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Applicat ions of the analyt ic hierarchy processto long range p lanning processes131

J a m e s R . E M S H O F FCampbell Soup Company, NJ, U.S.A.

T h o m a s L . S A A T YUmverstty of Pittsburgh, PA 15260, U.S.A.Received November 1977Revised August 1981

This pape r considers the long range pl annmg process from the p oint of view both of projecting forward hkely or de,,ired changesfrom th e current position to d efine a possible future state, and of identifying desirable future states and working backwards fromthose to consider ways in which they could be reached. This process is repeated untd consistency between the forward and backwardlookin g processes is achieved. A theory of analyttc hierarchies is used to give a formal structure of the process. An applicatkm to anactual corporate plan is briefly discussed.

I . Introduct ion

Lo n g r an g e p lan n in g p ro ces s es can b e fo rmu la t ed a s a two -p o in t b o u n d a ry p ro b lem. On e o f th eb o u n d a r i e s i s f ix ed a t t h e p r e s en t s t a t e f r o m wh ich a p ro ces s p ro jec t s f o rward in to th e fu tu r e . Th e o th e rb o u n d a ry i s f ix ed a t a f u tu r e s t a t e ( an d t ime) an d b y w o rk in g b ack ward s , o n e a t t em p ts to o v e rco m e th o seo b s tac l e s wh ich p r ev en t th e fo rw ard p ro cess f r o m mo v in g to ward s th e d es i r ed s t a te . Th i s p ro ces s i s it e r a tedu n t i l co n s i s t en cy b e tween th e fo rward an d b ack ward p ro ces s i s r each ed . A th eo ry o f an a ly t i ca l h i e r a r ch ie sis used to g ive a formal s t ructure of the process .

We f i rs t g iv e a th eo re t i ca l d i s cu ss io n o f h o w th i s me th o d wo rk s an d th en p r e s en t a d e t a i l ed cas e s tu d y inS ec t io n 4 . Th e ap p l i ca t io n i s t o an o rg an iza t io n p la n n in g p ro b lem a n d i l lu s t r a te s h o w we in v o lv ed l in e st a f fp e r s o n n e l i n s o lv in g th e p ro b lem .

W e u s e th e th eo ry o f r a t io s ca le s , p r io r i ti e s an d h ie r a rch ie s in o u r ap p ro ac h to p l an n in g . E x p o s i t io n s o fth e th eo ry an d s o me o f i t s ap p l i ca t io n s h av e ap p ea red in th e l it e r a tu re , an d h en ce we h av e s e t a sid e o n ly as ma l l p a r t o f t h e p ap e r to s h o w h o w i t wo rk s [12 ].Th e id eas r e l a t in g to p l an n in g wi th in an in t e r ac t iv e fo rwa rd -b a ck w ard f r amewo rk a s u s ed h e r e a re n ew.In p as s in g , we me n t io n th a t t h i s p ro ced u re h as a l r ead y b een ap p l i ed to th e fo l lo win g a r eas o f p l an n in g :Th e F u tu r e o f Hig h e r Ed u ca t io n in th e U.S . [1 3 ], Th e C o n f l i c t i n No r th e rn I r e lan d [9 ], C o rp o ra t e P lan n in g[4] , an d P lan n in g fo r th e Nav y . We b eg in a b r i e f an a ly s i s o f tr ad i t io n a l l o n g - r an g e p lan n in g .Th e An a ly t i c H ie r a r ch y P ro ces s u s ed h e r e was d ev e lo p ed b y S aa ty in 1 9 7 1 . I t is d es c r ib ed in d e ta i l i n[15] and [16] . [17] con ta in s a ppl ica t ions .

North-Ho lland Publishing CompanyEuropean J ournal of Operati onal Research 10 (1982) i 3 ! - 143

0 3 7 7 - 2 2 1 7 / 8 2 / 0 0 0 0 - 0 0 0 0 / $ 0 2 . 7 5 1 9 82 N o r t h - H o l l a n d

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132 J.R. Emsho ff, T.L . Saaty / Application of the analytic hwrarchy process2 . Remarks on planning

