Evaluating the use of BSC-DEA method in measuring organization´s efficiency

Abstract: In today's business environment, organizations try to improve their efficiency in order to have more power in the global competition. This requires capabilities to detect and evaluate the impact of Information Technology (IT) on the organization's efficiency.There are some difficulties in evaluating the impact of IT on the organization‟s efficiency. For example, one should consider many quantitative and qualitative factors in the evaluation process. For solving these kinds of problems, this thesis proposes a methodology to identify the effects of IT investment and the importance of IT related activities on the organization‟s efficiency, within the BSC-DEA model.In the first parts of thesis, the Balanced Scorecard is used as a performance management tool for evaluating an organization‟s efficiency. The four dimensions of the Balanced Scorecard link organization‟s strategies with indicators and help the management establish an integrated efficiency assessment system for evaluation of IT investment. This thesis has studied some shortcoming of BSC for efficiency measurement and argued that DEA has the advantage to fill these shortcomings of BSC and to better evaluates impacts of IT on the organization's efficiency.In the Second part of this thesis, I have shown that the DEA model generates one single efficiency figure in multi-input and multi-output situations. DEA performs the optimization analysis on each individual unit (DMUs) and generate relative efficiency value of each DMU. In this way, the integrated BSC-DEA model is constructed. For a better explanation of proposed BSC-DEA model, I presented and analyzed an example in the final part of the thesis.The presented model has two major benefits in subjected area:Firstly, It Combines two well-established managerial methodologies and proposes a new approach to evaluate IT effects on organizations. This approach uses “BSC” as a comprehensive framework for defining evaluation criteria with regard to IT investment and uses “DEA” as a nonparametric technique for ranking organization performance with those criteria. The second contribution is that with the comprehensive view which BSC gives us and with efficiency measure that DEA calculates, we can have a dependent variable to study how and why some organizations use IT better than others.