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Keywords: The paper proposed a Fuzzy Multiple Criteria Decision Making (FMCDM) approach for banking perfor-
FMCDM mance evaluation. Drawing on the four perspectives of a Balanced Scorecard (BSC), this research rst
Balance Scorecard (BSC) summarized the evaluation indexes synthesized from the literature relating to banking performance.
Fuzzy Analytic Hierarchy Process (FAHP) Then, for screening these indexes, 23 indexes t for banking performance evaluation were selected
TOPSIS
through expert questionnaires. Furthermore, the relative weights of the chosen evaluation indexes were
VIKOR
calculated by Fuzzy Analytic Hierarchy Process (FAHP). And the three MCDM analytical tools of SAW,
TOPSIS, and VIKOR were respectively adopted to rank the banking performance and improve the gaps
with three banks as an empirical example. The analysis results highlight the critical aspects of evaluation
criteria as well as the gaps to improve banking performance for achieving aspired/desired level. It shows
that the proposed FMCDM evaluation model of banking performance using the BSC framework can be a
useful and effective assessment tool.
2009 Elsevier Ltd. All rights reserved.
0957-4174/$ - see front matter 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.eswa.2009.01.005
10136 H.-Y. Wu et al. / Expert Systems with Applications 36 (2009) 1013510147
result from a more effective performance, it is crucial to improve of an enterprise, while evaluation is referred to as the goal that an
the banking relationship by matching the needs of the clients to enterprise can effectively obtain during a specic period (Lebas,
the delivery process of client services (Nist, 1996). Therefore, the 1995). Evans, Ashworth, Chellew, Davidson, and Towers (1996)
BSC is also utilized as a framework to develop evaluation indicators stated that performance evaluation is an important activity of
for banking performance (Davis & Albright, 2004; Kim & Davidson, management control, used to investigate whether resources are
2004; Kuo & Chen, 2010). allocated efciently; it is applied for the purpose of operational
Since Bellman and Zadeh (1970) developed the theory of deci- control to achieve a goal adjustment in the short-term and for
sion behavior in a fuzzy environment, various relevant models strategy management and planning in the long run. As indicated
were developed, and have been applied to different elds such as by Rue and Byars (2005), performance evaluation tells us how
control engineering, articial intelligence, management science, employees dene their own work, and it establishes a decision-
and Multiple Criteria Decision Making (MCDM) among others. making and communication process for improvement. Kaplan
The concept of combining the fuzzy theory and MCDM is referred and Norton (1992) described performance evaluation as a way to
to as fuzzy MCDM (FMCDM). Several practicable applications of review the achievements of organizations of both their nancial
utilizing FMCDM in criteria evaluation and alternatives selection and non-nancial objectives.
are demonstrated in previous studies (Bayazita & Karpak, 2007; There is abundant literature on performance evaluation demon-
Chen, Lin, & Huang, 2006; Chiou & Tzeng, 2002; Chiou, Tzeng, & strating various topics and successful examples relating to perfor-
Cheng, 2005; Chiu, Chen, Shyu, & Tzeng, 2006; Hsieh, Lu, & Tzeng, mance management (McNamara & Mong, 2005). The traditional
2004; Lee, Chen, & Chang, 2008; Pepiot, Cheikhrouhou, Furbringer, performance rankings of banks is based on simple and consistent
& Glardon, 2008; Wang & Chang, 2007; Wu & Lee, 2007). Primarily, factors such as nancial returns, returns on asset (ROA) and returns
the MCDM problems are rst classied into distinct aspects and on earning (ROE). Nevertheless, performance rankings conducted
different alternatives/strategies and the criteria are dened based in this way may not precisely illustrate institutions that embrace
on various points of view from stakeholders. Then, a nite set of strategies for sustaining top performance (Hanley & Suter, 1997).
alternatives/strategies can be evaluated in terms of multi-criteria. Non-nancial criteria such as customer satisfaction, community
Choosing a suitable method to measure the criteria can help the and employee relations can be vital to a banks winning strategy,
evaluators and analysts to process the cases to be evaluated and because using only ROA or ROE for performance ranking may not
determine the best alternative. Like most cases of evaluation, a necessarily determine which institution offers the highest returns
number of criteria have to be considered for performance apprai- to the investors, nor does it accurately prove which one is most
sal. Consequently, banking performance evaluation can be re- protable.
garded as a MCDM problem. In addition, the multiple criteria Evaluations of the performance of a bank can be diverse (Kosmi-
used in the BSC are more objective and comprehensive than a sin- dou, Pasiouras, Doumpos, & Zopounidis, 2006). Several previous
gle one. In this research, a FMCDM approach based on the four per- studies on bank performance measurement examined economies
spectives of the BSC was proposed to establish a performance of scale and scope employing traditional statistical methods such
evaluation model for bank institutions. The aims of this research as correlation analysis (Arshadi & Lawrence, 1987), translog cost
are as follows: (1) screen performance indexes to t the banks function (Gilligann, Smirlock, & Marshall, 1984; Molyneux, Altun-
for constructing a hierarchical framework of performance evalua- bas, & Gardener, 1996; Murray & White, 1983), loglinear models,
tion; (2) use FAHP (Fuzzy Analytic Hierarchy Process) to nd the or tools like Data Envelopment Analysis (DEA), etc. (Athanassopo-
fuzzy weights of the indexes by subjective perception; (3) apply ulos & Giokas, 2000; Drake, 2001; Giokas, 1991).