Plann ing i s an o ngo ing dec i s ion p roces s whose purposes a re :(1) to specify the ideals , object ives and goals an organizat ion des ires in the future;(2 ) to def ine the p rogram s tha t m us t be un der taken to ach ieve these ends; a nd(3 ) to p rocure the r esources , c r ea te the o rgan iza t ion , and co n t ro l the r esu l ts o f p lann in g im plem enta t ion .An im pl ic i t a s sum pt ion under ly ing an o rgan iza t ion ' s long r ange p lann ing p roces s i s tha t ac t ions based

only on what is bes t for present day cons iderat ions ( i . e . , tact ical decis ions) wil l not be suff icient for get t ingthe o rgan iza t ion to wh ere i t ough t to be in the fu tu re . W ere th i s as sum pt ion n o t so , the fu tu re cou ld " takecare o f i t s e l f when we ge t the re" . H owever , the p rocess by w hich an o rgan iza t ion de te rm ines i t s s t r a teg icdec i s ions i s m ore co m pl ica ted than tha t fo r day- to -day tac t i ca l dec i s ions . Am ong the i s sues a re :

(1 ) Performance Criteria: To determir~e ends , long-range s t rategies must address a wider set of valuesthan do shor t r ange ones .(2 ) Feedback: St ra teg ies in long- range p lan n ing a re d i f f i cu l t to eva lua te because o f l ack o f f eedback .(3) Controllability: An organ iza t ion i s be t t e r ab le to con t ro l shor t r ange than long- range dec i s ions .However , i t has g rea te r potential in f luence over long- range ou tcom es .To achieve a measure of success , i t i s essent ial that there be coordinated par t i c ipa t ion in the p lann ing

proces s by m anager s and s ta f f th roughou t the o rgan iza t ion . Fur therm ore , the p lann ing m us t be acontinuous process that is integrated sys tem at ica l ly w i th da y- to -day tac ti ca l dec i s ions.These are essent ial a t t r ibutes in the theory of s t r a teg ic p lann ing . T o com ple te the p ic tu re , one m us t

cons ider the p rac t i ce o f p lann ing . Our exper ience wi th p lann ing sugges t s tha t t [ e gap be tween p lann ingtheory and pract ice is large. See also Caldw ell [2] , Luca do [6] , S teine r and Sc hol lham me r [18] .

We bel ieve that th is gap is related to what i s no t done r a ther than to the way ac t iv i t i es a re ca r r ied ou t .Fo r exam ple , one o f the m os t com m only r epor ted om is s ions in p lann in g is m anage r ia l pa r t i c ipa t ion . Mace[7] iden t if i ed th i s in an ea r ly as ses sm ent o f the ro le o f the p res iden t in co rpora te p lann in g :Prob ably the s ingle mo s t imp or t ant p roblem in corpora t e p l an ning de r ives f rom the b e l i e f of some chie f ope ra t ing execut ive s tha tcorpora t e p l ann ing i s not a func t ion wi th which they should be d i rec t ly conce rned. Th ey r ega rd pl ann ing a s some thing to be de lega ted,which sub ordina te s can do wi thou t r e spons ibl e pa r t i c ipa t ion by chie f executive s . They th ink the end r e sul t of e f f ec t ive p l ann ing i s t hecomp i l a t ion of a ' p l ans ' boo k. S uch volumes ge t d i s t r ibuted to key executive s , wh o scan the conten t s br i e f ly , f il e them aw ay, brea the as igh of re l ie f , and ob se rve " tha nk goodness tha t i s don e - now l e t ' s ge t t o work" (p . 50).

Plann ing o f ten beco m es m ere ly a p rocess fo r spec i fy ing ann ua l budge t s , an ac t iv i ty fo r p repar ingscenar ios o f o rgan iza t iona l fu tu res , a m eans o f fo recas t ing changes in the ex te rna l env i ronm ent , o r am erger /acqu is i t ion func t ion . C lear ly , a l l o f these ac t iv i t i es a re par t o f long- range p lann ing ; however ,spec ia l iza t ion in one o f the a reas i s inadeq ua te to r e f lec t the fu l l dom a in o f p lan n ing .

One m ajo r r eason why i t i s d i f f i cu lt to in i t i a te in teg ra ted p lan n ing i s tha t the re a re m a ny re levan t f ac to r stha t m us t be s im ul taneous ly coord ina ted . O nce the p roces s beg ins , adap t ive l ea rn ing p rocedures can bedes igned to improve the qual i ty of p lanning. I f the in i t ia l des ign does not include al l factors , success is asl ike ly as runn ing an au tom obi le w i thou t a fue l pum p; work to im prove the o ther com ponen ts w i l l no tcorrect bas ic des ign def iciencies .

