Center for Performance Measurement at Stony Brook
Performance measurement is a key component of long-term strategic planning and decision making. An organization cannot engage in continuous quality improvement without periodic objective evaluations of its effectiveness and efficiency. These evaluations inform managers about the success of prior attempts to correct deficiencies and they identify specific areas of improvement going forward.
Many methodologies exist for measuring performance. In some cases, simple ratio analysis is sufficient while in other cases, analysts employ regression analysis or another multivariate approach. In complex organizations, these techniques have glaring deficiencies that can easily lead to erroneous, misleading and expensive results. Today, we have developed newer approaches that effectively capture the intricate and multifaceted aspects of the modern for-profit firm, nonprofit organization or government agency.
One of those approaches is Data Envelopment Analysis (DEA), a widely used methodology that evaluates the relative efficiency or performance of multiple operating subunits, each of which utilizes a variety of inputs and produces a variety of outputs. Often, the subunits operate under significantly diverse conditions, which DEA considers in the evaluation of their performance. DEA produces an empirical frontier that can be viewed as a benchmark, or as an indicator of best performance.
For example, a bank that operates many branches (the subunits) can learn which branches need improvement and by how much in each specific area. One branch may be in need of attracting more deposits while another may be falling short in revenue generation from interest and fees. A third branch may be operating on the “frontier,” meaning there is no evidence that the branch needs further improvement.
An analysis of school districts in a state will show which districts are using too much of a particular type of staff member (say teacher aides) while others have graduation rates or standardized mathematics test scores that can be higher. Districts that do not lie on the “frontier” need to improve, but the nature of the required improvement will vary across districts.
Researchers have shown how DEA can be applied in health care, public transportation, education, finance and banking, energy, sports and many other areas. However, unlike in Europe and in Asia, very few applications of DEA are used by U.S. organizations to improve their performance. We believe that DEA has the potential to make a significant impact on the performance of U.S. businesses, nonprofit organizations, and government agencies.
DEA can also assist regulatory agencies in evaluating the performances of the units over which they have authority.For example, electricity regulators are often asked to allow rate increases without having an explicit and objective evaluation of the efficiency of the utility making the request. In three cases in which a CoB faculty member worked with the local Office of the Public Advocate, the rate increase request was either denied or reduced based on the results of the DEA.
Three CoB faculty members are currently working with the New York State Department of Education to develop a DEA model that evaluates the performance of the nearly 700 school districts in New York State. NYSED plans to use the model to identify underperforming school districts and to pinpoint areas where each such district can focus its efforts to improve.
Since 1996, the State of North Carolina has used a DEA-based funding formula to reimburse school districts for pupil transportation expenditures, with the idea that the amount of the reimbursement would be based on the operating efficiency of the district’s transportation system. The funding formula was devised by a CoB faculty member and two CoB alumnae along with others.
In 2007, a CoB faculty member developed a similar DEA model for Washington State to help its Office of Public Instruction manage the almost 400 pupil transportation operations in that state. The State is considering using the model for funding purposes in future years.
DEA is a research interest of 6 current CoB faculty members (Thomas R. Sexton, Herbert F. Lewis, Christie Comunale, Christine Pitocco, Dmytro Holod, and Shane Higuera). All are interested in applications of DEA and some are also interested in expanding its theoretical and methodological basis. Two CoB faculty members have published numerous scholarly articles in which such developments are documented. DEA served as a core methodology in a recently completed Ph.D. dissertation in the Department of Technology and Society that was supervised by two CoB faculty members. The dissertation involved optimal technology selection for distributed energy generation.
The College of Business at Stony Brook University is home to the Center for Performance Measurement that serves as a focal point for the various performance measurement activities currently underway and provides a platform to launch new and exciting activities going forward. This is the first such center in the U.S.; others exist in Europe and in Asia.
The Center for Performance Measurement distinguishes itself through its focus on applications of DEA both locally and nationally. Application areas include many of the largest and costliest activities, such as health care, education, energy, transportation, and utilities. Other important application areas include retailing, professional services (such as banking, financial services, accounting, and consulting), and sports management.
Many of these application areas require modifications of traditional DEA methodology. Past methodological advances made by current CoB DEA researchers were inspired by such applications. These include the inclusion of site characteristics, two-stage DEA models, network DEA models, and reverse quantities. The Center for Performance Measurement continues to strengthen DEA methodology as required by new applications.
The Center for Performance Measurement plans to offer a series of online noncredit courses in DEA at beginning, intermediate, and advanced levels. The courses will be designed for people interested in learning DEA theory and methodology as well as the keys to effective application.
The Center for Performance Measurement partners with businesses and government agencies to assist them with applications of DEA within their organizations. These may be structured as short-term or long-term consulting projects.
DEA Workshops/Conferences and Speaker Series
The Center for Performance Measurement hosts research and application-based workshops and conferences at which researchers present their latest DEA theoretical and methodological research and novel applications of DEA in real-world management and policymaking settings. The Center for Performance Measurement also hosts a series of internal and external speakers who discuss their research and applications of DEA.
Director of the Center for Performance Measurement: Thomas R. Sexton
CoB faculty members who perform DEA research and work with organizations to apply DEA to improve efficiency:
- Herbert F. Lewis
- Christie Comunale
- Christine Pitocco
- Dmytro Holod
- Shane Higuera
The Center for Performance Measurement plans to bring in one visiting senior DEA researcher per year to keep the Center for Performance Measurement at the forefront of DEA research and applications.