1. Efficiency of bank branches
Juha Eskelinen
Aalto University School of Economics
Supervisor Markku Kallio
May

2. An empirical study of branch efficiency
Regional retail bank, 24 branches in Helsinki Metropolitan area
Why to study?
This is what many contemporary service organizations are!
Measuring makes reality in the organization – through objectives, incentives, development of operations, investments on people

3. Findings so far
Building a straightforward DEA model focusing on sales activity
Data starting from 10/2006, monthly level
Turbulent times shaking the branches and the frontier
Homogeneous
Sales oriented
Objective oriented
Heterogeneous
Attractiveness of locations
Socio-demographic environment
Competence differences between employees
Dominated by extraordinary branches
Investments
Loans granted

4. Next: how to help the branches to achieve their potential – approaches to study
Estimating the affect of operational conditions and practices
Input, output + contextual variables
Stochastic non-parametric frontier approach (Johnson - Kuosmanen)
Benchmarking with the most preferred branch
Similar but excellent branches
Most preferred solution for each branch (Value DEA, Halme et al)
Predicting future potential (?)
Bank branches evaluated based upon their initial conditions and practices + future requirements
System Dynamics (Dynamic Productive Efficiency model, Vaneman & Triantis)