3. Four essential requirements in planning!

W ha t i s needed to insu re tha t a p lan n ing p roces s m ain ta ins i t s system ic p roper t ies? W e be l ieve tha t theprocess has the fol lowing four expl ici t character is t ics :(1) Basic Orientation: a succ inc t s t a tem en t o f the co re sys tem s p roces s tha t r ep resen t s the hear t o flong- range p lann ing .(2 ) Organization Principle: a veh i ,: le fo r o rgan iz ing cu r ren t in fo rm at ion abo u t the var iab les tha t a f f ec tp lann i r :g dec i s ions by the o rgan iza t ion .

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J.R. Emshoff, T.L Saa ty / Apphcatwn of the analyuc hzerarchy process 133(3) Prior i t i zat ion Procedure: a veh ic le fo r incorpora t ing m anager ia l a t t i tudes and be l ie f s tha i w i l le m p h a s i z e v a r i o u s c o m p o n e n t s o f t h e p l a n n i n g s y s te m .(4 ) Adapt ive Process: a m ethod by which s ta f f inpu ts can focus on p lann ing i s sues where de ta i l edana lys i s can im prove the qua l i ty o f s t r a teg ic dec i s ions.W e now cons ider each o f them in tu rn .

3.1. Basic OrientationPlan n ing cons i s ts o f two bas ic in te rac t ing phases . T he f i rs t phase invo lves an as ses sm ent and op t im um

uti l izat ion of present capabi l i t ies . I t is cal led the Projec ted Planning P rocess , which i s a one po in t boundaryprob lem w hose boun dary i s f ixed at the p resen t s t a te . I t i s wha t we a l so ca l l t he f o rward proc e s s, a p r im ar i lydescr ipt ive approa ch con cerned w i th the fo l lowing k ind o f ques t ion : g iven the p resen t ac to r s and the i rpol icies , what wil l ( is bel ieved or l ikely to) be the future resul t ing f rom their act ions? Assessment of theim p ac t o f the p resen t i s usua l ly m ade in t e rm s o f p ro jec t ion s cenar ios which span the fu tu re . T he r esu lt i s acom pos i te s cenar io which i s an in teg ra ted as ses sm ent o f the ind iv idua l p ro jec tions .

T ha t aspec t o f p lann ing which i s concerned wi th work ing backwards f rom a des i r ed o r idea l i zed fu tu reand deve lop ing p lans to b r ing such a fu tu re abou t i s wha t we ca l l Pl ann i ng For A D e s i re d Fu t ure or thebac k w ard proc e s s. It is a norm at i v e approach concerned wi th the ques t ion : g iven a des i r ed fu tu re , wha tshou l d our po l ic ies be to a t t a in tha t fu tu re? T h is aga in i s a one po in t bou ndar y p rob lem f ixed a t the fu tu re .

I t i s c lea r tha t the backward p roces s i s l im i ted by cons t r a in t s on the po l ic ies to be deve loped andposs ible conf l ic ts with exis t ing pol icies . One is not a t complete l iber ty to select pol icies to meet that futureeven i f these were workab le . T h is i s due to the subs tan t ia l cons t r a in t s im posed by the p resen t hab i t s ,com m itm en ts and po l ic ies . Conver se ly , p ro jec t ing a l ike ly fu tu re f rom presen t po l ic ies com es in conf l i c tw i th the va lued o r des i r ed fu tu re . W hen pu t toge ther , the fo rward and backward p roces ses dem ons t r a tetha t one i s no t f r ee to pur sue p lann ing f rom the p resen t w i thou t under s tand ing and eva lua t ing where onewan ts to go , no r where one w an ts to go wi thou t exam in ing one ' s p resen t po ten t ia l s and capab i l i ti e s . I f ou rexis t ing pol icies fal l shor t of what is needed to at ta in that future, then, jus t ass trongly, futures which resul tf rom presen t po l ic ies m ay fa l l shor t o f the des i r ed fu tu re which we va lue . Making these two p roces sescom pat ib le i s one o f the m ajo r cha l lenges f ac ing p lanner s , I t is an even-ha nded p ragm at ic p roces s which i san en r ich m en t o f the conserva t ive tendenc ies o f the fo rward p roces s and a ' p ra gm at iza t ion ' o f afan tasy -p rone backward p roces s . I t s eem s then tha t the s tudy o f p lann ing i s no t a s im p)e benevo len t a r tf r ee ly concerned wi th the im provem ent o f liv ing. Ra ther , i t m akes a psycho log ica l con t r ibu t io n to the

FORWARDPROCESS

BACKWARDPROCESS

~ ~ ' i PresentI Organizati-onalPlanningPol ci esIComparison

Organizationai ~_ResponsePol cies

O the " M ,nvo n m e nActor Scenarios uturePoli ci esTwo- oitBoundarYResoltion [ ~ I Ompai OnP r o c e s s [

OtherActor [[Environn~ntal FDesiredl Futuret h e rAc t o r cenariosPoli ci esFig. I. A schematicrepresentation of th e b asic plann ingorientation.

