The Analytic Structure Process and Multi-Criteria Performance Management Devices
THE ANALYTIC HIERARCHY PROCESS AND MULTI-CRITERIA
EFFICIENCY MANAGEMENT DEVICES
Stephen L. Liedtka
Assistant Professor of Accounting
Future in the November/December 2005 issue of Cost Management
This newspaper describes the way the Analytic Pecking order Process (AHP), a popular decision-support methodology, is particularly well-suited towards the challenges of implementing a multi-criteria performance management system (MCS) such as the Well balanced Scorecard. To do so , the paper describes AHP technique in detail, and demonstrates AHP by using the method to create a fundamental MCS for any major air travel. Additionally , the paper reviews overall flight performance results generated by MCS and compares the derived ratings to the results from two contending approaches. In the three sets of results, the AHP-based performance ratings correlate maximum with annual stock market returns, providing a lot of evidence that AHP yields a superior version for relating strategy to aktionar wealth.
Acknowledgments: The author gratefully acknowledges the help of Frank Betagt, Larry Bodin, Dick Durand, Larry Gordon, Jim Largay, Marty Loeb, Ella Mae Matsumura, and Expert Decision, Inc. В
Address pertaining to correspondence: Rauch Business Centre, Lehigh University, 621 Taylor swift Street, Bethlehem, PA 18015, USA. Email-based: [email protected] edu.
THE INDUCTIVE HIERARCHY PROCESS AND MULTI-CRITERIA
PERFORMANCE SUPERVISION SYSTEMS
Academics and practitioners extended have contended that the traditional use of just one financial measure of firm functionality, such as revenue or residual income, can result in increased focus on the short-term at the expense of long-term organization health. To advertise a comprehensive view of the organization, therefore , researchers advocate the replacement of classic single-measure devices with models of financial and nonfinancial functionality measures that reflect every vital organization activities. Peter Drucker, as an example, recommended a " well balanced stress upon objectivesвЂќ including market standing up, innovation, output, physical and financial resources, earnings, manager efficiency and development, worker performance and frame of mind, and public responsibility. you More recently, the Balanced Scorecard (BSC) has gained wonderful popularity simply by reviving and significantly improving the " balanced stressвЂќ concept. Make use of a multi-criteria system (MCS) necessitates repeated and often tough comparisons. Decision makers, as an example, must consider the family member importance of selected objectives anytime tradeoffs are essential due to limited firm assets or the presence of inverse relationships among the list of objectives (e. g., certain cost vs . quality decisions). Further, evaluation of total firm or perhaps subunit functionality at the end of a period requires that decision creators somehow get back together measurements of the multiple conditions, which vary in character (e. g., customer-related vs . human resource-related), time frame (historical vs . future-oriented), and dimension unit (e. g., dollars vs . time). The lack of an official method for prioritizing and assessing strategic targets and procedures limits the usefulness in the BSC and other MCS. Devoid of reliable weightings of strategic objectives, for example, an MCS does not precisely communicate the firm's technique, including the depth of hard work that should be devoted to each goal. In addition , for performance analysis, lack of a formal decision-support program leaves people who have an extremely challenging judgment job. In such cases, extant research shows that decision-makers may take poor steps to lessen their intellectual burden. Decision-makers, for instance, present a tendency to ignore BSC measures which might be unique to a subunit, picking instead to consider only those procedures that are common across categories. 2 This kind of paper points out how the Analytic Hierarchy Process (AHP), a common decision-support...