The Rational Framework for Making Decisions
The Analytic Hierarchy Process (AHP) is the framework that enables decision makers to structure decisions hierarchically with Decision Lens. In the hierarchy, the overall goal of the decision is at the top of the model and strategic objectives are in the higher levels. Evaluation criteria are in the middle levels, and alternative choices are at the bottom. The process takes place as follows:
-
Set priorities on each level of the hierarchy using pair-wise comparisons.
At a given level on the hierarchy, decision makers evaluate each pair of decision factors, and make judgments as to their relative importance. The consistency of the judgments is tracked using the rigorous math analytics behind the AHP to validate the decision process. Where consistency is below 90%, criteria and judgments should be revisited. -
Create the decision making model
Decision makers are then able to create a model of their priorities, where the weight of the decision is distributed downwards from the top goal. -
Test the impact of changing priorities using AHP sensitivity analysis
Sensitivity analysis ensures that when a decision maker increases the weight of a criterion, the alternatives that performed well on that criterion will always get higher scores. Shown graphically, sensitivity analysis is extremely valuable for testing the impact of changing priorities on alternative business decision choices. -
Define business rules for budget allocation for a true portfolio-based framework
Decision makers can define business rules for budget allocation using Decision Lens’ linear programming optimizer. They can then allocate resources across investment alternatives to maximize business value. Optimization enables decision makers to effectively manage investments in projects and people using a true portfolio-based framework instead of a project-based framework.
[+]