are needed to examine the performance and productivity changes. The standard data envelopment analysis method is extended to incorporate benchmarks through (i) a variable-benchmark model where a unit under benchmarking selects a portion of benchmark such that the performance is characterized in the most favorable light, and (ii) a fixed-benchmark model where a unit is benchmarked against a fixed set of benchmarks. The models are applied to a large Canadian bank where some branches' services are automated to reduce costs and increase the service speed, and ultimately to improve productivity. The empirical investigation indicates that although the performance appears to be improved at the beginning, productivity gain has not been discovered. Our finding can facilitate the bank in examining its business options and further point to weaknesses and strengths in branch operations. (C) 2004 Elsevier Ltd. All rights reserved.