Professional Documents
Culture Documents
Problem Solving
Creative Thinking and Decision
Making are the corner stones of
Problem Solving
Decision Making
Present and likely future?
Creative Thinking
Problem to solve? What to brainstorm?
Opportunity to seize? How to structure?
Best action?
Resource allocation?
Solution Strategy
Implementation
• Design, Planning and Action
• Physical (engineering) and Behavioral
(management)
A Simple Example of Ranking
You have five people ranked on three
criteria: age (in years), wealth (in dollars)
and health (in relative priorities), how do
you determine their overall ranks. Assume,
in addition for this exercise, that the
younger a person is the more favorable it is
for his/her rank with respect to age.
Part 1: Decision Making Challenges
Source: Why Decisions Fail - Author Paul Nut - Publisher; Berret & Koehler 2002
20 year study of over 400 business decisions from Public, Private and Not-
For Profit organizations in the United States, Canada & Europe.
Current State of Corporate Decision Making
• Only 37% of decision makers said they have a
clear understanding of what their organization
is trying to achieve.
• Only 1 in 5 was enthusiastic about their team’s
and organization’s goals.
• Only 1 in 5 said they have a clear line of site
between their tasks and their organization’s
goals.
SOURCE: Harris Poll of 23,000 respondents
Inefficient Meetings
• 11 Million meetings in the U.S. per day
• Most professionals attend a total of 61.8 meetings per
month
• Research indicates that over 50 percent of this
meeting time is wasted
• Professionals lose 31 hours per month in
unproductive meetings, or approximately four work
days
• A network MCI Conferencing White Paper. Meetings in America: A study of trends, costs and attitudes toward business
travel, teleconferencing, and their impact on productivity (Greenwich, CT: INFOCOMM, 1998), 3.
• Robert B. Nelson and Peter Economy, Better Business Meetings (Burr Ridge, IL: Irwin Inc, 1995), 5.
Benefits from Structured Decision Making
• Increase the success of decisions made by at least 50%
• Increase benefits by blending diverse perspectives
• Achieve and sustain more excellent operational performance
• Maximize return on investments in business change
• Increase business leadership and stakeholder confidence and
commitment
• Achieve more consistent business performance
• Sustain increasing business prosperity
Source: Why Decisions Fail - Author Paul Nut - Publisher; Berret & Koehler 2002
20 year study of over 400 business decisions from Public, Private and Not-For Profit
organizations in the United States, Canada & Europe.
Benefits of Systematic Decision Making
Strong Pressures
and Weakened Resources
Vested Interests
Conflicting Values
Most Decision Problems are Multicriteria
• Maximize profits
• Satisfy customer demands
• Maximize employee satisfaction
• Satisfy shareholders
• Minimize costs of production
• Satisfy government regulations
• Minimize taxes
• Maximize bonuses
Knowledge is Not in the Numbers
Isabel Garuti is an environmental researcher whose father-in-law is a master chef
in Santiago, Chile. He owns a well known Italian restaurant called Valerio. He
is recognized as the best cook in Santiago. Isabel had eaten a favorite dish
risotto ai funghi, rice with mushrooms, many times and loved it so much that she
wanted to learn to cook it herself for her husband, Valerio’s son, Claudio. So
she armed herself with a pencil and paper, went to the restaurant and begged
Valerio to spell out the details of the recipe in an easy way for her. He said it
was very easy. When he revealed how much was needed for each ingredient, he
said you use a little of this and a handful of that. When it is O.K. it is O.K. and it
smells good. No matter how hard she tried to translate his comments to
numbers, neither she nor he could do it. She could not replicate his dish.
Valerio knew what he knew well. It was registered in his mind, this could not
be written down and communicated to someone else. An unintelligent
observer would claim that he did not know how to cook, because if he did, he
should be able to communicate it to others. But he could and is one of the best.
Knowing Less, Understanding More
Summerland
Population 3001
Feet Above Sea Level 208
Year Established 1870
Total 5079
Temperature
OBJECTIVITY!?
