Evaluating Canadian Bank Branch Operational Efficiency from Staff Allocation: A DEA Approach

Abstract

We examine the operational efficiency of one of the large Canadian banks’ branches, which is primarily affected byits strategy of allocating staff and the service quality provided to customers. Two Data Envelopment Analysis (DEA)models are proposed in this research: (1) a staff allocation evaluation model pertinent to employee numbers andtransaction volumes, and (2) a customer satisfaction benchmark model to check if the staff allocation scheme meetsthe expectations of the bank's management. Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS)model results for different branch sizes and geographical regions are presented for analysis. The findings arecompared to the bank’s current models, validating the use of the proposed DEA models for evaluating operationalefficiency from a staff allocation viewpoint in the banking industry. One of the interesting aspects of this work is thatthe requirement for best practice is not full efficiency but something less. The rationale is that if staff is pushed to thelimit, they break and leave – the costs of training and integrating new staff is very high and service levels suffer.