Internal Performance Evaluation: the Case of Bank Branches

This paper proposes a new approach for gauging the performance of branch managers of a financial institution by defining a Measure of Internal Performance (MIP). Our proposal is different from others existing in the literature in two main aspects. Firstly, it is consistent with the requirements of internal evaluation because it uses the managers’ real preferences instead of assuming them. Secondly, it takes into account that each branch has a different target to achieve according to its specific characteristics. We show how MIP can be used as a management tool. This measure is grounded in extant theory, especially in the recent disappointment models proposed by Jia, Dyer and Butler (2001). This paper is one of the very first to apply the disappointment models to evaluate the internal performance of an organisation.