How do we manage?
Organizing the Ways to Access,
Connect, and Prioritize Information
• We cannot use randomly gathered information very well without
thinking in organized ways. The best way to use the plethora of
sporadic, randomly acquired information in our memories is to create
well-organized complex structures and represent the basic concepts
with criteria and alternatives with which such information deals and
then do prioritization to determine what is important and what is not.
We quickly learn that we know much to use in predicting what
happens in the real world than we can do without such systematic ways
to represent understanding. We have no better ways to do it. The
modern computer is a gift that we can use to deal with complexity to
enhance the power of our minds. Without them it is extremely difficult
to mange complexity in the integrated ways that now we can. It is a
new revolution for better decision making.
Making a Decision
Car: A B B
V V V
Alternatives: B A A
Suppose the criteria are preferred in the order shown and the
cars are preferred as shown for each criterion. Which car
should be chosen? It is desirable to know the strengths of
preferences for tradeoffs.
To understand the world we assume that:
We can describe it
CRITERIA
ALTERNATIVES
Relative Measurement
The Process of Prioritization
In relative measurement a preference, judgment
is expressed on each pair of elements with respect
to a common property they share.
Apple A 1 2 6 6/10 A
Nicer ambience
comparisons
Normalized Ideal
Paris 1 2 5 0.5815 1
Politician
Normalized Total
comparisons
B. Clinton
1 3 7 0.6220 1
M. Tatcher
1/3 1 5 0.2673 0.4297
• TASTE
• AROMA
• RIPENESS
The Analytic Hierarchy Process (AHP)
is the Method of Prioritization
• AHP captures priorities from paired comparison judgments of the
• elements of the decision with respect to each of their parent criteria.
Equal importance
Moderate importance of one over another
Strong or essential importance
Very strong or demonstrated importance
Extreme importance
Fundamental Scale of Absolute Numbers
Corresponding to Verbal Comparisons
1 Equal importance
3 Moderate importance of one over another
5 Strong or essential importance
7 Very strong or demonstrated importance
9 Extreme importance
2,4,6,8 Intermediate values
Use Reciprocals for Inverse Comparisons
0.05
0.47
0.10
0.15 0.24
Which Drink is Consumed More in the U.S.?
An Example of Estimation Using Judgments
Drink
Consumption
in the U.S. Coffee Wine Tea Beer Sodas Milk Water
Coffee 1 9 5 2 1 1 1/2
Wine 1/9 1 1/3 1/9 1/9 1/9 1/9
Tea 1/5 2 1 1/3 1/4 1/3 1/9
Beer 1/2 9 3 1 1/2 1 1/3
Sodas 1 9 4 2 1 2 1/2
Milk 1 9 3 1 1/2 1 1/3
Water 2 9 9 3 2 3 1
Food Consumption
in the U.S. A B C D E F G
A: Steak 1 9 9 6 4 5 1
B: Potatoes 1 1 1/2 1/4 1/3 1/4
C: Apples 1 1/3 1/3 1/5 1/9
D: Soybean 1 1/2 1 1/6
E: Whole Wheat Bread
(Reciprocals) 1 3 1/3
F: Tasty Cake 1 1/5
G: Fish 1
The resulting derived scale and the actual values are shown below:
Steak Potatoes Apples Soybean W. Bread T. Cake Fish
Derived .345 .031 .030 .065 .124 .078 .328
Actual .370 .040 .000 .070 .110 .090 .320
(Derived scale has a consistency ratio of .028.)
