General problem-solving methodology useful for complex multi-criteria decisions with variables that do not have genuine numerical consequences.
Particularly useful when the decision-maker can provide a logical structure to the problem, but does not have objective data to evaluate alternatives (strategic decision making, for example).
- Helps structure complex problem(s) in an intuitive manner.
- Uses "relative" judgments that are often easier to acquire than absolute judgments.
- Enables managers to more fully and carefully assume the alternatives.
- Allows manager to include qualitative aspects of a dilemma place.
- Has been "validated" in a number of tests.
- Has been widely applied in industry.
Decompose a predicament into hierarchical levels using the following building blocks:
1. Overall Goal (subgoals) to be attained (e.g., best location for store).
2. Criteria and Subcriteria (e.g., store traffic, growth of neighbourhood, etc.).
3. Scenarios (e.g., growing neighbourhood, stable economy, etc.).
4. Alternatives (e.g., suburban shopping mall, stand-alone store, downtown).
Establish priorities concerning alternatives in the hierarchy. This is done by comparing alternatives in a pair-wise manner to assess their relative importance, relative preference, or relative likelihood with respect to criteria at the immediately higher level in the hierarchy. The evaluation is made using either a verbal scale, numerical scale, or a rating scale.
Assess the consistency of the judgments using consistency ratio.
Synthesize priorities at each level to obtain overall priority of each alternative with respect to the necessary goal. The total priority for each alternative is the degree to which that alternative fits all the criteria, subcriteria, and scenarios.
Use sensitivity analyses to watch the alternatives.
1. Reciprocal condition
If A is 5 times more comfortable than B, then B is 1/5th as comfortable as A.
2. Comparability within limit
Alternatives at the same level of a hierarchy should be comparable, that is, individuals must express their intensity of preferences for the alternatives.
3. Principle of hierarchic composition (can be relaxed)
Weights at the higher levels of a hierarchy can be determined independently of the weights estimated at the lower levels. This principle permits weights to be "carried backward" in a hierarchical structure, and is satisfied if evaluation of alternatives is not dependent on criteria and vice versa.
4. Expectations
All alternatives and criteria are represented in the hierarchy, and all alternatives can be ranked by the decision-maker according to the selected criteria.
- Deciding whether to enter a particular market segment.
- Choosing vendors/distributors for long-term relationships.
- Selecting mode of entry into foreign markets.
- Evaluating attractiveness of SBU's.
- Deciding whether to start new product.
- Selecting store area.[i]
Analytical Hierarchy Process – a powerful and flexible decision-making tool for complex, multi-criteria problems where both qualitative and quantitative aspects of a problem need to be incorporated. The AHP helps decision-makers structure the important components of a pickle into a hierarchical structure similar to a family tree. Then, by reducing complex decisions to a series of simple comparisons and rankings, then synthesizing the results, the AHP not only helps you near at the best decision, but also provides a clear rationale for the choice you made.
The basic structure of the hierarchy
A research-based, multicriteria, decision-making management technique is essential for modern project management.
Presented is an article, which discusses a research-based, multi-criteria, decision-making management strategy, the Analytical Hierarchy Process (AHP), that is essential for modern project management. Modern project management decisions are made in an environment often characterized by need for flexibility, complexity, and inclusion of a decision-maker's subjectivity. Typical project management, public or private, involves making decisions on the allocation of resources, choice of project managers, vendor selection, philosophize evaluation, and project selection, in an effective and timely manner. The article illustrates how these types of decisions can be analyzed through the AHP. Using AHP, the decision problems are delineated into hierarchies in the effect of goals, alternatives, and criteria for pair-wise comparisons using Expert Choice software. The article's purpose is to explore how AHP can be employed in helping to make more efficient decisions during the project life cycle. A typical project life cycle includes four phases. The first phase is conceptualizing, which has been recognized and endorsed on a preliminary basis by top management. The second is planning. During this phase, most often, the project has been selected and top management has given the "go ahead" to launch it. The critical decisions in this phase arise from the performance of some functions such as selecting project personnel, determining the availability of resources, and choosing contractors if needed. The third is executing or implementing. During this phase, performance capabilities are continually tested to ensure that the project performs as intended. The fourth is terminating. Important decision analyses in this phase include project audits and evaluations, personnel appraisal, and client acceptance. Article includes a table showing the AHP-based selected decision models.[iii]
A methodology is proposed for the development of a systematic measure of corporate social performance by using several types of managers.
A survey which proposes a methodology for developing a systematic, aggregate measure of corporate social performance (CSP), using information from both the social issues and management science literature is presented. The proposed measure offers the ability to include independent assessments of performance on various dimensions of CSP and the ability to include value judgements of the stakeholders. The proposed measure also zeroes in on outcomes, so that trusty realizations, neither intentions nor perceptions, are measured. In addition, it utilizes a management science technique called the Analytical Hierarchy Process (AHP), a systematic procedure for developing a composite CSP measure that eases problems met in prior measures. There are some advantages to the exhaust of the AHP method to originate an aggregate measure of CSP. First, it directly includes the relative value weights assigned by the various individuals in the final measure. Second, it enables the researcher not to depend on the respondents to offer their idea of performance, but permits data from independent sources to be included in the analysis. Third, it can be utilized with any stakeholder group, any set of social dimensions, and any evaluation data. Article discusses the limitations of the inspect and prior research on measurement of CSP.[iv]
In the performance evaluation of auditors, there was a strong agreement between role expectations of superiors and subordinates.
A ogle which analyzes the dimensions employed in audit practice to evaluate job performance found that role expectations vary significantly at different positions in the firm, as a strong agreement between role expectations of superiors and subordinates was determined to be present. Performance evaluation forms were initially obtained from each of the Big 6 firms to obtain a current evaluation practice background. Seven current dimensions were worked upon, based on examination and form comparison. All of them had associated descriptions. Previous dimensions in the performance evaluation literature were compared to the indicate study's resulting dimensions. The personnel partner of each of the Big 6 firms was then consulted to confirm the representativeness of the seven performance dimensions. The instrument employed was based on the Analytical Hierarchy Process (AHP), which utilizes a comparisons matrix of all pairs of elements, and converts it to a cardinal scale summing to one, having values for each of the elements. Overall results show the changes in role and performance expectations as an auditor moves up in the company hierarchy. It was found that technical proficiency, as well as what might be termed as internally-focused skills, was the main emphasis at the staff level, while management ability becomes more important upon promotion to senior level. Article includes a ratings table for senior position by Rater Group.[v]
[i] (Dr Chris Dubelaar, http://nt00.marketing.unsw.EDU.AU/USER/CHRISD/sess7-4/sld012.htm, 2nd March 1998)
[ii] By Kenneth Crow
DRM Associates© 1998 DRM Associates
All rights reserved.
May be printed for reading, reference and distribution with attribution.
Other use prohibited.
[iii] By Sarfraz A. Mian and Christine Xiaoyi Dai
Copyright 1999 Responsive Database Services, Inc.
Business and Management Practices
Project Management Journal
March 1999
[iv] By Bernadette M. Ruf, Krishnamurty Muralidhar, and Karen Paul
Copyright 1998 Responsive Database Services, Inc.
Business and Management Practices
Journal of Management
No. 1, 1998
[v] By Craig Emby and Lois Deane Etherington
Copyright 1996 Responsive Database Services, Inc.
Business and Management Practices
Auditing: A Journal of Practice & Theory
Fall 1996
