The Combined Use of Balanced Scorecard and Data Envelopment Analysis in the Banking Industry

Abstract

Background: Starting from the limitations of different single-method approaches to measuring the organizational efficiency, the paper is focused on covering both the financial and non-financial factors of this concept by combining two methods, namely the Balanced Scorecard (BSC) and Data Envelopment Analysis (DEA). Objectives: The main goal of the research in the paper is to show that certain deficiencies in the independent application of each method are eliminated by combining these methods. Methods/Approach: The paper combines two methods, BSC and DEA, to measure the relative efficiency of all branches of a bank in Serbia. Results: Results confirmed that the combined use of the named methods facilitates measurement of organizational efficiency by using both financial and non-financial indicators.Conclusions: The paper shows that it is possible to achieve synergetic effects in the evaluation of organizational efficiency in the banking sector if BSC is applied first, to define goals within four perspectives, and then four DEA models are developed to measure efficiency in each perspective.

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