SAW (Simple Average Weight), TOPSIS (Technique for Order Prefer-
ence by Similarity to Ideal Solution method), and VIKOR (VlseKri- 2.2. Performance evaluation index
terijumska Optimizacija I Kompromisno Resenje) to rank the
performance and improve the gaps of three banks in the example; Performance measurement can be dened as a system by which
and (4) provide suggestions based on the research results for per- a company monitors its daily operations and evaluates whether
formance evaluation and serve as a reference for future research in the company is attaining its objectives. To fully utilize the function
this eld. of performance measurement, it is suggested to set up a series of
The remainder of this paper is organized as follows. The con- indexes which properly reect the performance of a company.
cepts of performance evaluation and BSC are introduced and re- These indicators can be quantiable, or unquantiable. For in-
viewed in Section 2. In Section 3, the performance evaluation stance, an index such as lead time is viewed as a quantiable (or
framework and the analytical methods used in FMCDM for evalu- nancial) measure, whereas the degree of customer satisfaction
ating the banking performance are proposed. Section 4 provides is unquantiable (or non-nancial) measures. Managers often have
an empirical example for banking performance, including the hier- difculty in delineating strategies and selecting proper measures
archical framework of BSC performance evaluation indexes and the while implementing the BSC system.
result analyses and discussion to illustrate the proposed perfor- In the early stage of implementing the BSC, it is important to
mance evaluation model. Section 5 concludes the paper. collect as many ideas as possible concerning performance mea-
surement by interviewing business managers and discussing their
business vision, mission, and strategies. Meyer and Markiewicz
2. Performance evaluation and Balanced Scorecard (1997) grouped the measures relating to the critical success factors
of banking performance into eights categories: (1) protability, (2)
This section briey reviews the underlying concepts adopted efciency and productivity, (3) human resource management, (4)
by this research, such as the denitions of performance evalua- risk management, (5) sales effectiveness, (6) service quality, (7)
tion, performance evaluation index, and Balanced Scorecard capital management, and (8) competitive positioning. Collier
(BSC). (1995) employed structural equation models to analyze the pro-
cess performance of banks using criteria such as process quality er-
2.1. Denitions of performance evaluation rors, employee turnover rate, labor productivity, on-time delivery,
and unit cost. The multidimensional indexes used by Arshadi and
The denitions of performance and evaluation are as follows. Lawrence (1987) include protability, pricing of bank services,
Performance is referred to as one kind of measurement of the goals and loan market share.
H.-Y. Wu et al. / Expert Systems with Applications 36 (2009) 1013510147 10137
The majority of past studies have focused on customers and business performance of information technology (IT) expenditures
how they choose the bank that will offer them general bank ser- in the banking industry using the t-test and regression models. Kuo
vices. According to the related literature, the selection criteria and Chen (2010) applied the four perspectives of the BSC to con-
which customers use to evaluate and choose between banks, in- struct key performance appraisal indicators for the mobility of
clude price, speed, access, customer service, location, image and the service industries through the fuzzy Delphi method. Leung,
reputation, modern facilities, interest rates, opening hours, incen- Lam, and Cao (2006) proposed a tailor-made performance mea-
tive offered, product range, and service charge policy and so on surement model using the analytic hierarchy process and the ana-
(Anderson, Cox, & Fulcher, 1976; Boyd, Leonard, & White, 1994; lytic network process for implementing the BSC.
Chia & Hoon, 2000; Devlin, 2002; Devlin & Gerrard, 2005; Elliot, A large amount of research related to the nancial industry em-
Shatto, & Singer, 1996; Martenson, 1985). The more recent re- ployed the BSC to evaluate performance and has beneted from its
search of Devlin and Gerrard (2005) made an attempt to address use (Ashton, 1998; Davis & Albright, 2004). Nevertheless, most of
the relative importance of various choice criteria in the selection these studies focused on how to set up an effective mechanism
of a banking institution by applying a quantitative methodology to select evaluation criteria rather than on calculating their relative
of statistical analysis. They provided an analysis of customer choice weight. Therefore, this research aims at developing an evaluation
criteria and multiple banking and made an itemized comparison of model for banking performance not only to investigate the relative
the relative importance of choice criteria which impact on the importance among the selection criteria, but also to examine the
choice for main and secondary banking institutions. critical gaps for achieving aspired/desired level.
3.1.1. Fuzzy number 2004; Zadeh, 1975). The possible values for these variables could
In the classical set theory, the truth value of a statement can be be: very dissatised, not satised, fair, satised, and very
given by the membership function as lA(x) satised. The evaluators are asked to conduct their judgments,
and each linguistic variable can be indicated by a triangular fuzzy
1 if x 2 A;
lA x 1 number (TFN) within the scale range of 0100. An example of
0 if x R A: membership functions of ve levels of linguistic variables is shown
Fuzzy numbers are a fuzzy subset of real numbers, and they in Fig. 3. For instance, the linguistic variable Satised can be rep-
represent the expansion of the idea of a condence interval. resented as (60, 80, 100). Besides, each evaluator can personally de-
According to the denition by Dubois and Prade (1978), the fuzzy ne his/her subjective range of linguistic variables. The use of
number A e is of a fuzzy set, and its membership function is linguistic variables is applied widely. In this paper, linguistic vari-
leA x : R ! 0; 105leA x51; x 2 X, where x represents the crite- ables expressed by TFN are adopted to stand for evaluators subjec-
rion and is described by the following characteristics: (1) le x is tive measures to determine the degrees of importance among
A
a continuous mapping from R (real line) to the closed interval evaluation criteria and also assess the performance value of
[0, 1]; (2) le x is of a convex fuzzy subset; (3) le x is the normal- alternatives.
A A
ization of a fuzzy subset, which means that there exists a number
x0 such that le x0 1. For instance, the triangular fuzzy number 3.2. Fuzzy analytic hierarchy process
A
(TFN), A e l; m; u, can be dened as Eq. (2) and the TFN member-
ship function is shown in Fig. 2: The Analytic Hierarchy Process (AHP) was devised by Saaty
8 (1980, 1994). It is a useful approach to solve complex decision
< x l=m l
> if l 6 x 6 m; problems. It prioritizes the relative importance of a list of criteria
leA x u x=u m if m 6 x 6 u; 2 (critical factors and sub-factors) through pairwise comparisons
>
:
0 otherwise: amongst the factors by relevant experts using a nine-point scale.
