MBP Adjusted Efficiency Measurements: Value for Managers

Although frontier analysis literature abounds, relatively few papers are found on the practical use in benchmarking efforts by managers. We investigate why frontier-analysis-based benchmarking insufficiently find its way into practice and explore possibilities for an increased use by managers. We confront benchmarking and efficiency literature, two branches that evolved rather separately. Benchmarking literature describes multiple benchmarking steps, from determining what to benchmark to implementing improvement actions. Determinants of managers’ willingness to benchmark include benchmarking relevance, required managerial skills, resources and time. In efficiency literature, multiple efforts have been undertaken to select more relevant targets. However, frontier analysis is rarely linked to the identification of actual improvement actions and to managerial skills, resources and time required for benchmarking. We argue that interactive settings and intermediaries are preconditions for establishing these links. They provide a learning effect for managers, facilitating the identification of relevant targets (e.g. based on individual preference information) and actual improvement actions. Interactive settings also reduce the required amount of prior preference information and thus require less skills. Involving intermediaries makes it easier to gather data from multiple firms, obtain the required skills for using frontier analysis software and identify improvement actions based on experiences with different firms