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! 3 4 J.R . Emshoff . 1 L Saa ty / Application of the analyt ic hierarchy processfu l f i l l me n t o f ou r v a l ue s a nd de s i re s fi ~r t he fu t u re a s s t rong l y a n d i n t r i n s i c a l l y a s i t doe s t o ou r s a t i s fa c t i onin the successes of ou r pr esen t ac tion. ;.

T h e t w o - p o i n t b o u n d a r y p r o b l e m - p r e s e n t t o fu t u r e a n d f u t u r e to p r e s e n t - i s c o n c e r n e d w i t h th ef o l l o w i n g m a n a g e m e n t p r o c e s s : g i v e l t t he p re se n t s e t o f po l i c i e s a nd g i ve n a de s i re d fu t u re , mod i fy t hee x i s t i ng po l i c ie s a nd de s i gn ne w c om 3a t i b l e po l i c ie s t o a t t a i n t ha t fu t u re . Th e n m od i fy t he de s i red fu t u refor gre a te r com pat i b i l i ty wi th the e fI~ect iveness of new pol ic ies . I te ra te the proces s un t i l a good feas ibleso l u t i on ( i f t he re is one fo r t he c ons t ra i n t s r e p re se n t e d i n t he h i e ra rc h y) a r is e s .

The s t a r t i ng po i n t i s t o p ro j e c t t he l i kel y fu t u re f rom p re se n t a c t i ons , a do p t a de s i re d fu t u re , de s i gn ne wpo l i c ie s , a d j o i n t he m t o t he s e t o f e x~ . st ing .po l ic ie s , p ro j e c t a ne w fu t u re a nd c om pa re t he t w o fu t u re s fo rt he i r ma i n a t t r i bu t e s : the projected an~t the desired. T h e d e s i r e d f u t u r e m a y n e e d m o d i f i c a t io n t o r e d u c e t h ed i s p a r i t y b e t w e e n t h e t w o f u t u r es . T i e p r o c e s s is d i a g r a m m e d i n F i g . 1.

W e no t e t ha t p l a nn i ng h a s a l so be e n r e ga rde d i n t e rms o f a r i sk a ve r se u t i li t y func t i on sub j e c t t o a s e t o f. c ons t ra i n t s de sc r i be d by t he p re se n t ~ t a t e (one -po i n t bounda ry ) . In t h i s a pproa c h , one s e e ks t o mi n i mi z e

t he po t e n t i a l c os t s o f une xpe c t e d o~ a t c ome s . O ne c a n a l so a t t e mpt t o d i mi n i sh t he p roba b i l i t y o f t heo c c u r r e n c e o f a n u n d e s i r a b l e o u t co m e b y i n t r o d u c i n g a d d i t i o n a l c o n s tr a i n t s. A n o t h e r a p p r o a c h t o p l a n n i n gi s t o f i x t he bounda ry po i n t i n a fu t ~ t re s t a t e a nd ma x i mi z e a u t i l i t y func t i on re p re se n t i ng de s i re d i de a l s .Th e so l u t i on p roc e dure i s t he n t o e duc a t e a nd some t i me s e ve n w i l l fu l l y fo rc e pe op l e t o v i o l a t e w h a t a rea s sume d t o be s e l f - i mpose d o r a r t i f i c a l c ons t ra i n t s .W e be l ie ve t ha t t h e s t ruc t u re o f t he p l a nn i n g p roc e s s ne e ds i n t e g ra t i on . C l e a r l y t he re i s ove r l a p be t w e e nm o s t a p p r o a c h e s t o p l a n n i n g . H o g e v e r, o u r e x p e ri e n ce h a s t a u g h t u s t h a t t h e t w o - p o i n t b o u n d a r ya pp roa c h i s a r i c h f ra me w ork fo r i de n t i fy i ng p ro j e c te d a nd d e s i re d ou t c om e s a nd u t i li z ; r, g t he i r s t r e ng t hsw i t h i n t he f r a me w ork o f a na l y t i c a l h i e ra rc h i e s t o i mprove t he ou t c ome o f a p l a n . I t a l so e nc oura ge si n t e r a c t io n a n d c o n s e n s u s , a c r u ci a l p a r t o f p l a n n i n g w h i c h i n d u c e s p a r t i c ip a n t c o m m i t m e n t . F u r t h e r m o r e ,i t e na b l e s one t o m a ke t r a de of f s i n r e ., .ou rc e a l l oc a t i on by l ook i ng fo r ba l a n c e d m a rg i na l be ne f i t s . F i na l l y , i ti s i de a ll y su it e d fo r r e ve r s i ng a p la i t due t o t he f l e x i b il i ty o f bo t h t he h i e ra rc h i c a l f r a me w ork a n d t hep r i o r i t i z a t i on p roc e s s a nd t he i r rob J s t ne s s a nd t he fa c i li t y w i t h w h i c h t he y c a n be use d i n s t udy i ngp l a n n i n g a s a n o n g o i n g p r o c e s s .3.2. Organizing principle

