The Guide To Analytic Hierarchy Process

AHP and Strategic Alignment of Projects

The Analytic Hierarchy Process, normally called AHP, is a powerful yet simple method for making decisions. It is commonly used for project prioritization and selection.

AHP lets your capture your strategic goals as a set of weighted criteria that you then use to score projects. It’s the “how” that matters - AHP structures the collaboration between your different stakeholders (executives, business unit heads, subject matter experts, etc.) and uses decision science to improve both the quality of and the buy-in to your decision.

The result is a ranked list of projects - each project having a score between 0 and 100 - that you can use to drive your project selection and resource allocation decisions.

This score represents how well your projects are aligned to your strategic goals and projects that are aligned with strategic goals are 57% more likely to achieve their business goals (read more: 8 Benefits of Strategic Alignment of Projects).

AHP - The best way to prioritize projects?

AHP the best project prioritization method For decades, researchers have been inventing and evaluating different methods of prioritizing projects and, so far, the Analytic Hierarchy Process is the winner.

Project prioritization is a difficult problem. You have a diverse set of stakeholders who want to “get projects done”. You also have a finite set of resources to deliver those projects. There are never enough resources to satisfy everyone’s needs.

Your projects are the mechanism to achieve your strategic goals and picking the wrong projects, therefore, means your organizational performance suffers.

Research carried out in business schools and departments of engineering, in psychology labs and in operations research groups right around the world has invented, refined and evaluated over 100 methods of prioritizing and selecting projects. In 2017, the University of New South Wales published a review of all of this work.

The result is that only two methods of prioritizing projects were found to be suitable, and the one that was deemed to be most usable is the Analytic Hierarchy Process.

How AHP helps reduce decision bias

You portfolio exists to deliver your strategic goals. The challenge is that your stakeholders don’t all agree on which goals are most important. They may not even agree on what the goals really are!

To make matters worse, each individual is, let’s be frank, human. Humans are poor at making rational decisions that involve multiple “dimensions.” As soon as you come up against a decision with more than 2 or 3 “dimensions”, the subconscious kicks in and that’s when the problems really start. Biases will influence the decision without the decision-maker even being aware of it.

AHP helps address this. It structures the decision in a way that helps reduce decision bias, that ensures every voice is heard and that actively builds consensus between your stakeholders. The result, which has been validated by researchers around the world, is better decisions with a strong commitment to action from your stakeholders.

How AHP works

In concept, AHP is very simple. You define and evaluate a set of business goals which translate into weighted criteria. You score each project against those criteria and calculate a weighted score for each project. The process is similar to a weighted score from a spreadsheet or a project prioritization matrix, but with a couple of important differences.

It’s HOW you do the weighting and scoring that differentiates AHP-based project prioritization.

The most important difference between AHP and other methods is the way in which you weight your criteria. AHP breaks this question up into a number of small judgments. You are shown pairs of criteria and then tell the software which criterion is more important (and by how much).

Analytical Hierarchy Process - Pairwise Comparison

This simple process helps reduce bias because each judgement is “small enough” for you to make it rationally, without relying on the (biased) subconscious.

Crucially, AHP is also a team sport. Your various stakeholders get to vote on which criterion is more important. Sometimes there will be good alignment, but other times, such as in the following image, the stakeholders disagree.

Analytical Hierarchy Process - Consensus

Identifying the differences of opinion allows you to have a quick discussion about why your stakeholders disagree. This process encourages your stakeholders to listen to each other and to learn about other teams’ needs. It means the issue is viewed from a number of different directions, reducing any individual’s bias.

The “loudest voice” no longer wins just because it is the loudest voice.

When the group comes to agreement on what the overall vote should be, everyone understands where this vote came from and, typically, the stakeholders walk away from this discussion with a strong sense of ownership.

When you’ve going through all the pairs of criteria, AHP software like TransparentChoice will find the best fit to your data and will calculate the weighting for your criteria.

Now you’re ready to start, scoring your projects against the criteria. This should also be a team sport.

Good AHP software lets you bring together different opinions on how a project might, for example, improve customer retention. Crucially, different perspectives help improve the quality of the decision, but they also help build buy-in and trust in the scores you finally calculate.

Which, of course, is the next step. Combining the weighted criteria with the scores for each project gives you a weighted score for each project. You should end up with something like this; a ranked list of projects that you can use to make project selection and resource allocation decisions.

Analytical Hierarchy Process - Ranking

Why AHP-based Spreadsheets Fail

Some people try to use spreadsheets that do all the maths of AHP.

But that’s totally missing the point.

AHP is about people. It’s about collaboration. It’s about knowledge-sharing and consensus-building and a spreadsheet simply won’t do that for you. Implement AHP in a spreadsheet will often leave stakeholders confused and with a sense that this is “decision-making by numbers” and has nothing to do with the real world.

AHP-based project prioritization software is a pretty rare beast and we like to think that TransparentChoice’s software is the best. We certainly put a lot of effort into making it easy to use and to keeping the cost of ownership down.

It’s this ease of use, the visual nature of collaborative voting and the discussions that follow that transforms AHP from an exercise in math to a powerful tool to make great decisions, ones that enjoy strong buy-in.

If you’re considering using AHP to help prioritize your projects, here are 5 questions to ask before deciding on a project prioritization tool.

AHP - making other decisions

Of course, AHP is not only used in project prioritization. Some of the most common decisions made using AHP include:

  • Project prioritization and selection
  • Procurement
  • Site selection (e.g. “Where should we build our new warehouse / road / airport?”)
  • Technology selection
  • Strategy development
  • Evaluating different design options
  • Stakeholder engagement (e.g. to determine product roadmap, to select the location of an airport or to help develop government policy)
  • Trade studies
  • Hiring

In fact, the analytic hierarchy process is a great method to use any time one or more of these conditions is met:

  • Your decision has multiple stakeholders
  • Your decision is long-lasting
  • Your decision has a significant impact on your organization
  • Your decision involves a large expenditure of money or resources
  • You need to “prove” you made a good decision

To learn more, you can download this AHP Brochure.

AHP for students and academics

Over 800 academics and students have used TransparentChoice to support their research and learning. We offer free AHP software that allows students to become familiar with the basics of AHP without overloading them with “enterprise capable” features.

For researchers, we offer the Academic Sponsorship Program. This program lets qualifying researchers access our powerful enterprise-strength software at greatly reduced prices in return for participating in our AHP knowledge-sharing program. This program is designed to help AHP research make the leap from the lab to the real-world.