Efficiency ranking method using DEA and TOPSIS (ERM-DT): case of an Indian bank

Abstract

Purpose – The purpose of this paper is to present a tie-breaking procedure for computing performance efficiencies to improve benchmarking and performance evaluation process in a business situation. Design/methodology/approach – The authors propose a unified approach based on data envelopment analysis (DEA) and technique for order of preference by similarity to ideal solution (TOPSIS), to overcome the difficulty of unique ranking in the prevalent benchmarking and performance evaluation processes such as DEA, Super efficiency DEA model, etc., under constant return to scale (CRS) assumption. This model is called as efficiency ranking method using DEA and TOPSIS (ERM-DT). In order to check the consistency of the approach, various input-output combinations (to calculate the efficiencies) have been illustrated. Further, the authors present a case of an Indian Bank to illustrate an application of the proposed approach. Findings – The proposed approach, ERM-DT enables assign a unique rank to decision making units and provides a tie breaking procedure. Results obtained using the proposed approach are statistically compared with those obtained from the CRS DEA approach and super efficiency DEA approach using Friedman’s test. Practical implications – The proposed model provides an efficiency ranking method based on a score obtained by considering the minimum distance from the best value and maximum distance from the worst value. The proposed methodology is capable of handling negative data and undesirable output variables. This approach is unit invariant and makes the calculations simple. The authors present an application to compute the efficiency of various branches of an Indian bank. The authors hope the proposed method can enhance the decision-making ability of the management in complex situations. Originality/value – The authors propose an integrated DEA and TOPSIS framework for better benchmarking and performance evaluation. This approach provides a tie-breaking procedure for the efficiencies computed using CRS DEA approach. Ranks are assigned based on score obtained by considering the distance from the worst and the best solution. The proposed approach can be used with non-positive data points and undesirable output variables.

A circular economy model for waste management in India

“…TOPSIS concept is based on a simple idea, which is, that the optimal ideal solution should have the maximum benefits from the positive-ideal solution and should have the minimum benefits from the negative-ideal solution. Here, the positive-ideal solution is identified from the best alternative whereas the negative-ideal solution is from the most unsuitable alternative (Chitnis and Vaidya, 2016;Sarkar, 2013;Srikrishna et al, 2014). The overall steps and methodology of TOPSIS SIMOS is given below (refer to Sreedharan et al, 2018 for detailed steps on this MCDM technique).…”

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“…Asmita Chitnis, et al (2016) [8] proposed a unified approach based on DEA and TOPSIS to overcome the difficulty of unique ranking in the prevalent benchmarking and performance evaluation processes. The authors presented a case of an Indian bank to illustrate an application of the proposed approach.…”

“…Mohammad, et al (2016) [9] identified the criteria and their coefficients used for financial performance evaluation of private banks using the fuzzy AHP method. After that, the authors evaluated financial performance of Iran private banks and ranked them using the information on the financial statements through TOPSIS method Mehdi Fallah Jelodar (2016) [10] prioritized the factors affecting performance efficiency in the areas of management, personnel, finance, and customers using the methods of DEA and hierarchical analysis.…”

ESM-VT Yöntemi ile Uluslararası Destinasyonların Turizm Sektörü Etkinliğinin Değerlendirilmesi (Evaluation of the Tourism Sector Effectiveness of International Tourism Destinations with ESM-VT Method)

“…Then, TOPSIS method was applied to sort out these alternatives and find the best alternative (Chitnis & Vaidya, 2016). The results show that while Hong Kong, USA and India rank the first three in terms of tourism sector efficiency, Mexico (19) and Russia (18) are in the last rank.…”