Best practice analysis of bank branches: An application of DEA in a large Canadian bank

Abstract

This paper presents a best practice analysis of the Ontario based branches of a large Canadian bank. Consistent with managerial goals, the analysis focuses on the performance of branch personnel; it considers as outputs both transactions and maintenance work. To sharpen our efficiency estimates, we use DEA AR models with output multiplier constraints based on standard transaction and maintenance times. A model that adds similar constraints on the input multipliers, based on personnel salary, is used to find the cost efficient branches, and estimate "allocative" efficiency. Special emphasis is placed on quantifying and discussing the impact of model choice on the results. Post-hoc statistical tests are performed to investigate the impact of several external factors on personnel efficiency as well as the effects of efficiency on quality and profitability.