Measuring the relative efficiency and output potential of public sector organizations: An application of data envelopment analysis

Abstract

The problem of measuring the effectiveness and efficiency of any organization---private or public---has been of concern to practioners and organization researchers at least since the writings of Taylor and Fayol. It has become fundamental to any society concerned with accountability and the social and economic performance of its institutions. The concept of measuring effectiveness and efficiency is based on the view of organizations as production systems, transforming multiple inputs (resources) into multiple outputs (goods and services) through organization, management, and technology. Although normative theories, models, and methodologies of organization design abound, the state of the art of the field precludes choosing between different organization designs in terms of tradeoffs in performance. Furthermore, the problem of assessing the efficiency of an organization has in the past been made difficult due to the noncommensurate nature of the many inputs and outputs involved and the difficulty in accounting for factors not under the control of the organization. This paper describes the application of the Data Envelopment Analysis Methodology (DEA)---an application of fractional linear programming---to the measurement of the relative efficiency of public sector organizations performing like tasks, such as municipalties, courts, police departments, schools, etc. The DEA methodology, using the principle of Paretomore » optimality, can decompose the overall efficiency of an organization into technical and managerial components and adjust for variables not under management control. The methodology can also be used to calculate the resource conservation potential of an organization as well as the maximum outputs that could be obtained by the organization if it were to become as efficient as the most efficient unit in the set. The DEA approach is illustrated using actual data comparing the performance of 43 Navy recruiting district over a three-year period.« less

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