HOW TO PROVE TO YOUR BOSS THAT YOU ARE RIGHT? AHP-IT!
By bSURE Solutions Sdn Bhd
We make decisions everyday in our lives: we decide what to wear, what food to eat, what words to say or which road to take home. The decision-making process begins when we need to do something but do not know what, which leads us to review several possible courses of action and select one. The choice we pick, or the decision we make, can be an action or opinion and our decision-making processes can be based on explicit assumptions or tacit assumptions. The process can also be rational or irrational – everyone can remember some point in their lives where they meticulously analysed every possible choice and they can also recall making gutsy, spur of the moment decisions.
The decisions a business has to make can be mind-boggling. For example, let’s say you want to decide the location of your restaurant. You will have to take into account factors such as convenience, access to public roads, crime rates and locations costs, not to mention neighbouring shops and competitors. One will have to consider many points. For instance: how many people will walk or drive past the shop? Is there enough parking? Will the building have to be re-modelled or repainted to fit your needs? All these considerations just for deciding the location of the restaurant, and we have not even gone into deciding what type of promotional materials to use.
Analytic Hierarchy Process, or AHP, is a technique researched and devised by Professor Thomas Saaty, Pittsburgh University, USA in the late 70’s. It is a structured technique based on mathematics and psychology that helps users to determine a “correct” decision instead of prescribing one. Designed to reflect how people think, AHP is a flexible decision-making tool that helps the decision-making process by allowing priorities to be set and reducing complex decisions to a series of one-on-one comparisons.
In AHP, a problem is represented by a hierarchical representation. The goal or objective is placed at the top of a multi-criteria tree hierarchy while the decision alternatives are placed at the bottom. In between, are the criteria or aspects of the problem systematically evaluated by comparing each criterion to all other criteria in pair.
The criteria can be evaluated based on facts or subjective judgments from the decision maker. These evaluations are then converted to numerical values that are compared throughout the entire hierarchy, allowing for diverse and seemingly incomparable elements to be compared against one another in a rational way.
It has seen usage in numerous fields from risk management, candidate evaluation, architecture and many other areas where prioritisation is important. It allows a person to make an accurate analysis of possible choices, and even includes subjective factors, such as visibility and convenience. For example, returning to the previous example of deciding on the location of a restaurant, there are many criteria to consider, such as adequate parking, crime rates and so forth.
By using AHP, the user can evaluate trade-offs and generate consistent weights based on which criterion is more important. Each criterion is then rated, and each possible location of the restaurant is compared with respect to the various criteria and finally, the location with the best score is selected. What sets AHP apart is its ability to help users handle elements that are rational, irrational or intuitive and deal with any uncertainties that are present in the decision-making process.
In the case of evaluating the training needs of an employee, having determined the various competencies of a position or role, we will find that not all competencies are of equal importance to their organisational responsibilities and objectives. With many criteria to evaluate, determining the priorities of the training needs can be a headache for many supervisors.
AHP is structured, systematic and mathematically proven technique that has received worldwide attention. Many Fortune 500s have used it in many complex and mission critical business decisions. Decision making can be trained.
So, the next time you have a problem-solving assignment and you need to rationalise to your boss of your recommendation, do not rely on your guts feeling. AHP-It!
Why gamble when you can be sure?
References: 1. http://en.wikipedia.org/wiki/Analytic_Hierarchy_Process