Centralized Super-Efficiency and Yardstick Competition – Incentives in Decentralized Organizations

Abstract

Due to deficient instruments of performance management, decentralized organizations often produce inefficiently. Promising approaches to dynamic incentives and performance management have recently been developed based on Data Envelopment Analysis (DEA). These, however, are not yet able to account for the specific needs of central performance management. We develop two new intra-organizational performance measures for defining dynamic incentive schemes and increasing overall performance. For suggestive evidence we evaluate the performances of 11 bank branches.