Measurement of Managerial Performance Based on Two-Stage Relative Efficiency Method

Two-stage relative efficiency model, a newly named analytical method, is presented here in order to measure managerial performance fairly. This method evaluates managerial performance by eliminating the influence of existing conditions. Empirical results show that managers in firms with relatively superior existing conditions still need to work hard to maintain their competitiveness and achieve better than before performance. On the other hand, managers in those firms with relatively inferior existing conditions can also achieve better than before performance and fair evaluation if they conscientiously make great efforts. The method presented here can avoid penalizing good managers who manage within an unfavorable existing condition as well as avoid rewarding poor managers who manage in a favorable existing condition. In a word, the two-stage relative efficiency model is an equitable and objective measuring method for efficiency.