F o r m u l a t i o n o f a p l a n n i n g p r o c e s ; a s a t w o - p o i n t b o u n d a r y p r o b l e m c n a b l e s u s t o s t r u c t u r e e x p l i c i t l yt he de c i s i on f ra me w ork t o be fo rmul a t e d . F rom de c i s i on t he o ry , t h re e ba s i c va r i a b l e s a re i nvo l ve d :(1) Planning policies a va i l a b l e t o t a e o rga n i z a t i on ,

(2) Outcomes t he o rg a n i z a t i on ma re a l i ze i n t he fu t u re , a nd(3 ) Effic~encies w h i c h show t he p r~ ba b i l i s t i c r el a~ .i onsh ip b e t w e e n p l a n n i ng p o l i c i e s a nd ou t c ome s .The se va r i a b l e s a re c om m on t o a l de c i s i on p roce s se s, bu t t he r e l a t i onsh i p a mo ng t h e m i s d i f fe re n t fo r

t he fo rw a rd a nd ba c kw a rd p l a nn i ng p roc e s se s . F o r t he fo rw a rd p roc e s s t he po l i c i e s a re defined, th eeff ic ienc ies est imated , a n d t h e p r o b a b l e o u t c o m e s deduced. F o r t h e b a c k w a r d p r o c e s s , t h e o u t c o m e s a r eva lued , the e ff ic ienc ies influenced a nd t he po l i c i e s developed. T h i s d i f f e r en c e is f u n d a m e n t a l l y d u e t o t h ew a y t he p rob l e m i s s t ruc t u re d i n e a c h c a se . The o rga n i z i ng p r i nc i p l e i n bo t h p roc e s se s i s hierarchical, b u tt he domi na nc e re l a t i onsh i ps a re r e w : r se d . O ne o f t he pu rpose s o f t h i s pa pe r i s t o show t ha t t he use o fh i e r ar c h i e s as a n o r g a n i z i n g p r i n c i p k , f o r t h e t w o - p o i n t b o u n d a r y p l a n n i n g p r o b l e m e n a b l e s r i c h s o l u ti o n st o be de ve l ope d .

The h i e ra rc hy o f t he fo rw a rd o r p ro j e c t e d p roc e s s ma y be c ha ra c t e r i z e d i n t he s e que nc e :

l a n n i , o l i i s H f f io i o i e I - / O o m e s iThi s p roc e s s c a n b e d i v i de d fu r t he r by s e gm e n t i ng t he ef f i c ie nc i e s l e vel i n t o i t s t w o ba s i c c om pon e n t s :

e v e n t s c a u s e d b y t h e p u r p o s e f u l b e h a v i o r o f o t h e r a c t o r s , a n d e v e n t s c a u s e d b y n o n - p u r p o s e f u l b e h a v i o r

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J.R. Emsho ff, T.L. Saa ty / Application of the analync hterarct(v process 135( e .g . , the w e a t he r ) . P u rpose fu l be ha v i o r i s i t s e lf a h i e ra rc hy , d i a g ra m m a t i c a l l y c om pose d o f :

