In the current financial climate, there is renewed pressure on organizations to become more efficient. Efficiency is about creating more and/or using less. Of course, the application of this simple concept is fraught with difficulties.
- What constitutes an “efficient” operation?
- Are we trying to produce more or use less…or trim at both ends?
- How much do we need to improve?
- What do we need to do to reach our efficiency targets?
- As our competitors and/or clients improve their own operations, will we find ourselves needing to squeeze more and more from our operations?
If the technical aspects of improving efficiency seem daunting, they can often seem like child’s play when compared to the potential political ramifications. Efficiency drives are scary. They suggest lay-offs, longer hours, less resources, etc. Combining technical uncertainty with concerned employees can create an explosive cocktail. Efficiency improvement projects, more so than other types of organizational initiatives, need to be objective, decisive and executed as quickly as possible.
Data envelopment analysis (or frontier analysis) is a tool for drawing efficiency insights from existing data. It is especially suited to organizations who wish to make efficiency improvements across a range of similar entities, such as:
- retail outlets
- regional offices
Based on the data supplied to it, data envelopment analysis locates the (n-dimensional) best-practice frontier—compromising all the top performers. Less efficient entities are then projected onto this frontier to identify their improvement targets. Via data envelopment analysis you can:
- uncover the component of performance in your organization
- identify and learn from your “stars”
- determine action plans for areas where there is scope for improvement
- monitor and response to structural changes in your business environment
At Decision Mechanics we have applied data envelopment analysis to assist a range of global corporations and national governments. Our consultants co-developed Banxia Software’s Frontier Analyst—the leading data envelopment analysis system that is used by organizations in almost 70 countries. We have also partnered with Prism Decision Systems to design a web-based benchmarking system for (US) schools.