How to easily make complex decisions?

Author: Dr. Dawid Jasinski, PMP, PMI-ACP

Analytic Hierarchy Process is a multicriteria decision-making model. Using AHP for fact-based decision making leads to better choices not only during project portfolio composition but also in all complex or emotionally/politically burden decisions.

Autor

Dr. Dawid Jasinski

How to make a difficult decision? Alone or as a team? Based on facts or emotion?

It depends on the decision.

In business, decisions made under the influence of emotions are usually the best – FOR COMPETITION.

Whether a decision should be made on its own depends on the rank of the decision and the decision-maker. Each of us makes many decisions every day that do not have a significant impact on our or someone else’s life. We do not need to consult them because we have enough competences to make them consciously and responsibly.

When a decision goes beyond our competence or its consequences have a significant impact on others or business, we like to consult others. We do this to get a different point of view or to make sure that we are correct in our beliefs.

The most significant difficulty in making important decisions is to assess their impact on many factors simultaneously.

Choosing between coffee and tea for breakfast seems neither complicated nor difficult. It is because of the consequences of this choice. Neither will they kill nor strengthen us.

However, if we had to decide whether to have coffee or tea for breakfast for the rest of our lives, it would be a little more challenging to make a decision. This decision will have an impact on the rest of our lives; perhaps not on the critical issue, but the consequences will be much higher than in the first case. It would probably be worth considering the long-term effects of coffee on health or the shade of tooth enamel. Maybe when making a choice, the price of each drink would play a role? Possibly taste would be vital in making the decision? Would taste be more important than price? And over health?

A seemingly easy decision gets complicated when its consequences will accompany us for a long time.

And what if the choice between coffee and tea would affect all members of our family?

An example of a decision that is easy but complicated is the choice of projects to implement. Project proposals often compete for the same resources, have different rates of return in the short and long term, different cash flow, different levels of risk. Moreover, the implementation of a given project is often in the interest of different groups, which try to influence their position or emotions in decision making.

In making the best decision, taking into account many criteria, mathematical methods come into play. One of them is the Analytical Hierarchy Process (AHP). This tool allows us to make the best choice taking into account many criteria and their mutual relationship. Decision making is done in three stages:

  1. Definition and assessment of the importance of each assessment criterion
  2. Definition and evaluation of alternative decisions concerning individual assessment criteria
  3. Summary assessment of alternative decisions against the different assessment criteria

People are not very accurate at making absolute estimates, they are better at (and more comfortable with) making comparative (relative) estimates [Griffiths 2012 p. 276]. AHP is based on making relative estimates. In other words: we do not evaluate on a numerical scale independently of individual, alternative choices, but determine how much decision 1 is better or worse than decision 2 in terms of the evaluation criterion chosen.

The AHP tool also assesses whether our assessments of the validity of individual criteria are logically consistent. Let us assume that A>B>C. In this case A>C. The more logically inconsistent our assessments are, the higher the consistency ratio will be. When the consistency ratio is equal to or less than 0.1, this means that our grades are consistent.

An algorithm for the analytical hierarchy process

To take advantage of AHP, you can:

  1. build your tool based on free knowledge from the Internet (links below)
  2. use ready-made paid solutions (links below)
  3. download the free tool I created for you

Go to the “Step 1” tab

1.1 Enter the number of evaluation criteria in cell E3. Using the above example of the choice between coffee and tea, these will be taste, price, health. As a result, the size of the matrix at the bottom of the page will be adjusted.

1.2 Name each criterion by entering their names in cells B6-B8.

1.3 Click on cell F10. It will assign the names to the rows and columns of the matrix.

1.4 Complete the matrix. In the matrix, we always compare two criteria; one from the row and the other from the column. At the intersection of the row with the column, enter the value of the assessment of the criterion in the row against the criterion in the column. For example, in the picture below, we assess whether health values are more important than taste. Number 7 means that health values are much more important to me than taste. If the taste would be a bit more critical for me than health values, then in cell E15 (on the other side of the diagonal) I would write, e.g. 4. Remember that you always evaluate the row against the column. Number 1 means that both criteria are equally important for you. Therefore, on the diagonal matrix, the digits one are written. It is crucial to write the figures ONLY on one side of the diagonal- for one cell couple. If cell C17 is filled, then cell E15 is left empty.

Another way to fill the matrix is to enter the digits only on one side of the diagonal. In this case, if you want to assess that taste is more important than health, enter “=1/x” in cell C17 where x stands for taste evaluation BEFORE the health value.
1.5 Click on cell F12. The empty fields of the matrix will be filled in. Note that the remaining cells are filled in according to the formula 1/x above—for example, D15=5. Figure 0.2 appears on the diagonal in C16, because 1/5=0.2.

Also a new table of “Weights {W}” has appeared. There are the weights of each criterion. Taste=0.19, Price=0.06, Health Values=0.75. It follows that, in my opinion, health values are the most important criterion. The least significant is the price.

The last new element is the consistency ratio. Its value is higher than 0.1. It means that my assessments were not logically consistent. It is not a disqualifying factor in the calculation, but it is worth looking again at the assessment I made and may improve some of them. After changing the value in cell D15 from 5 to 2, the consistency ratio has dropped below 0.1. That means that the grades are consistent.

Go to the “Step 2” tab

2.1 In the first step, we give the number of alternative decisions in cell E3, between which we choose. The number of projects to be assessed is mentioned in the sheet. This is because I have created this sheet to evaluate and select the project to be implemented from among several possibilities.

2.2 Name each alternative in cells B6-B8.

2.3 Click on cell F10 to create a matrix of the correct size and give names to the individual rows and column of the matrix.

2.4 Fill in all the arrays in the same way as the array in the “Step 1” tab. As you have probably noticed, there are as many matrices as the evaluation criteria. It is because we will now evaluate all alternative decisions concerning the evaluation criteria defined in the first step.

2.5 When the matrices are completed, click on F12. The empty fields of the matrixes will be completed automatically, the weights of the alternative decisions and the Consistency Ratio discussed earlier will be counted. It is time for the last step.

Go to the “Step 3” tab

Click on cell B3, and you will get the final results. In the table on the left, you can see which selection scored the most points. In my example, this is tea. In the table on the right, you can see a summary of the weights of the individual evaluation criteria for evaluating both alternatives. Below the table are the weights of the criteria.

AHP can be used to make team decisions

Then each person makes separate calculations. Next, the final results are summed up. The alternative with the highest score is the winner.

AHP can be used to make many complicated decisions, both individually and as a team. This method can also be used to select projects for implementation according to specific criteria. The selection of projects using AHP allows to significantly reduce the impact of emotions and political games on the decision made. 

Simple Tool to Make Dificult Decisions

Download the AHP template & application guideline

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