An incentive approach based on data envelopment analysis for intra-organization yardstick competition

Recently, Varmaz, Varwig, and Poddig (2013) developed a DEA-based Yardstick competition model for intra-organizational incentive mechanisms. Afsharian, Ahn, and Thanassoulis (2017) identified two shortcomings and developed an approach to remedy these shortcomings. However, Afsharian et al.’s (2017) approach cannot comprehensively capture the contribution of each DMU to the overall efficiency of the system. To overcome these shortcomings, we propose a new approach to measure individual's contribution to the system’s overall performance. The applicability of our proposed approach was validated with an empirical study of a German retail bank. This study’s results are compared with those from Varmaz et al.’s (2013) study and Afsharian et al.’s (2017) study. The results indicate that our proposed approach scores over Varmaz et al.’s (2013) approach and Afsharian et al.’s (2017) approach in not only correctly estimating each unit’s contribution to the overall performance but also properly revealing the sources of the contribution.