WEIGHT COMPARISONS
Comparison Cairo Tokyo Chicago San London Montreal Eigen- Distance to Relative
of Distances Francisco vector Philadelph Distance
from ia in miles
Philadelphia
Cairo 1 1/2 8 3 3 7 0.263 5,729 0.278
Tokyo 3 1 9 3 3 9 0.397 7,449 0.361
Chicago 1/8 1/9 1 1/6 1/5 2 0.033 660 0.032
San 1/3 1/3 6 1 1/3 6 0.116 2,732 0.132
Francisco
London 1/3 1/3 5 3 1 6 0.164 3,658 0.177
Montreal 1/7 1/9 1/2 1/6 1/6 1 0.027 400 0.019
Relative Electricity Consumption (Kilowatt Hours) of Household Appliances
Annual
Electric Actual
Consumption Elec. Dish Hair
Refrig TV Iron Radio Eigen-vector Relative
Range Wash Dryer
Weights
Electric
1 2 5 8 7 9 9 .393 .392
Range
Refrig-
1/2 1 4 5 5 7 9 .261 .242
erator
Dish-
1/8 1/5 1/2 1 4 9 9 .110 .120
washer
C1 C2 C3 C4
C1 1 5 6 7
C2 1/5 1 4 6
C3 1/6 1/4 1 4
C1 C2 C3 C4
C1 1 4 6 7
C2 1/4 1 3 4
C3 1/6 1/3 1 2
C2 .23 .22
C3 .10 .09
C4 .05 .06
Square of Reciprocal
Normalized normalized of previous Normalized
Distance distance distance column reciprocal
64
Antares is the 15th brightest star in the
sky.It is more than 1000 light years away.
Comparing a Dog-Catcher w/ President
Comparing a Dog-Catcher w/ President
Goal
Satisfaction with School
L F SL VT CP MC Weights
Learning 1 4 3 1 3 4 .32
B .59 .33 .09 .05 .50 .09 .38 B 1 1 .20 .07 .50 .13 .73 .39
C .25 .33 .46 .17 .25 .22 .25 C .42 1 1 .22 .50 .32 .50 .27
The Distributive mode is useful when the The Ideal mode is useful in choosing a best
uniqueness of an alternative affects its rank. alternative regardless of how many other
The number of copies of each alternative similar alternatives there are.
also affects the share each receives in
allocating a resource. In planning, the
scenarios considered must be comprehensive
and hence their priorities depend on how many
there are. This mode is essential for ranking
criteria and sub-criteria, and when there is
dependence.
A Complete Hierarchy to Level of Objectives
Focus: At what level should the Dam be kept: Full or Half-Full
Decision
Congress Dept. of Interior Courts State Lobbies
Makers:
Protect
Objectives: Irrigation Flood Control Flat Dam White Dam Cheap Power
Environment
GOAL
Very Good Masters 6-15 years Very Good Above Avg. Above Avg.
(0.28) .28/.48 = .58 (0.25).25/.59 =.43 (0.25) (0.21) (0.23) (0.23)
Bachelor
Good (0.11) etc. 3-5 years Good Average Average
(0.16) .16/.48 = .33 (0.10) (0.11) (0.10) (0.14)
High School
Below Avg. (0.05) 1-2 years Poor Negative Below Avg.
(0.05) .05/.48 = .10 (0.04) (0.04) (0.04) (0.06)
Unsatisfactory Unsatisfactory
(0.03) .03/.48 = .06 (0.03)
Final Step in Absolute Measurement
Rate each employee for dependability, education, experience, quality of
work, attitude toward job, and leadership abilities.
Dependability Education Experience Quality Attitude Leadership Total Normalized
0.0746 0.2004 0.0482 0.3604 0.0816 0.2348
Esselman, T. Outstand Doctorate >15 years Excellent Enthused Outstand 1.000 0.153
Peters, T. Outstand Masters >15 years Excellent Enthused Abv. Avg. 0.752 0.115
Hayat, F. Outstand Masters >15 years V. Good Enthused Outstand 0.641 0.098
Becker, L. Outstand Bachelor 6-15 years Excellent Abv. Avg. Average 0.580 0.089
Adams, V. Good Bachelor 1-2 years Excellent Enthused Average 0.564 0.086
Kelly, S. Good Bachelor 3-5 years Excellent Average Average 0.517 0.079
Joseph, M. Blw Avg. Hi School 3-5 years Excellent Average Average 0.467 0.071
Tobias, K. Outstand Masters 3-5 years V. Good Enthused Abv. Avg. 0.466 0.071
Washington, S. V. Good Masters 3-5 years V. Good Enthused Abv. Avg. 0.435 0.066
O’Shea, K. Outstand Hi School >15 years V. Good Enthused Average 0.397 0.061
Williams, E. Outstand Masters 1-2 years V. Good Abv. Avg. Average 0.368 0.056
Golden, B. V. Good Bachelor .15 years V. Good Average Abv. Avg. 0.354 0.054
The total score is the sum of the weighted scores of the ratings. The
money for raises is allocated according to the normalized total score. In
practice different jobs need different hierarchies.