Buckley (1985) incorporated the fuzzy theory into the AHP, called
Based on the characteristics of TFN and the extension deni- the Fuzzy Analytic Hierarchy Process (FAHP). It generalizes the cal-
tions proposed by Zadeh (1975), given any two positive triangular culation of the consistent ratio (CR) into a fuzzy matrix. The proce-
fuzzy numbers, A e 2 l2 ; m2 ; u2 ; and a positive
e 1 l1 ; m1 ; u1 and A
dure of FAHP for determining the evaluation weights are explained
real number r, some algebraic operations of the triangular fuzzy as follows:
numbers A e 1 and Ae 2 can be expressed as follows:
Addition of two TFNs : Step 1: Construct fuzzy pairwise comparison matrices. Through
e1 A
A e 2 l1 l2 ; m1 m2 ; u1 u2 : 3 expert questionnaires, each expert is asked to assign lin-
guistic terms by TFN (as shown in Table 1 and Fig. 4) to
Multiplication of two TFNs : the pairwise comparisons among all criteria in the dimen-
e1 A
e 2 l1 l2 ; m1 m2 ; u1 u2 : sions of a hierarchy system. The result of the comparisons
A 4 e
is constructed as fuzzy pairwise comparison matrices A
Multiplication of any real number r and a TFN : as shown in Eq. (9).
Step 2: Examine the consistency of the fuzzy pairwise comparison
e 1 rl1 ; rm1 ; ru1 for r > 0 and li > 0; mi > 0; ui > 0
rA matrices. According to the research of Buckley (1985), it
5 proves that if A = [aij] is a positive reciprocal matrix then
Subtraction of two TFNs H: e a
A ~ij is a fuzzy positive reciprocal matrix. That is, if
e1 H A
e 2 l1 u2 ; m1 m2 ; u1 l2 for li > 0; mi > 0; ui > 0: the result of the comparisons of A = [aij] is consistent, then
A e a
it can imply that the result of the comparisons of A ~ij
6 is also consistent. Therefore, this research employs this
Division of two TFNs : method to validate the questionnaire
A1 A2 l1 =u2 ; m1 =m2 ; u1 =l2 : 7 2 3 2 ~12 ~1n 3
1 ~12
a a~1n 1 a a
6a ~2n 7 6 ~ ~2n 7
Reciprocal of a TFN: 6 ~21 1 a 7 6 1=a 12 1 a 7
e6
e 1 1=u1 ; 1=m1 ; 1=l1 for li > 0; mi > 0; ui > 0:
A 6 .. .. .. .. 7 6
7 6 .. .. .. .
7
. 7:
A 1 8 4 . . . . 5 4 . . . . 5
~n1
a ~n2
a 1 ~1n
1=a 1=a~2n 1
3.1.2. Linguistic variable 9
Linguistic variables are variables whose values are words or
Step 3: Compute the fuzzy geometric mean for each criterion. The
sentences in a natural or articial language. In other words, they
geometric technique is used to calculate the geometric
are variables with lingual expression as their values (Hsieh et al.,
mean ~ri of the fuzzy comparison values of criterion i to
each criterion, as shown in Eq. (10), where a ~in is a fuzzy
A
~ (x)
value of the pair-wise comparison of criterion i to criterion
n (Buckley, 1985)
1
A~ ( x)
Very Not Very
dissatisfied satisfied Fair Satisfied satisfied
1
0.5
0 x x
l m u 0 20 40 60 80 100
Fig. 2. Membership function of the triangular fuzzy number. Fig. 3. Membership functions of the ve levels of linguistic variables.
H.-Y. Wu et al. / Expert Systems with Applications 36 (2009) 1013510147 10139
Table 1
Membership function of the linguistic scale.
!, !,
A~ (x) X
m X
m
Equally Weakly Essentially Very strongly Absolutely LEij LEkij m; MEij MEkij m;
important important important important important
1 k1 k1
!,
X
m
UEij UK kij m: 14
k1
x
1 3 5 7 9
Step 2: Fuzzy synthetic judgment. According to the fuzzy weight,
Fig. 4. Membership functions of the linguistics variables for criteria comparisons. ~ j , of each criterion calculated by FAHP, the criteria vector
w
~ is derived as Eq. (15). And, the fuzzy performance
w
e as presented in Eq. (16), of all the alternatives
matrix E,
~r i a ~in 1=n :
~i1 a 10
can be acquired from the fuzzy performance value of each
Step 4: Compute the fuzzy weights by normalization. The fuzzy alternative under n criteria.
weight of the ith criterion w ~ i , can be derived as Eq.
~ w
w ~ j; . . . ; w
~ 1; . . . ; w ~ n t ; 15
(11), where w ~ i Lwi ; M wi ; U wi by a TFN
~ i is denoted as w
and Lwi , Mwi , and U wi represent the lower, middle and e ~eij :
E 16
upper values of the fuzzy weight of the ith criterion
Then, the nal fuzzy synthetic decision can be deduced from the cri-
~ i ~ri ~r 1 ~r 2 ~r n 1 :
w 11 e and
teria weight vector w ~ and the fuzzy performance matrix E;
then the derived result, the nal fuzzy synthetic decision matrix
e is calculated by R
R, eE e () w, ~ where the sign, ,, indicates
3.3. The synthetic value of fuzzy judgment the computation of the fuzzy number, consisting of both fuzzy addi-
tion and fuzzy multiplication. Considering that the computation of
Since Bellman and Zadeh (1970) proposed the decision-making fuzzy multiplication is rather complicated, the approximate multi-
methods in fuzzy environments, an increasing number of related plied result of the fuzzy multiplication is used here. For instance,
models have been applied in various elds, including control engi- the approximate fuzzy number R e i of the fuzzy synthetic decision
neering, expert system, articial intelligence, management science, of the alternative i is denoted as Eq. (17), where LRi, MRi, and URi are
operations research, and MCDM. The above decision-making prob- the lower, middle, and upper synthetic performance values of alter-
lems were solved by applying the fuzzy set theory. This approach is native i, respectively, and the calculations of each are illustrated as
called the fuzzy MCDM (FMCDM). Its main application is focused Eq. (18)
on criteria evaluation or project selection. The FMCDM method
e i LRi ; MRi ; URi ;
R 17
can assist decision makers in selecting the best alternative, or rank-
ing the order of projects. X n X
n
Due to the differences in the subjective judgments among the where LRi Lwj LEij ; MRi Mwj MEij ;
j1 j1
experts for each evaluation criterion, the overall valuation of the
fuzzy judgment is employed to synthesize the various experts
X
n
URi Uwj UEij : 18
opinions in order to achieve a reasonable and objective evaluation. j1
The calculation steps to obtain the synthetic value are:
Next, the procedure of defuzzication (Hsieh et al., 2004;
Step 1: Performance evaluation of the alternatives. As shown in Opricovic & Tzeng, 2003) locates the Best Nonfuzzy Performance
Fig. 3, very dissatised, not satised, fair, satised, value (BNP). Methods used in such defuzzied fuzzy ranking gen-
and very satised are the ve linguistic variables used to erally include the mean of maximal (MOM), center of area (COA),
measure the performance of the alternatives against the and a-cut. Utilizing the COA method to nd out the BNP is a simple
evaluation criteria. Each linguistic variable can be pre- and practical without the need to bring in the preferences of any
sented by a TFN with a range of 0100. Assume that e E kij evaluators. Therefore it is used in this study. The BNP value of
denotes the fuzzy valuation of performance given by the the fuzzy number R e i can be found by
evaluator k towards alternative i under criterion j as Eq.