O t h e rA c t o r s [ I i [ i

, he i r -- , E f f i c i e nc ie s o f ~ O u t c om e s The yI P o l i c ie s The i r P o l i c ie s H o pe t o A c h i e ve ]

Eme ry a nd Tr i s t [3 ] u se t he t e rm Transactional Environment t o de sc r i be o t he r a c t o r s w hose be ha v i o rd i re c t l y a f fe c t s o rga n i z a t i ona l e f f i c i e nc i e s . S uc h a c t o r s i nc l ude supp l i e r s , i nve s t o r s , c us t ome rs , e t c . Th i sa na l ys i s c a n , i n t u rn , be e xpa n de d by a dd i ng a n o t h e r l e vel t o a na l yz e t he e l e me n t s t ha t c on t r i b u t e t o t hee f f i c i e nc y o f t he be ha v i o r o f m e m be rs o f t he t r a nsa c t i ona l e nv i ronm e n t . P u rpose fu l be ha v i o r o f suc h a ct ~, rsha s a n i nd i re c t e ffe c t on t h e o r i g i na l o rga n i z a t i on ; Em e ry a nd Tr i s t u se t he t e rm Contextual Ent;ironment tede sc r i be suc h e f fe c t s A d i a g ra m o f t he h i e ra rc hy o f t he fo rw a rd p roc e s s w i t h t r a nsa c t i ona l e nv i ronme n t a le ffec ts i s show n in F ig . 2 .

N o t e t h a t t h e n a t u r a l b r a n c h i n g o f t h e h i e r a rc h y f o r t h e F o r w a r d p r o c e s s g e n e r at e s a l ar g e n u m b e r o fposs i b l e ou t c ome s f rom a sma l l numbe r o f i n i t i a l po l i c i e s S ome t i me s t he e l e me n t s ( s t a t e va r i a b l e s ) o f t hed i f f e r e n t o u t c o m e s a r e c o m p a t i b l e a n d c a n t h u s b e c o m b i n e d i n t o a s i n gl e c o m p o s i i e o u tc o m e . F o re xa mpl e , t he pu re ou t c ome s o f ge ne ra t i ng e ne rgy f rom nuc l e a r pow e r , fo s s i l fue l s , a nd so l a r e ne rgy ma y bec o m b i n e d i n t o a c o m p o s i t e o u t c o m e . H o w e v e r , o u t c o m e s m a y h a v e i n c o m p a t i b i l it i e s w h i c h c a n n o t b ec o m b i n e d . F o r e x a m p l e , d i f f e r en t p l a n t - s it e lo c a t i o n s c a n n o t b e c o m b i n e d . O n l y o n e o i t h e s i te s m a y b ec h o s e n .

Th e h i e ra rc h y c ha ra c t e r i z e d by t he ba c k w a r d o r de s i re d p roc e ss ma y be re p re se n t e d a s i n t he fo l l ow i ngd i a g r a m :

i i ie s i re d D e s i re d O rg a n i z a t i onO u t c om e s Ef f i c ie nc i es P l a nn i ng P o l ic i esThe ba c kw a rd p roc e s s be g i ns w he re t he fo rw a rd p roc e s s e nds . The o rga n i z a t i on f i r s t e xa mi ne s t he ra nge

of p ro j e c t e d ou t c ome s a nd de t e rmi ne s t hose ou t c ome s w h i c h i t p re fe r s f rom t hose w h i c h i t doe s no t . The ni t w orks ba c k t o t he e f f i c i e nc i e s t o i de n t i fy t he c ha nge s t ha t a re c r i t i c a l t o t he a c h i e ve me n t o f a de s i re dou t c ome . I t i de n t i f i e s po l i c i e s t o i n f l ue nc e o t he r a c t o r s t o a c h i e ve t h i s ou t c ome . The h i e ra rc hy fo r t he

i Planningt PoliciesI1

EFFICIENCIES

~ [ Othe ....I A c t o r s . . . . . Lcies ~ f- ~

1e

1es

0UtC0meS

DUTCDES

Fig. 2. Hierarchy including transactional environment.