Should U.S. Sanction China? (Feb. 26, 1995)
BENEFITS
Protect rights and maintain high Incentive to Rule of Law Bring China to Help trade deficit with China
make and sell products in China (0.696) responsible free-trading 0.206) (0.098)
Yes .80 Yes .60 Yes .50
No .20 No .40 No .50
Yes 0.729 No 0.271
COSTS
$ Billion Tariffs make Chinese products Retaliation Being locked out of big infrastructure
more expensive (0.094) (0.280) buying: power stations, airports (0.626)
Yes .70 Yes .90 Yes .75
No .30 No .10 No .25
Yes 0.787 No 0.213
RISKS
Long Term negative competition Effect on human rights and Harder to justify China joining WTO
(0.683) other issues (0.200) (0.117)
Yes .70 Yes .30 Yes .50
No .30 No .70 No .50
Yes 0.597 No 0.403
6 . . No
. . .. .
5
. . Yes
. . .. . . . ...
4
.. . . . ... .
3 . . . ..
2
.
1
0 6 18 30 42 54 66 78 90 102 114 126 138 150 162 174 186 198 210
Experiments
Whom to Marry - A Compatible Spouse
Security
Affection
CASE 1: Marry Not Marry
Loyalty
Relative Interest Forward Exchange Official Exchange Relative Degree of Confi- Size/Direction of U.S. Past Behavior of
Rate Rate Biases Market Intervention dence in U.S. Economy Current Account Exchange Rate
.423 .023 .164 .103 Balance .252 .035
Federal Size of Bank of Forward Size of Consistent Erratic Relative Relative Relative Size of Anticipated Relevant Irrelevant
Reserve Federal Japan Rate Forward Inflation Real Political Deficit Changes
Monetary Deficit Monetary Premium/ Rate Rates Growth Stability or
Policy Policy Discount Differential Surplus
.294 .032 .097 .007 .016 .137 .027 .019 .008 .032 .032 .221 .004 .031
Tighter Contract Tighter High Premium Strong Strong Higher More More Large Decr. High High
.191 .002 .007 .002 .008 .026 .009 .013 .048 .048 .016 .090 .001 .010
Steady No Chng. Steady Medium Discount Mod. Mod. Equal Equal Equal Small No Chng. Med. Med.
.082 .009 .027 .002 .008 .100 .009 .006 .003 .022 .016 .106 .001 .010
Easier Expand Easier Low Weak Weak Lower Lower Less Incr. Low Low
.021 .021 .063 .002 .011 .009 .001 .003 .006 .025 .001 .010
Focus Costs
Best Alternative
Group Decision Making
and the
Geometric Mean
Suppose two people compare two apples and provide the judgments for the larger
over the smaller, 4 and 3 respectively. So the judgments about the smaller relative
to the larger are 1/4 and 1/3.
Arithmetic mean
4+3=7
1/7 ≠ 1/4 + 1/3 = 7/12
Geometric mean
√ 4 x 3 = 3.46
1/ √ 4 x 3 = √ 1/4 x 1/3 = 1/ √ 4 x 3 = 1/3.46
That the Geometric Mean is the unique way to combine group judgments is a
theorem in mathematics.
0.05
0.47
0.10
0.15 0.24
Why Is the Eigenvector Necessary
1) Consistent matrix: Aw = nw; Ak = n k −1 A.