BNPi URi LRi MRi LRi =3 LRi 8i: 19
(12) shows, then:
The ranking of the alternatives then proceeds based on the value of
e
E kij LEkij ; MEkij ; UEkij : 12
the derived BNP for each of the alternatives.
In this research, e
E ij represents the average fuzzy judgment
values integrated by m evaluators as 3.4. TOPSIS method
e
E ij 1=m e
E 1ij e
E 2ij e
Em 13
ij : TOPSIS was developed by Hwang and Yoon (1981), based on the
According to Buckley (1985), the three end points of e
E ij can concept that the chosen/improved alternatives should be the
be computed as shortest distance from the positive ideal solution (PIS) and the
10140 H.-Y. Wu et al. / Expert Systems with Applications 36 (2009) 1013510147
v
farthest from the negative-ideal solution (NIS) for solving a MCDM uX
u n
problem. Thus, the best alternative should not only be the shortest di t v ij v j 2 8i; 25
distance away from the positive ideal solution (aspired/desired le- j1
v
vel), but also should be the largest distance away from the negative uX
u n
ideal solution (tolerable level). In short, the ideal solution is com- di t v ij v j 2 8i: 26
posed of all the criteria with the best values attainable (aspired/de- j1
sired levels), whereas the negative ideal solution is made up of all
the criteria with the worst values attainable (tolerable level). The Step 6: Calculate the relative closeness (similarity) to the ideal solu-
general step-by-step procedure using the TOPSIS is briey listed tion and rank the preference order. The relative closeness
as follows. of alternative Ai with respect to A* can be expressed as
Eq. (27), where the index value of RC i is between 0 and 1.
Step 1: Establish the original performance matrix. The structure of
di di
the performance matrix (X) is shown as Eq. (20), where RC i 1 ; 27
Ai denotes the alternative i, i = 1, 2, . . . , m; Cj is the jth crite-
di di di di
rion, j = 1, 2, . . . , n. Therefore, xij represents the performance
where RC i shows that the larger the index value, the better the per-
value of alterative i in criterion j
formance of the alternatives and
di
i 1; 2; . . . ; m 28
di di
Step 3: Compute the gaps fQ i ji 1; 2; . . . ; mg for ranking. The rela- The compromise solution obtained by VIKOR can be accepted by
tion is dened as Eq. (32), where S min Si (the best S* the decision makers because it provides a maximum group util-
i
can be set equal zero), S max Si (the worst S can be ity of the majority (with measure S, representing concor-
i
set to equal one); R min Ri (the best R* can be set to dance), and a minimum individual regret of an opponent
i
equal zero), R max Ri (the worst R can be set to equal (with measure R, representing discordance). The compromise
i
one), and v 2 [0, 1] is introduced as the weight of the strat- solutions can be the basis for negotiations, by involving the criteria
egy of the the majority of the criteria (or maximum weights of the decision makers preference.
group utility), usually v = 0.5. In this research, the value
of v is set to equal 0, 0.5 and 1 for sensitive analysis.
4. An empirical example for banking performance
Si S Ri R
Qi v 1 v ; i 1; 2; . . . ; m;
S S R R The four perspectives of BSC were taken as the framework for
32 establishing performance evaluation indexes in this research.
Based on this framework, the FAHP was used to obtain the fuzzy
Step 4: Rank and improve the alternatives, sort by the values S, R, and
weights of the indexes. The three MCDM analytical tools, SAW,
Q, in decreasing order and reduce the gaps in the criteria. The
TOPSIS, and VIKOR were respectively applied to evaluate the bank-
results are three ranking lists, with the best alternatives
ing performance based on the weight of each index, and to improve
having the lowest value.
the gaps with three banks as an empirical example. The hierarchi-
Step 5: Propose a compromise solution. For a given criteria weight,
cal framework of the BSC performance evaluation criteria, and the
the alternatives (a0 ), are the best ranked by measure Q
results, analyses and discussions of the empirical example are
(minimum) if the following two conditions are satised:
illustrated in the following section.
C1. Acceptable advantage: Q(a00 ) Q(a0 ) P DQ, where a00 is
the alternative with second position in the ranking list
by Q; DQ = 1/(J 1); J is the number of alternatives. 4.1. Hierarchical framework of the BSC performance evaluation
C2. Acceptable stability in decision making: Alternative a0 criteria
must also be the best ranked by S or/and R. This compro-
mise solution is stable within a decision making process, From the four BSC perspectives, and based on a review of the lit-
which could be: voting by majority rule (when v > 0.5 erature, 55 evaluation indexes related to banking performance
is needed), or by consensusv 0.5, or with veto were summarized. Then, expert questionnaires were used for
(v < 0.5). Here, v is the weight of decision making strategy screening the indexes t for the banking performance evaluation.
majority of criteria (or the maximum group utility). Twenty-three evaluation indexes were selected by the committee
of experts, comprised of twelve professionals from practice and
If one of the conditions is not satised, then a set of compromise the academia. The descriptions of the criteria for the selection eval-
solutions is proposed, consisting of: uation of a banks performance are listed in the appendix. The hier-
archical framework of the BSC performance evaluation criteria (i.e.
