The Analytical Hierarch Process – An Aid To Decision Making

Abstract

Multiple‐alternative decisions are commonplace in the business environment. The Analytical Hierarchy Process (AHP) in a business institution is a decision aid which is extremely useful for multiple‐alternative decisions. The AHP prioritizes competing alternatives by assigning percentage points to each alternative in a decision. An explanation of the AHP and its use are given in this article. AHP applications covering forecasting, pricing and budgeting decisions are also discussed. The quantitative rankings generated by the AHP offer the decision maker insight and rigor unavailable in a purely judgmental analysis. A common problem for managers is the quantification of judgmental data. Group and individual judgments are sometimes made on an ad hoc basis with little or no documentation supporting the decision process. Alternative courses of action often are not formally ranked as to their relative importance. Questions concerning the importance of assumptions which surround decisions remain unanswered. A methodology to prioritize alternatives and assumptions in the decision process could aid in solving problems that rely on human judgment.