2) Perturbed matrix: Aw = λmax w.
1 m k
3) Transitivity → lim ∑ A e / eT Ak e → w, eT = (1,...,1). By Cesaro sumability
k →∞ m
k =1
M M M M
1/ a1n 1/ a2n ... 1
How to go from
Aw=nw
to Aw=cw
and then to Aw=λmaxw
Clearly in the first formula n is a simple eigenvalue and all other
eigenvalues are equal to zero.
A forcing perurbation of eigenvalues theorem:
If λ is a simple eigenvalue of A, then for small ε > 0, there is an
eigenvalue λ(ε) of A(ε) with power series expansion in ε:
λ(ε)= λ+ ε λ(1)+ ε2 λ(2)+…
and corresponding right and left eigenvectors w (ε) and v (ε) such
that w(ε)= w+ ε w(1)+ ε2 w(2)+…
v(ε)= v+ ε v(1)+ ε2 v(2)+…
n
∑a
j=1
ij w j = λ max wi
∑w =
i=1
i 1
1 2 1 0 λ 0
A= , I = , λI =
3 4 0 1 0 λ
1 − λ 2
( A − λI ) =
3 4 − λ
A − λI = (1 − λ)(4 − λ) − 6 = λ2 − 5λ − 2 = 0
5 + 33
λ1 =
2
5 − 33
λ2 =
2
n n wj
max ∑aij ≥∑aij = λmax for max wi
j =1 j =1 wi
n n wj
min ∑aij ≤∑aij = λmax for min wi
j =1 j =1 wi
n n
Thus for a row stochastic matrix we have 1=min ∑aij ≤ λmax ≤ max ∑aij = 1, thus λmax =1.
j =1 j =1
Sensitivity of the Eigenvector
n
∆ w1= ∑
j= 2
( v Tj ∆ A w 1 /( λ 1 - λ j ) v Tj w j )w j
Structuring and Measuring Medium High Medium Low Low Low Very High Medium
Baysian Analysis Medium High Medium High High Low High High
MAUT/MAVT High Very High Medium Very High High High Very High Very High
AHP
NA = Not Applicable
Table1 (cont'd)
Structuring NA NA NA NA NA NA NA NA
Analogy/Association NA NA NA NA NA NA NA NA
Boundary Examination NA NA NA NA NA NA NA NA
Brainstorming/Brainwriting NA NA NA NA NA NA NA NA
Morphological Connection NA NA NA NA NA NA NA NA
Why-What's Stopping Low Low NA Medium NA NA NA Low
Ordering and Ranking NA NA NA Medium NA NA NA Low
Voting NA NA NA Medium NA NA NA Low
Nominal Group Technique NA NA Medium Low Low Low NA Medium
Delphi NA NA Medium Low Low Low NA Medium
Disjointed Incrementalism High NA Low Medium Medium NA NA Low
Matrix Evaluation High NA NA Medium Medium NA NA Low
Goal Programming High High Low Medium Medium Medium NA Medium
Conjoint Analysis
Outranking
NA = Not Applicable
03/27/2006 09:58 PM
Dear Prof. Saaty:
Recently, I am thinking my future research fields all along. It is a really difficult decision. I want to devote
myself to MCDM. I also know that Herbert A. Simon got the Nobel prize in 1978 for his contribution to
organizational decision making, and Nash for his contribution to game theory and its applications. I wonder
if there is any possibility for the research on MCDM to make the same great contribution.
-----Original Message-----
From: saaty@katz.pitt.edu [mailto:saaty@katz.pitt.edu]
Sent: Tuesday, March 07, 2006 8:24 PM
To: Sun Yonghong
Subject: Re:
Dear Mr. Sun,
I assume you are just learning the subject because I think these are old papers that are not written
electronically. Would it be ok to send you other papers on the subject or should I try to find them and scan
them? I have generalized the AHP to the Analytic Network Process with dependence and feedback (ANP)
you may want something on it too. I teach a graduate course on the ANP starting tomorrow.
Kind regards,
Tom Saaty