Alternatives a0 and a00 if only condition C2 is not satised, or four dimensions and 23 indexes) for banking is shown in Fig. 5. The
Alternativesa0 , a00 , . . . , a(M) if condition C1 is not satised; and a(M) 23 evaluation indexes are grouped into the four BSC dimensions,
is determined by the relation Q(a00 ) Q(a0 ) < DQ for maximum M F: Finance (F1F6), C: Customer (C1C6), P: Internal Process
(the positions of these alternatives are in closeness). (P1P6), and L: Learning and Growth (L1L5).
Based on the hierarchical framework of the BSC performance Indexes C Bank S Bank U Bank
evaluation indexes, the FAHP questionnaire using FTN was distrib- F1 (80.00, 100.00, 100.00) (73.33, 91.67, 96.67) (65.00, 81.25, 92.50)
uted among the experts for soliciting their professional opinions. F2 (50.00, 66.67, 83.33) (60.00, 75.00, 90.00) (52.50, 68.75, 85.00)
The relative importance (fuzzy weight) of each performance index F3 (30.00, 50.00, 70.00) (30.00, 50.00, 70.00) (50.00, 66.67, 83.33)
analyzed by FAHP is listed in Table 2 using Eqs. (10) and (11). The F4 (23.33, 41.67, 60.00) (40.00, 58.33, 76.67) (60.00, 75.00, 90.00)
F5 (45.00, 62.50, 80.00) (52.50, 68.75, 85.00) (57.50, 75.00, 87.50)
result shows that the critical order of the four BSC dimensions for F6 (40.00, 56.25, 72.50) (45.00, 62.50, 80.00) (73.30, 91.70, 96.70)
banking performance evaluation is C: Customer (0.4101), F: Fi-
C1 (50.00, 66.70, 83.30) (37.50, 56.30, 75.00) (40.00, 58.30, 76.70)
nance (0.3271), P: Internal process (0.1314), and L: Learning C2 (56.70, 75.00, 86.70) (23.30, 41.70, 60.00) (20.00, 37.50, 55.00)
and growth (0.1314). The top ve important evaluation indexes C3 (73.30, 91.70, 96.70) (32.50, 50.00, 67.50) (60.00, 75.00, 90.00)
are C1: Customer satisfaction (0.1237), F3: Return on assets C4 (30.00, 50.00, 70.00) (40.00, 58.30, 76.70) (23.30, 41.70, 60.00)
(0.0812), F4: Earnings per share (0.0784), C4: Customer reten- C5 (57.50, 75.00, 87.50) (60.00, 66.70, 83.30) (50.00, 66.70, 83.30)
C6 (60.00, 75.00, 90.00) (45.00, 62.50, 80.00) (73.30, 91.70, 96.70)
tion rate (0.0741), and C2: Prot per customer (0.0715). The
least important evaluation index is L1: Responses of customer ser- P1 (52.50, 68.75, 85.00) (45.00, 62.50, 80.00) (33.33, 50.00, 66.67)
P2 (47.50, 62.50, 77.50) (40.00, 58.33, 76.67) (52.50, 68.75, 85.00)
vice (0.0109).
P3 (40.00, 58.33, 76.67) (60.00, 75.00, 90.00) (65.00, 81.25, 92.50)
P4 (60.00, 75.00, 90.00) (50.00, 66.67, 83.33) (60.00, 75.00, 90.00)
P5 (66.67, 83.33, 93.33) (66. 67, 83.33, 96.67) (50.00, 66.67, 83.33)
4.3. Ranking of the banking performance P6 (50.00, 66.67, 83.33) (52.50, 68.75, 85.00) (66.67, 83.33, 93.33)
L1 (40.00, 58.33, 76.67) (40.00, 58.33, 76.67) (73.33, 91.67, 96.67)
Three banks (e.g. C Bank, S Bank, and U Bank) were taken as an L2 (66.67, 83.33, 93.33) (57.50, 75.00, 87.50) (60.00, 75.00, 90.00)
illustrative example and were evaluated by the experts based on L3 (23.33, 41.67, 60.00) (23.33, 41.67, 60.00) (40.00, 58.33, 76.67)
the selected evaluation criteria. Since there are differences of sub- L4 (45.00, 62.50, 80.00) (45.00, 62.50, 80.00) (56.67, 75.00, 86.67)
L5 (50.00, 66.67, 90.00) (50.00, 66.67, 83.33) (50.00, 56.67, 83.33)
jective judgments among the way experts view each evaluation
criterion, the overall evaluation of the fuzzy judgment was em-
ployed to synthesize the opinions of the various experts in order
to achieve a reasonable and objective evaluation. In this research, by Eqs. (15)(18). Table 4 presents the nal fuzzy synthetic judg-
the ve linguistic variables, very dissatised, not satised, ment of the three banks based on the evaluation criteria. Conse-
fair, satised, and very satised were used to measure the quently, based on the fuzzy weights of the evaluation criteria
banking performance with respect to the evaluation criteria. As calculated by FAHP, the three MCDM analytical tools, SAW, TOPSIS,
shown in Fig. 3, each linguistic variable is presented by a TFN with and VIKOR were respectively adopted to rank the banking perfor-
a range of 0100. The average fuzzy judgment values of each crite- mance. First, the performance ranking order of the three banks
rion of the three banks, integrated by various experts through Eqs. using SAW is C Bank (113.97) U Bank (113.65) S Bank
(12)(14), are summarized in Table 3. Then, the nal fuzzy syn- (107.99) as shown in Table 4.
thetic judgment of the three banks is deduced from the fuzzy cri- The TOPSIS method was then applied to evaluate the banks per-
teria weights (Table 2) and the fuzzy judgment values (Table 3) formance. Referring to Table 3, the BNP values computed by Eq.
Table 2
Fuzzy weights of BSC performance evaluation index by FAHP.
