This study proposes a multi-dimensional system of
performance measures applicable to hierarchical organizations
such as multi-plant manufacturing firms, bank or
retailing networks, restaurants chains, or other organizations
where different decision making rights are assigned
to different levels of a hierarchy. We have been motivating
our approach, and will illustrate it below, in the context
of a bank with a large branching network. The performance
dimensions measured are inherent in the strategies
pursued by the branches operating within each of 17 distinct
regional banking groups of a parent bank in our case.
Within each regional banking group two decision-making
levels, each with its own objectives, interact—one at the top
bank level and another at the branch level (i.e., the retail
banking network). We assume that managers (at either
the regional or branch level) act to maximize their own
objectives: (1) the top bank managers aim at maximizing
the NBP by making decisions about the locations, resource
allocations, and “product-mix” strategies of the branches;
and (2) the branch managers make decisions to optimize
their commissions, which are directly related to branch
performance. While the objectives at the two levels of the
hierarchy may be different in nature, our performance evaluation
model links these two objectives as part of the overall
objective of the organization. Within our framework, we