A Brief Guide to the Analytical Hierarchy Process
The Analytical Hierarchy Process (AHP) is a technique that companies use to analyze problems and find suitable solutions. It presupposes tackling any issue from a hierarchical perspective, implying that not all opportunities and possible solutions are equally important (Saranya et al., 2021). Instead, the analysis differentiates between possible decisions relevant to the problem and those that will not contribute to comprehensive problem-solving.
An effective way to conceptualize the methodology of AHP is to envision a solution that addresses the issue from a short-term perspective, but ultimately fails in the long term. For instance, if the company cannot pay off its debt, the first option would be to cease dividend payments, thereby saving money. Although this move might resolve the financial deficit problem, it may also lead to investors selling their shares, causing the company’s stock price to drop.
As a result, cutting the dividend payments may not be the most appropriate decision. This dilemma can be solved by introducing a hierarchy of potential solutions. The overall framework consists of three levels of data, the first of which is the problem itself. The second level comprises various solutions to the underlying issue. These variants constitute various alternatives from which the manager can choose.
The final level details the specifics of each option, thus informing the decision-makers of its usefulness and appropriateness. In the above example, second-level solutions would be cutting off the dividends and increasing them. Third-level details would include alienating investors and a short-term cash flow increase in one case, as well as an increase in the company’s stock price and improved long-term cash flow.
Steps of the AHP Model
Comparison of alternatives themselves does not provide valuable information unless the manager understands their priorities. This is why hierarchy is used in this selection analysis – it provides objective metrics that would help them highlight the most relevant option (Saranya et al., 2021). In essence, the AHP enables analytics to eliminate emotions and subjective biases from decision-making by incorporating a hierarchy of strictly defined criteria. Therefore, each manager’s task is to identify the aspects of the problem that need to be resolved in order of importance.
The first step is to identify the problem that a certain company or individual faces. All subsequent data points added to the hierarchy must provide the capability to achieve this goal. The second step is to outline the specific criteria that are important for the manager. The third step is to determine how different criteria are valued in relation to one another. The final step is to sort the existing options according to the pre-defined hierarchy.
The most crucial step of the entire analysis is establishing the importance of the criteria. For this purpose, a 9-point scale comprises nine presumed assumptions about two elements. Each alternative should be compared with every other to form a comprehensive pairwise comparison. Subsequently, each item must be analyzed from the perspective of relative importance (Taylor, 2021). For example, “1” would mean that both criteria are equally important, while “9” would signal the extreme importance of one criterion over the other.
The AHP model is a widely used tool in research. Saranya et al. (2021) conducted a study on the applicability of this technique in construction management. Having reviewed 77 scholarly papers, they ascertained that numerous companies use it as a basis for making decisions. Subsequently, the research confirms that using the AHP model is a standard practice in business decision-making.
Perceived Relatedness, Competence, and Autonomy
Psychology plays an important role, as the manager has to decide on the importance of the criteria. It becomes even more significant when the problem under focus involves employees. Regardless of status and occupation, people have three emotional needs: relatedness, competency, and autonomy (Santana-Monagas et al., 2022).
Autonomy
Autonomy refers to a person’s freedom of action, which is permitted by a higher authority. Individuals with a sense of autonomy feel accountable for their acts without separating themselves from them (Gerber & Anaki, 2021). This view of autonomy aligns with the notion of self-compassion and is likely aided and sustained by it. As a result, when faced with difficulties and restrictions, increased autonomy increases performance by accepting unpleasant effects and being receptive to dangerous self-relevant knowledge (Gerber & Anaki, 2021). However, considering job satisfaction, the importance of autonomy could be minimal.
Relatedness
Relatedness refers to feeling supported by others and being part of an interconnected community. According to research in the field, concern for others can be a precondition for satisfying the need for relatedness—a person who cares for someone else will experience a genuine feeling of belonging as a result. However, this concern might be exhibited due to the need for relatedness (Gerber & Anaki, 2021). According to Gerber and Anaki’s (2021) research, relatedness is a direct barrier to work exhaustion. This implies that social ties within the workplace could enhance performance by preventing burnout.
Competence
Competence is the ability to succeed effectively in a given task. Conversely, competence is readily impeded when confronted with severe, unsolved tasks and constant, imprecise, and frequently negative feedback (Gerber & Anaki, 2021). Simultaneously, the need for competence appears to be the most powerful predictor of work happiness (Battaglio, 2021). Job satisfaction may be linked to an individual’s ability to complete the assigned task and its difficulty.
Integration into Practice
Managers can utilize these elements to foster effective relationships with their employees. They can also be used to conduct hierarchy analysis. The manager can estimate how their employees’ needs are satisfied. For instance, if the established goal is to offer a promotion, the most valued criterion can be autonomy, provided the manager prioritizes the ability to make decisions independently.
Therefore, managers must understand their employees and perceive their needs accordingly. It is also possible to shift the focus from the employees to the manager and build the order of criteria important to the manager’s sense of autonomy and relatedness. As a result, when exploring workplace psychology bolsters the AHP model, making the most appropriate decisions becomes easier.
References
Battaglio, R. P., Belle, N., & Cantarelli, P. (2021). Self-determination theory goes public: Experimental evidence on the causal relationship between psychological needs and job satisfaction. Public Management Review, 1–18. Web.
Gerber, Z., & Anaki, D. (2021). The role of self-compassion, concern for others, and basic psychological needs in the reduction of Caregiving Burnout. Mindfulness, 12(3), 741–750. Web.
Saranya, T., Saravanan, S., Jennifer, J. J., & Singh, L. (2021). Assessment of groundwater vulnerability in highly industrialized Noyyal Basin using AHP-drastic and Geographic Information System. Disaster Resilience and Sustainability, 151–170. Web.
Santana-Monagas, E., Núñez, J. L., Loro, J. F., Huéscar, E., & León, J. (2022). Teachers’ engaging messages: The role of perceived autonomy, competence, and relatedness. Teaching and Teacher Education, 109, 1-11. Web.
Taylor, M. A. P. (2021). Managing transportation infrastructure and assets. Climate Change Adaptation for Transportation Systems, 105–150. Web.