Criteria (Dimension and index) Local weights Overall weights BNPa STD_BNPb Rank
(F) Finance (0.1293, 0.3325, 0.7592) 0.4070 0.3271 2
(F1) Sales (0.0830, 0.2020, 0.4371) (0.0107, 0.0672, 0.3318) 0.1366 0.0604 6
(F2) Debt ratio (0.0305, 0.0696, 0.2405) (0.0039, 0.0231, 0.1823) 0.0699 0.0309 14
(F3) Return on assets (0.0830, 0.2282, 0.6103) (0.0107, 0.0759, 0.4633) 0.1833 0.0812 2
(F4) Earnings per share (0.0807, 0.2348, 0.5824) (0.0104, 0.0781, 0.4422) 0.1769 0.0784 3
(F5) Net prot margin (0.0531, 0.1166, 0.3057) (0.0069, 0.0388, 0.2321) 0.0926 0.0410 10
(F6) Return on Investment (0.0580, 0.1489, 0.3997) (0.0075, 0.0495, 0.3035) 0.1202 0.0532 7
(C) Customer (0.1775, 0.4348, 0.9184) 0.5102 0.4101 1
(C1) Customer satisfaction (0.1104, 0.3179, 0.7404) (0.0197, 0.1382, 0.6800) 0.2793 0.1237 1
(C2) Prot per on-line customer (0.0894, 0.1960, 0.4171) (0.0159, 0.0852, 0.3831) 0.1614 0.0715 5
(C3) Market share rate (0.0609, 0.1370, 0.3117) (0.0108, 0.0596, 0.2863) 0.1189 0.0527 8
(C4) Customer retention rate (0.0703, 0.1792, 0.4476) (0.0125, 0.0779, 0.4111) 0.1672 0.0741 4
(C5) Customers increasing rate (0.0441, 0.0837, 0.2252) (0.0078, 0.0364, 0.2068) 0.0837 0.0371 13
(C6) Prot per customer (0.0450, 0.0861, 0.2394) (0.0080, 0.0374, 0.2199) 0.0884 0.0392 11
(P) Internal process (0.0643, 0.1164, 0.3098) 0.1635 0.1314 3
(P1) No. of new service items (0.1085, 0.3340, 0.8097) (0.0070, 0.0389, 0.2508) 0.0989 0.0438 9
(P2) Transaction efciency (0.0878, 0.1936, 0.4171) (0.0056, 0.0225, 0.1292) 0.0525 0.0232 19
(P3) Customer complaints (0.0597, 0.1274, 0.2851) (0.0038, 0.0148, 0.0883) 0.0357 0.0158 20
(P4) Rationalized forms and processes (0.0691, 0.1771, 0.4476) (0.0044, 0.0206, 0.1387) 0.0546 0.0242 18
(P5) Sales performance (0.0433, 0.0828, 0.2252) (0.0028, 0.0096, 0.0698) 0.0274 0.0121 22
(P6) Management performance (0.0442, 0.0851, 0.2394) (0.0028, 0.0099, 0.0742) 0.0290 0.0128 21
(L) Learning and growth (0.0643, 0.1164, 0.3098) 0.1635 0.1314 3
(L1) Responses of customer service (0.0381, 0.0742, 0.2016) (0.0025, 0.0087, 0.0625) 0.0245 0.0109 23
(L2) Professional training (0.1289, 0.3234, 0.6899) (0.0083, 0.0376, 0.2137) 0.0866 0.0383 12
(L3) Employee stability (0.0967, 0.2014, 0.4392) (0.0062, 0.0234, 0.1361) 0.0552 0.0245 17
(L4) Employee satisfaction (0.0898, 0.1915, 0.4466) (0.0058, 0.0223, 0.1384) 0.0555 0.0246 16
(L5) Organization competence (0.0898, 0.2095, 0.4781) (0.0058, 0.0244, 0.1481) 0.0594 0.0263 15
a
BNP (Best non-fuzzy performance) = [(U L) + (M L)]/3 + L.
b
STD_BNP: standardized BNP.
H.-Y. Wu et al. / Expert Systems with Applications 36 (2009) 1013510147 10143
(19) of the average fuzzy judgment values of the three banks inte- Table 5
grated by various experts was given by Eq. (20) as shown in Table The performance matrix [xij]mn of three banks by various experts.
5. The normalized performance matrix was obtained as summa- Indexes C Bank S Bank U Bank
rized in Table 6 by Eq. (21). According to the fuzzy weights of F1 93.33 87.22 79.58
the BSC performance evaluation indexes by FAHP as shown in Ta- F2 66.67 75.00 68.75
ble 2, the weighted normalized performance matrices calculated F3 50.00 50.00 66.67
by Eq. (22) and both positive ideal and negative ideal solutions F4 41.67 58.33 75.00
F5 62.50 68.75 73.33
for the BSC evaluation criteria set by Eqs. (23) and (24) are shown F6 56.25 62.50 87.23
in Table 7. Table 8 lists the separations of the ideal solution di
C1 66.67 56.27 58.33
and the negative-ideal solution di for the three banks by Eqs. C2 72.80 41.67 37.50
(25) and (26). The relative closeness RC i to the ideal solution C3 87.23 50.00 75.00
and preference evaluation result derived from Eqs. (27) and (28) C4 50.00 58.33 41.67
by TOPSIS are presented in Table 9. The relative closeness RC i val- C5 73.33 70.00 66.67
C6 75.00 62.50 87.23
ues for the three banks are C Bank (RC* = 0.5579), U Bank
(RC* = 0.4704), and S Bank (RC* = 0.3521), respectively. This implies P1 68.75 62.50 50.00
P2 62.50 58.33 68.75
that C Bank has the smallest gap for achieving the aspired/desired
P3 58.33 75.00 79.58
level among the three banks, whereas S Bank has the largest gap. P4 75.00 66.67 75.00
Similarly, VIKOR was used to rank the banking performance of P5 81.11 82.22 66.67
the three banks based on the fuzzy weights of the BSC performance P6 66.67 68.75 81.11
evaluation indexes by FAHP as shown in Table 2. Table 10 shows L1 58.33 58.33 87.22
the performance matrix given by Eq. (20) with the best value xj L2 81.11 73.33 75.00
(aspired/desired levels) and the worst value x L3 41.67 41.67 58.33
j (tolerable/worst
L4 62.50 62.50 72.78
levels). The values of Si and Ri computed by Eqs. (29)(31) are
L5 68.89 66.67 63.33
shown in Table 11, while the computed value Qi (with v = 0, 0.5,
1) by Eq. (32) and the preference order ranking are given in Table
12. The performance ranking order of the three banks by VIKOR is C It indicates that all the ranking results are identical. However,
Bank (Qi = 0.0000) U Bank (Qi = 0.3909) S Bank (Qi = 1.0000). the nal values of the three banks calculated by SAW and TOPISIS
Finally, the nal values and preference order ranking by these are extremely close to each other. In this case, the VIKOR method is
three MCDM methods, SAW, TOPSIS, and VIKOR are summarized found to be a better method of assessment to clearly discriminate
in Table 13. the banking performance.