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!36 J.R. Emshoff , T.L. Saaty / Application of the analytic hierarch y processdes i r ed p rocess m ay be r ep resen ted as fo l lows :

DesiredEfficiencyChange n

I ' r o u c o m1 0 t h r c o r sPoliciesmChange n! t Changein ] ValueOf

Efficiencies Outcomesof Other for OtherActors Actors

PlanningPoliciesand~t CounterPolicies

3 . 3 . P r i o r i t i za t i o n P r o c e d u r e [ 1 5 , 1 6 , 1 7 ]One would l ike to avo id a po ten t ia l exp los ion o f a l te rna t ives which a r i s e f rom the h ie ra rch ies c rea ted fo r

t h e f o r w a r d a n d b a c k w a r d p h a s e s o f t h e t w o p o i n t b o u n d a r y p r o b l e m .A h ie ra rch ica l sys tem cons i s ts o f s everal l evel s, each l eve l con ta in ing o ne o r m ore m em be cs o r e lem en tswi th a s ing le e lem e n t in the dom in an t top l eve l. L e t us beg in by exam in ing the n a tu re o f the p rob lem as

crea ted by the h ie ra rch ica l r ep resen ta t ion . Suppose tha t e i the r the fo rward o r backward phase has beens t ruc tu red in to h ie ra rchy leve ls w i th each leve l co r respond ing to a dec i s ion com pon en t such as the ac to r s ,the i r ob jec t ives , pos s ib le ou tcom es , e tc . W e need to addres s th ree im por tan t ques t ions :

(1 ) how does one as ses s the im po r tance o f the e lem en ts a t each l eve l o f the h ie ra rchy , and(2) how is the relat ive pr ior i ty of the levels in the hierarchy determined, and(3 ) o f wha t use i s such knowledge?

I t tu rns ou t tha t a m e thod o f r a t io s ca l ing can be used to de te rm ine the im por tan ce o f e lem en ts in a l eve lwi th r espec t to each e lem en t in the ad jacen t upper l eve l and the in fo rm at ion thus genera ted can bein teg ra ted ac ros s the l evel s o f the h ie ra rchy . P r io r i t i za t ion uses pa i rwise com par i sons o f e lem en ts to c rea te am at r ix o f as ses sm ent ; the p r io r i t ie s a re es tab l i shed by f ind in g the l a rges t e igenva lue and i ts co r respond ingigenvec tor for th is matr i x [12]. I t turn s out tha t the larges t e igenva lue ?~max ( for a pos i t ive reciprocal ma tr ix~,ma x ~ 11 always) ma y be used to m easure con s is tency by fo rm ing the cons is tenc y index(~, m.~x n ) / (n - I )and com par ing i t w i th the average va lue o f such an index fo r a l a rge s am ple o f r andom ly genera tedreciprocal matr ices .

W e now tu rn to the ques t ion o f wha t n um e r ica l sca le to use in the pa i rwise com pa r i son m at r ices .Ou r cho ice h inges on the fo l lowing observa t ion . T he s ca le sho u ld s a t i s fy the fo l lowing :( ! ) I t shou ld be pos s ib le to r ep resen t peop le ' s d i f fe rences in f ee l ings when they m ake co m par i sons . I t

shou ld r ep resen t as m u ch as pos s ib le a ll d i s t inc t shades o f f ee l ing tha t p eop le have .(2) I f we denote the scale values by x l , X z . . . . . X r , t h e n i t w o u l d b e d e s i r a b l e t h a t x , + l - x , = ! ,

i = 1 . . . , r - 1. W e need un i fo rm i ty be tween d i f f e rences to m a ke su re tha t the s ca le cover s a ll judg m e ntsand tha t un i ty shou ld be the d i f f e rence be tween ad jacen t g rad a t ions o f judgem ent .

S ince we r equ i re tha t the sub jec t m us t be aw are o f a ll g rada t ions a t the s am e t im e , and we agree wi th thepsycho log ica l exper im en ts which show tha t a n ind iv idua l cann o t s im u l taneous ly com pare m ore than s evenob jec t s (p lus o r m in us two) w i thou t be ing confused , we a re l ed to choose r - 7 -+ 2 . Us ing a un i t d i f f e rencebetw een success ive scale values is a ll tha t we al low, and us ing th e fact th at x t - 1 for the iden t i tycom p ar i son , i t fo l lows tha t the s ca le va lues w i l l r ange f rom one to n ine . T he s ca le and the verba l conver s ionof com para t ive d i f f e rences am ong two ob jec t s i s shown in T ab le 1.

