Analytical Hierarchy Process (AHP)

Analytical Hierarchy Process (AHP): A Comprehensive Guide for PMI-PBA

Why the Analytical Hierarchy Process (AHP) is Important

The Analytical Hierarchy Process (AHP) stands as a crucial prioritization technique in business analysis because it:

• Provides a structured approach to making complex decisions involving multiple criteria
• Transforms subjective judgments into objective scores
• Offers mathematical rigor to prioritization exercises
• Helps stakeholders reach consensus through a transparent process
• Reduces bias in decision-making
• Creates documented rationale for prioritization decisions
• Assists organizations in allocating limited resources effectively

What is the Analytical Hierarchy Process (AHP)?

AHP is a structured decision-making framework developed by mathematician Thomas Saaty in the 1970s. It breaks down complex decision problems into a hierarchy of more manageable sub-problems. As a business analysis technique, AHP enables the systematic evaluation and prioritization of requirements based on multiple criteria through pairwise comparisons.

AHP belongs to the family of multi-criteria decision analysis (MCDA) methods and is particularly valuable when stakeholders need to evaluate options against competing objectives. Unlike simpler prioritization techniques, AHP can handle both quantitative and qualitative factors while maintaining mathematical consistency.

How Analytical Hierarchy Process Works

Step 1: Decompose the decision problem into a hierarchy
• Top level: Overall objective or goal
• Middle level: Criteria and sub-criteria for evaluation
• Bottom level: Alternatives or options being considered

Step 2: Perform pairwise comparisons
• Compare criteria against each other using a scale (typically 1-9)
• Compare alternatives against each criterion using the same scale
• A score of 1 means equal importance, 9 means extreme importance
• Reciprocals are used for inverse comparisons (if A to B is 5, then B to A is 1/5)

Step 3: Calculate priority weights
• Construct comparison matrices
• Calculate the principal eigenvector of each matrix
• Normalize the eigenvector to get relative weights

Step 4: Check consistency
• Calculate Consistency Ratio (CR)
• If CR < 0.1, the judgments are considered consistent
• If CR > 0.1, revisit the comparisons

Step 5: Calculate final priorities
• Multiply criteria weights by alternative weights
• Sum the products to get final priority scores
• Rank alternatives based on final scores

Example of AHP Application

Consider prioritizing four software features based on three criteria: customer value, implementation cost, and strategic alignment.

First, establish relative importance of criteria through pairwise comparisons:
• Customer Value vs. Cost = 3 (Customer Value moderately more important)
• Customer Value vs. Strategic Alignment = 2 (Customer Value slightly more important)
• Cost vs. Strategic Alignment = 1/2 (Strategic Alignment slightly more important)

After matrix calculations, we might get weights:
• Customer Value: 0.54
• Cost: 0.16
• Strategic Alignment: 0.30

Then evaluate each feature against each criterion, calculate final scores, and prioritize accordingly.

Exam Tips: Answering Questions on AHP

Understanding Question Types
• Calculation questions: May ask you to perform pairwise comparisons or calculate weights
• Application questions: May present a scenario and ask which prioritization technique is appropriate
• Process questions: May test your knowledge of AHP steps
• Comparison questions: May ask you to contrast AHP with other prioritization techniques

Key Points to Remember
• AHP uses a scale of 1-9 for comparisons
• The consistency ratio should be less than 0.1
• Reciprocals are used for inverse comparisons
• AHP involves both criteria weighting and alternative scoring
• The sum of weights at each level equals 1.0
• AHP is particularly useful when multiple criteria must be considered

Calculation Approach
• For matrix questions: Set up rows and columns properly
• For weight calculations: Normalize each column, then average across rows
• For consistency: Calculate λmax, Consistency Index, and Consistency Ratio
• For final priorities: Multiply and sum the appropriate weights

Common Pitfalls to Avoid
• Confusing which number represents higher importance (9 is highest, not 1)
• Forgetting to use reciprocals for reverse comparisons
• Mixing up criteria weights with alternative scores
• Skipping the consistency check
• Applying an overly complex hierarchy when a simpler approach would suffice

Strategic Answering Tips
• Read carefully to identify when AHP is appropriate versus other techniques
• Remember that AHP is most valuable for complex decisions with multiple criteria
• AHP works best with a manageable number of alternatives (typically fewer than 7)
• Draw a quick hierarchy diagram to organize your thinking
• When pressed for time, focus on understanding the comparative weights rather than precise calculations

By mastering the Analytical Hierarchy Process, business analysts can make better-informed decisions and justify their prioritization choices with mathematical backing. This technique elevates the prioritization process from purely subjective judgment to a more objective, structured approach that stakeholders can trust.