Analytic Hierarchy Process for Effective Decision Making in Project Management Glenn Hamamura Dr. Lawrence Rowland
Decision Making We are all fundamentally decision makers. Everything we do consciously or unconsciously is the result of some decision. Thomas Saaty developer of the AHP method the whole process of managerial decision making is synonymous with the practice of management Nobel Laureate Herbert Simon we believe that AHP must be part of the common knowledge base of an MBA. Saul Gass University of Maryland September 2011 Systems Excellence LLC 2011 2
Decision Making Decision Making is choosing among alternatives in order to attain specific objectives Problem Solving Process Define the Problem Generate Solutions Decide Course of Action Implement Solution Evaluate Solution September 2011 Systems Excellence LLC 2011 3
Making Decisions Intuitive Simple, individual decisions Not critical decisions Analysis and Decision Complex decisions (high stakes) Information gathering and analysis Discussion of tradeoff s and alternatives Analytic Model and Decision Complex decisions (high stakes) Development of a decision model September 2011 Systems Excellence LLC 2011 4
Multi Criteria Decision Analysis Criteria for decision making are selected for each decision Example: for a car selection fuel efficiency, style, reliability Some criteria may be qualitative, while others are quantitative How do you consider these criteria differences? September 2011 Systems Excellence LLC 2011 5
Analytic Hierarchy Process AHP was developed by Dr. Thomas Saaty in the late 1960 s. His goal was to develop a simple, consistent way to make complex decisions September 2011 Systems Excellence LLC 2011 6
AHP Decision Areas Strategic Planning Resource Allocation Source Selection Public Policy Project Selection Complex Decision Making September 2011 Systems Excellence LLC 2011 7
Uses of AHP Policy analysis of the decision to build the National Missile Defense system Used in student admissions, military personnel promotions, and hiring Prioritization of IT initiatives Establish priorities for criteria to improve customer satisfaction Allocation of funds for research Others Reference: Thomas Saaty 2008 September 2011 Systems Excellence LLC 2011 8
AHP Process Goal Criteria Alternatives September 2011 Systems Excellence LLC 2011 9
AHP Example Goal Criterion 1 Criterion 2 Criterion 3 Alternative 1 Alternative 2 Alternative 3 September 2011 Systems Excellence LLC 2011 10
Example Choose a Leader Age Experience Education Charisma Candidate 1 Candidate 2 Candidate 3 September 2011 Systems Excellence LLC 2011 11
More Complex Example Goal select the best job Flexibility Opportunity Security Reputation Salary Location Time Start up Salary potential Criteria Reference: Saaty 2008 Work Top level Domestic International University Alternatives September 2011 Systems Excellence LLC 2011 12
Paired Comparisons 3 Items A, B, C Is A more important than B? Is A more important than C? Is B more important than C? A B C A?? B? C September 2011 Systems Excellence LLC 2011 13
Scale Intensity of Importance Definition Explanation 1 Equal Importance Two activities contribute equally to the objective 3 Moderate Importance Experience and judgment slightly favor one activity 5 Strong Importance Experience and judgment strongly favor one activity 7 Very Strong Dominance is demonstrated in practice 9 Extreme Importance Evidence favoring one activity is the highest possible 2, 4, 6, 8 Intermediate Values September 2011 Systems Excellence LLC 2011 14
Example Style Goal Select a Car Reliability Fuel Efficiency Car A Car B Car C Car D September 2011 Systems Excellence LLC 2011 15
Example Criteria Comparisons Style Reliability Efficiency Style 1 1 / 2 3 Reliability 2 1 4 Efficiency 1 / 3 1 / 4 1 Goal Select a Car Style.3196 Reliability.5584 Fuel Efficiency.1220 September 2011 Systems Excellence LLC 2011 16
Example Pairwise Comparison of Alternatives Style CAR A CAR B CAR C CAR D Reliability CAR A CAR B CAR C CAR D CAR A CAR B CAR C CAR D Efficiency CAR A CAR B CAR C CAR D CAR A CAR B CAR C CAR D CAR A CAR B CAR C CAR D September 2011 Systems Excellence LLC 2011 17
Example Goal Select a Car Style.3196 Reliability.5584 Fuel Efficiency.1220 Car A.116 Car A.37 Car A.30 Car B.247 Car B.29 Car B.24 Car C.060 Car C.07 Car C.21 Car D.58 Car D.26 Car D.25 September 2011 Systems Excellence LLC 2011 18
Example Goal Select a Car Style Reliability Fuel Efficiency.3196.5584.1220 Car A.116 Car A.37 Car A.30 Car A.30 Car B.247 Car B.29 Car B.24 Car B.27 Car C.060 Car C.07 Car C.21 Car C.09 Car D.58 Car D.26 Car D.25 Car D.33 September 2011 Systems Excellence LLC 2011 19
Use Analytic Hierarch Process for Project Selection J.D. Kendrick D. Saaty September 2011 Systems Excellence LLC 2011 20
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Software Demonstration September 2011 Systems Excellence LLC 2011 26
Software Demonstration September 2011 Systems Excellence LLC 2011 27
Software Demonstration September 2011 Systems Excellence LLC 2011 28
Software Demonstration September 2011 Systems Excellence LLC 2011 29
Software Demonstration September 2011 Systems Excellence LLC 2011 30
Software Demonstration September 2011 Systems Excellence LLC 2011 31
Software Demonstration September 2011 Systems Excellence LLC 2011 32
Software Demonstration September 2011 Systems Excellence LLC 2011 33
Presenters Glenn Hamamura, PMP Principal Consultant, Systems Excellence LLC Larry Rowland, Ed.D., PMP Department of Financial Economics and Information Systems, Chair; & Associate Professor of Information Systems, Hawaii Pacific University Mr. Glenn Hamamura is the principal of Systems Excellence LLC, a Hawaii based consulting firm and a PMI Registered Educational Provider. He holds Master of Science and Bachelor of Science degrees from Stanford University, and has been involved in project management in the IT industry for many years. Glenn is also a Stanford Certified Project Manager, a Certified Professional Facilitator (CPF), and an ASQ (American Society for Quality) Certified Manager of Organizational Excellence. He has served as an Examiner for the Malcolm Baldrige National Quality Award (2006 2008) and as a Senior Examiner (2009 through 2011). [glenn.hamamura@gmail.com] Dr. Larry Rowland, PMP, has been teaching project management at Hawaii Pacific University since 1998. He is also co founder and board member of the PMI Honolulu Chapter and adviser to HPU's Project Management Club. Larry trained in the AHP with Dr. Saaty and has used the approach as part of his graduate level course in project management. [lrowland@hpu.edu] September 2011 Systems Excellence LLC 2011 34
References Decision Making with the Analytic Hierarchy Process / Thomas Saaty / 2008 Use Analytic Hierarchy Process for Project Selection / John David Kendrick and Dan Saaty / ASQ August 2007 Decision by Objectives / Ernest Forman September 2011 Systems Excellence LLC 2011 35