Measuring Performance in a Multiproduct Firm: An Application to the U.S. Postal Service

Abstract

Measuring performance in a multiproduct firm is difficult because of the complex nature of the firm's output. We present an approach to measuring performance, called operating efficiency which is the ratio of aggregate output to aggregate resource use. We describe how to calculate operating efficiency for a multiproduct organization and demonstrate how it can be used to understand why performance varies across plants and/or through time. Our application of operating efficiency to the U.S. Postal Service is discussed along with the reactions of potential users.