Table 4
Fuzzy synthetic performance values of the evaluation criteria by SAW.
Table 6 Table 9
The normalized performance matrix [rij]mn of three banks by various experts. The relative closeness RC i to the ideal solution and preference order ranking by
TOPSIS.
Indexes C Bank S Bank U Bank
Banks C Bank S Bank U Bank
F1 1.00 0.56 0.00
F2 1.00 0.00 0.75 RC i 0.5579 0.3521 0.4704
F3 0.00 0.00 1.00 Ranking 1 3 2
F4 0.00 0.50 1.00
F5 0.00 0.58 1.00 Note: The ranking is based on the relative closeness indicating the gap to improve
F6 0.00 0.20 1.00 for achieving the aspired/desired level. The largest value means the smallest gap to
achieve the ideal level.
C1 1.00 0.00 0.20
C2 1.00 0.12 0.00
C3 1.00 0.00 0.67
C4 0.50 1.00 0.00
C5 1.00 0.50 0.00 Table 10
C6 0.51 0.00 1.00 The performance matrix [xij]mn with the best value xj and the worst value x
j by
VIKOR.
P1 1.00 0.67 0.00
P2 0.40 0.00 1.00 Indexes C Bank S Bank U Bank xj x
j
P3 1.00 0.22 0.00 a
P4 1.00 0.00 1.00 F1 93.33 87.22 79.58 93.33 79.58
P5 0.93 1.00 0.00 F2b 66.67 75.00 68.75 66.67 75.00
P6 0.00 0.14 1.00 F3a 50.00 50.00 66.67 66.67 50.00
F4a 41.67 58.33 75.00 75.00 41.67
L1 1.00 1.00 0.00 F5a 62.50 68.75 73.33 73.33 62.50
L2 1.00 0.00 0.21 F6a 56.25 62.50 87.23 87.23 56.25
L3 0.00 0.00 1.00
L4 0.00 0.00 1.00 C1a 66.67 56.27 58.33 66.67 56.27
L5 1.00 0.60 0.00 C2a 72.80 41.67 37.50 72.80 37.50
C3a 87.23 50.00 75.00 87.23 50.00
C4a 50.00 58.33 41.67 58.33 41.67
C5a 73.33 70.00 66.67 73.33 66.67
C6a 75.00 62.50 87.23 87.23 62.50
P1a 68.75 62.50 50.00 68.75 50.00
Table 7 P2a 62.50 58.33 68.75 68.75 58.33
The weighted normalized performance matrix [vij]mn with the ideal solutions A* and P3b 58.33 75.00 79.58 58.33 79.58
the negative ideal solutions A by TOPSIS. P4a 75.00 66.67 75.00 75.00 66.67
P5a 81.11 82.22 66.67 82.22 66.67
Indexes C Bank S Bank U Bank A* A
P6a 66.67 68.75 81.11 81.11 66.67
F1a 0.0604 0.0335 0.0000 0.0604 0.0000
L1b 58.33 58.33 87.22 58.33 87.22
F2b 0.0309 0.0000 0.0232 0.0000 0.0309
L2a 81.11 73.33 75.00 81.11 73.33
F3a 0.0000 0.0000 0.0812 0.0812 0.0000
L3a 41.67 41.67 58.33 58.33 41.67
F4a 0.0000 0.0392 0.0784 0.0784 0.0000
L4a 62.50 62.50 72.78 72.78 62.50
F5a 0.0000 0.0237 0.0410 0.0410 0.0000
L5a 68.89 66.67 63.33 68.89 63.33
F6a 0.0000 0.0107 0.0532 0.0532 0.0000
C1a 0.1237 0.0000 0.0246 0.1237 0.0000 xj indicates the best values for setting all the criteria functions (aspired/desired
C2a 0.0715 0.0084 0.0000 0.0715 0.0000 levels) and xj indicates the worst values (tolerable/worst levels).
a
C3a 0.0527 0.0000 0.0354 0.0527 0.0000 Indicates the evaluation index is associated with benet criteria and maximum
C4a 0.0370 0.0741 0.0000 0.0741 0.0000 is the ideal solution.
b
C5a 0.0371 0.0185 0.0000 0.0371 0.0000 Indicates the evaluation index associated with cost criteria and minimum is the
C6a 0.0198 0.0000 0.0392 0.0392 0.0000 ideal solution.
Table 12
The value Qi with v = 0, 0.5, 1 and preference order ranking by VIKOR for sensitive
Table 8 analysis.
The separations of the ideal solution di and the negative-ideal solution di by TOPSIS.
Banks Qi [v = 0] Qi [v = 0.5] Qi [v = 1]
Banks di di
C Bank 0.0000 (1) 0.0000 (1) 0.0000 (1)
C Bank 0.1480 0.1867 S Bank 1.0000 (3) 1.0000 (3) 1.0000 (3)
S Bank 0.1982 0.1077 U Bank 0.3599 (2) 0.3909 (2) 0.4219 (2)
U Bank 0.1731 0.1537
Note: () indicates ranking order.
