Identifying Critical Measures in DEA

Abstract

Since each DMU has its own inherent tradeoffs among the multiple measures that significantly influence the performance, it is extremely important for the management to know the critical measures. The current chapter introduces the approach of Chen and Zhu (Annals of Operations Research, 124 (1–4), 225–244, 2003) for identifying the critical measures to DMUs’ performance. Note that once the DEA evaluation is done, the management needs to either (i) maintain the best practice for the efficient DMUs or (ii) achieve the best practice for the inefficient DMUs. Thus, when a set of multiple performance measures is determined, measures that are influential to maintaining and achieving the best practice should be regarded as critical to the performance of DMUs. Also, it is believed that a critical measure is signaled by whether changes in its value affect the performance, not by whether inclusion or exclusion of the measure affects the performance.