The board of directors has selected three possible candidates (Tom, Dick and Harry), but they are struggling to decide who will be the new CEO since some BOD members aren't sure which skills should be prioritized in this process.Resilience is a complex system that represents dynamic behaviours through its complicated structure with various nodes, interrelations, and information flows. Imagine that we need to select a new CEO for a traditional, big company. Let's go through a simple, existent example published on wikipedia understand how the AHP really works. These numbers represent each alternative's relative ability to achieve the decision goal and voila, you have your rational decision! A Practical Example In the final step of the process, numerical priorities are calculated for each of the decision alternatives. A numerical weight is derived for each element of the hierarchy, allowing diverse and often incommensurable elements to be compared to one another in a rational and consistent way. The AHP then converts these evaluations into numerical values that can be processed and compared over the entire range of the problem. In fact, the premise that human judgments can be used in performing evaluations is essential to the AHP. In making the comparisons, the decision makers can use concrete data about the elements, but they typically use their own judgments about the elements' relative meaning and importance. Once the hierarchy is built, the decision makers evaluate various alternatives by comparing them to each other two at a time. Saaty in the 1970s, AHP, or Analytic Hierarchy Process, is a technique for group decision making wherein the problem is decomposed into a hierarchy of more easily comprehensible sub-problems, each of which can be analyzed independently. The AHP MCDM Methodĭeveloped by Thomas L.
Here's how AHP can be used to easily make a complex decision. We'll focus on AHP today since it's mathematically simple compared to the other methods listed above and since it allows us to compare criteria without previously assigning numeric metrics to them. An assumption of TOPSIS is that the criteria are monotonically increasing or decreasing.įinally, we have AHP, one of the most widely used MCDM Methods. TOPSIS (Technique for Order of Preference by Similarity to Ideal Solution) is a method of compensatory aggregation that compares a set of alternatives by identifying weights for each criterion, normalizing scores for each criterion, and calculating the geometric distance between each alternative and the ideal solution, which is the best score in each criterion. This MCDM Method is based on fuzzy logic and is used to address problems whose variables are partly known and partly unknown, being defined as "insufficient data" and "weak knowledge." The idea is to have a large amount of input data and to examine it in an interactional manner. Grey Theory's decision making techniques are highly mathematical. The decision maker uses concordance and discordance indices to analyze outranking relations among different alternatives and to choose the best alternative using CRISP data. These indices are concordance and discordance matrices. Different versions of both methods have been developed, but all methods are based on the same fundamental concepts they just differ operationally and according to the type of decision being made. The main idea is the proper utilization of “outranking relations.” They enable decision makers to model a decision process by using coordination indices. ELECTRE (ELimination Et Choix Traduisant la REalite) and PROMETHEE (Preference Ranking Organization METHod for Enrichment of Evaluations) are the main methods used in the French family of theory decision studies. These methods allow decision makers to select the best choice with the biggest advantage and the least conflict between various criteria.
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