MANAGING BANK PRODUCTIVITY USING DATA ENVELOPMENT ANALYSIS (DEA)

One bank used data envelopment analysis (DEA) to substantially improve its branch productivity and profits while maintaining service quality. It identified over $6 million of annual expense savings not identifiable with traditional financial and operating ratio analysis in its 33-branch system. A fairly new linear-programming-based benchmarking technique, DEA explicitly considers all the resources each branch uses and the services it provides. It compares branches objectively to identify the best-practice branches, the less productive branches, and the changes the less productive branches need to make to reach the best-practice level and to improve their profitability.