A new approach to performance measurement using data envelopment analysis: implications for organisation behaviour, corporate governance and supply chain management

Traditionally, the operational performance of enterprises has been measured in terms of financial accountability and profit since they provide a monetary yardstick of performance evaluation and comparisons. However, in the global knowledge economy, performance should be analysed beyond financial ratios criteria and systems, and should be measured in terms of corporate governance (CG), organisation behaviour (OB) and supply chain management (SCM) because these factors determine the performance of enterprises in the broader socio-economic perspective generally, and corporate social responsibility (CSR) specifically. An integrated approach to performance measurement requires an assessment of the contributions of stakeholders and the major tenets of modern organisation theory, namely OB, CG, SCM and corporate social responsibility because these are determinants of performance and missing in previous work. This dissertation develops a contemporary organisation behaviour performance measurement (OBPM) framework for enterprises in the emerging global knowledge economy. It integrates the dimensions of OB, CG and SCM by the development of an open socio-technical systems (OSTS) framework within a new model called ‘data envelopment analysis of corporate social responsibility’ (DEACSR). This framework addresses the importance of stakeholders at various stages of the supply chain, the style of management and design of organisation, as well as the need to be able to measure qualitative contributors, such as CSR, to organisation performance. In all instances of performance management however, present levels of performance must be measured before they can be improved. Therefore, this proposed framework embeds extended appropriate dimensions of measures of corporate operations and performance in the contemporary world. To implement the OBPM framework, the data envelopment analysis (DEA) linear programming technique of operations research is used to generate a ranking of CSR-related efficient performing business units. DEA is widely regarded as an effective modelling technique for the measurement of efficiencies in similar decision-making units (DMUs). The software, DEA Solver Pro 4.1, was applied to the ‘corporate social responsibility management capacity’ (CSRMC) dimensions of the OBPM framework in an Australian bank with national and international operations, thus providing a new application. DEA was applied to 231 DMUs of the bank to identify which were the most efficient CSR performers even though the bank itself, has achieved premier gold star ratings on national CSR indices for the last four years. The DEA results have listed 11 fully efficient (100%) units and rank ordered the remainder. The efficient units have strong characteristics of humanistic participative management, organisational support and empowerment, a commitment to business ethics and stakeholder acknowledgement and support. In addition, inter-item correlations of these characteristics for the efficient DMUs show that the results are not only plausible, but comprehensive and intuitively correct. Therefore the results support an OBPM framework on the basis that: 1) DEA is an effective instrument in the operations research methodology used to elicit efficiently performing business units; since 2) CSR is validated as a significant dimension of corporate governance; due to 3) the organisational behaviour inherent in an humanistic OSTS-designed enterprise which enhances corporate citizenship. The implications of an OBPM framework and the DEA results obtained by applying this framework are as follows: 1) The OBPM framework is consistent with the need to redesign the corporation of the future, as the OSTS-designed organisation can display synergies in the technical and social subsystems xvi through the enhanced performance of collaborative relationships within the organisation and the whole supply network. 2) Humanistic styles of management, with the characteristics of business ethics and stakeholder empowerment, contributes to organisation performance. 3) CSR is a platform for stakeholder engagement and an essential element of organisation performance. The limitation to this study is that the non-parametric nature of DEA means it is not applicable to the measurement of performance in every instance. This thesis has made an original contribution to the literature in the area of performance measurement theory; by developing a new approach to performance measurement which goes beyond traditional financial measures, by implying new developments in OB and management theory, CG, and SCM, and by implementing this new performance measurement approach with DEA. The quest for enterprises to be competitive in the contemporary global economy will inevitably lead them to a reconfiguration of the OSTS design presented in this thesis