H.-Y. Wu et al. / Expert Systems with Applications 36 (2009) 1013510147 10145
Banks SAW TOPSIS VIKOR In response to the rapid growth of service industries and the in-
C Bank 113.97 (1) 0.5579 (1) 0.0000 (1) creased global competition, particularly for the banking institu-
S Bank 107.99 (3) 0.3521 (3) 1.0000 (3) tions, the need for alternative controls and performance
U Bank 113.65 (2) 0.4704 (2) 0.3909 (2) measures has attracted much attention. However, researchers are
Note: () indicates ranking order. nding it difcult to measure banking performance because of
the intangible nature of the products and services of the banking
4.4. Discussion industry. According to the relevant literature, most studies only
used nancial factors to evaluate banking performance (Kosmidou
This research conducted a performance analysis on three banks et al., 2006). The present research proposed a FMCDM evaluation
using a FMCDM approach based on the BSC perspectives. The FAHP model for banking performance by determining a comprehensive
and the three MCDM analytical methods (i.e. SAW, TOPSIS, and VI- set of evaluation criteria based on the concept of the BSC. Our pro-
KOR) were employed in the performance analysis for computing posed model embraces both nancial and non-nancial aspects,
the fuzzy weights of the criteria, ranking the banking performance and optimizes the relationships of a bank. It matches the needs
and improving the gaps of the three banks, respectively. Based on and requirements of the clients with the delivery processes of
the results of the analysis, some essential ndings were discussed the bank in order to achieve the best possible customer satisfaction
as follows. through effective performance.
The FAHP adopted by the research, which combines the AHP Based on the extensive content of the BSC evaluation criteria
with fuzzy set theory, can not only capture the thinking logic of hu- for banking performance as selected from the relevant literature
man beings but also focuses on the relative importance of the eval- and the objective opinions synthesized from the experts, the
uation criteria of the banking performance. As shown in Table 2, FAHP and the three MCDM analytical methods (i.e. SAW, TOPSIS,
the result of the FAHP analysis reveals that the Customer dimen- and VIKOR) were adopted in the performance analysis for com-
sion is the primary focus of the BSC and customer satisfaction is puting the fuzzy weights of the criteria, and for ranking the
the most important evaluation index. This is because banking is a banking performance of three banks as an illustrative example.
service industry, and banking performance is strongly connected The relative fuzzy weights calculated by FAHP prioritize the
to customer satisfaction. Therefore, in addition to paying attention importance of the BSC evaluation criteria for banking perfor-
to the nancial indexes, such as ROA and EPS, which are ranked as mance. With respect to the relative weights of the criteria, it
the second and third most import indexes for sustaining a high not only reveals the ranking order of the banking performance
banking performance, banks also must ensure that their customers but it also pinpoints the gaps to better achieve the banks goal
remain loyal to them and develop new markets to attract new by using the MCDM analytical methods. The analysis result indi-
customers. cates that management should make good use of the limited re-
In addition, as mentioned in Section 3.4, the TOPSIS method sources available to improve those aspects of their business that
is used to provide information on how to improve the gaps in needs improvement the most. Our proposed framework with
each criteria so as to achieve the banks objective (desired/as- FMCDM shows to be a feasible and effective assessment model
pired level) and cannot be used for ranking purpose (Opricovic for banking performance evaluation, and it can be applied to
& Tzeng, 2004). Therefore this research adopted the VIKOR other institutions as well.
method for ranking and improving the alternatives of this prob- In conclusion, the ndings of this study can be summarized as
lem. Hence, based on the fuzzy weights of the evaluation criteria follows: 1. Integrating all the relevant experts opinions, 23 out of
calculated by FAHP, the performance ranking order of the three the 55 evaluation indexes are selected as being suitable for bank-
banks using SAW is C Bank U Bank S Bank. The ranking or- ing performance in terms of BSC perspectives; 2. By applying the
der is the same as the results derived from both TOPSIS and VI- FAHP, the order of relative importance of the four BSC perspec-
KOR. However, the result found that it was evident that the nal tives for banking performance is C: Customer, F: Finance, L:
values calculated by VIKOR distinguished the banking perfor- Learning and growth, and P: Internal process. The top ve pri-
mance among the three banks. This nding is consistent with orities of the evaluation indexes are C1: Customer satisfaction,
previous studies (Chu, Shyu, Tzeng, & Khosla, 2007; Opricovic F3: Return on assets, F4: Earnings per share, C4: Customer
& Tzeng, 2007). retention rate, and C2: Prot per customer, respectively; and
When comparing the performance of S Bank with that of the 3. Using the fuzzy weights of the criteria calculated by FAHP,
other two banks, as shown in Table 5, it is evident that S Bank the ranking of the banking performance of the three banks by
has the poorest performance value in the Customer dimension employing the MCDM analytical methods is U Bank, C Bank, and
while this is the most important BSC factor according to the ex- S Bank, respectively. Based on our ndings the following sugges-
perts. As far as the evaluation indexes within the Customer tions are made. First, since there is no one performance evalua-
dimension are concerned, S Bank has the lowest performance va- tion index to t all, performance evaluation indexes should be
lue in the market share rate index. This implies that increasing tailored to meet the organizations overall goals as well as the
its market share must be considered a crucial factor in that objectives of each individual unit. Second, the performance evalu-
banks growth strategy. Therefore, in addition to retaining its ation indexes of the BSC perspectives may not be mutually inde-
existing customers, S Bank should also develop new service pendent. Other analytical methods (e.g. fuzzy integral, Analytic
items and/or provide more and improved promotions to attract Network Process, etc.) can be employed to solve the interactive
new customers in order to keep up with the other two banks. and feedback relations among indexes. Third, future research
Based on the performance analysis, it is evident that the main may utilize several other techniques to investigate the casual
reason for S Bank being ranked lowest is due to the fact that relationships among performance evaluation indexes of the BSC
its performance values from a customer perspective are poor. to objectively build strategy maps. Finally, exploring more cases
Therefore, for S Bank to improve its performance, it must rst and conducting more empirical studies are recommended to fur-
put more emphasis on customer satisfaction, and then on nan- ther validate the usefulness of the proposed performance evalua-
cial return. tion model.
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