T o i l lu st r a te the p rocedu re fo r def in in g p r io r i ti e s , cons ider the fo l lowing es t im a t ion p rob lem . A nexper im en t was conduc ted in s ea rch o f r e la t ionsh ip be tween the i l lum ina t ion rece ived by four iden t ica lob jec t s (p laced on a l ine a t know n d i s tances f rom a l igh t source) and the. d i s tance f rom the source . T hecom par i son o f i l lu m in a t ion in tens i ty was per fo rm ed v i sua l ly and indepen den t ly by ty ro s e ts o f peop le . T heob jec t s were p laced a t the fo l lowing d i s tances m easured in yards f rom the l igh t sources : 9 , ~5, 21 and 28. In

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J.R. Emshoff. T.L Saaty / Application of the analytw hwrarchy process 1 3 7T a b l e !

I n t e n s i t y o fI m p o r t a n c e

Def in i t ion Explana t ion

I a35792 . 4 . 6 . 8Rec ip roca l s o fa b o v e n o n - z e r on u m b e r s

E q u a l i m p o r t a n c eW e a k i m p o r t a n c e o f o n e o v e r a n o t h e rEssen t ia l o r s t rong impor tanceD e m o n s t r a te d i m p o r t a n c eA b s o l u t e i m p o r t a n c eIn te rmed ia te va lues be tween the twoa d j a c e n t j u d g m e n t si f ac t iv i ty i has one o f the above non-ze ro numb ers ass igned to i t when com-pared wi th ac t iv i ty j , the n j has therec ip roca l va lue when compared wi th I .

Two ac t iv i t i e s con t r ibu te eq ua l ly to the ob jec t ive .Exper ience and judgment s l igh t ly favor one ac t iv i ty overano ther .Experience and judgm ent s t rong ly favor one ac t iv i tyo v e r a n o t h e rAn ac t iv i ty ~s s t rong ly favored ov er ano th er and i t sdominance i s demons t ra ted in p rac t i ce .The ev idence favor ing one ac t iv i ty over ano th er J s o f theh ighes t poss ib le o rder o f a f f i rmat ,on .When compromise i s needed .

" On occas ion m 2 b y 2 prob lems , we have used 1 + c , O < c ~ ,~ to indicate very sl ight dominance between two nearly equal act iwues.

n o r m a l i z e d f o r m , t h e s e d i s t a n c e s a r e : 0 .1 2 3 , 0 . 2 0 5 , 0 .2 8 8 , 0 .3 8 4 .T w o o b s e r v e r s ( o n e o f w h o m w a s a y o u n g c h i ld ) i n d e p e n d e n t l y c o n s t r u c t e d m a t r i c e s o f p a i rw i s e

c o m p a r i s o n s o f t h e b r i g h t n e s s o f t h e o b j e c t s l a b e l e d i n i n c r e a s in g o r d e r a c c o r d i n g t o t h e i r n e a r n e s s t o t h es o u r c e . T h e y a r e :

R e l a t i v e v i s u a l b r i g h t n e s s R e l a t i v e v i s u a l b r i g h t n e s s( F i r s t t r i a l) ( S e c o n d t r i a l )

C I

C~ 1G '

IC.~ ~;IG

C: 'C3 G5 6 7 C ' ll 4 6 C2! 1 4 C.~_~ ! ! G4

C, C= G G1 4 6 7

! 3 4! ! ! 26 3! J J !7 4 2

F r o m t h e e i g e n v a l u e t h e o r y , t h e s o l u t io n s t o t h e s e m a t r i c e s a r e a s f o ll o w s "R e l a t i v e b r i g h t n e s s e i g e n v e c t o r R e l a t i v e b r i g h t n e s s e i g e n v e c t o r( F i r s t t r i a l) ( S e c o n d t r i a l)C I - 0 . 6 2 0 . 6 2( '2 = 0 . 2 4 0 . 2 2C 3 - - O . lO 0 . 1 0c 4 = 0 . 0 5 0 . 0 6X = 4 . 3 9 X = 4 . 1 0

T o d e m o n s t r a t e t h a t t h i s a p p r o a c h l e a d s t o v a l i d r e s u lt s i n p r a c t i c e , w e c a l c u l a t e d t h e t r u e r el a t iv eb r i g h t n e s s u s i n g t h e i n v e r s e - s q u a r e l a w o f o p t i c s . T h e r e s u l ts o f th i s a r e a s fo l lo w s :N o r m a l i z e d r e c ip r o c a l d i s t a n c e s q u a r e

C I = 0 .6 1C 2 - 0 . 2 2c 3 = 0 . 1 1C 4 = 0 . 0 6

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13 8 J.R. Emshoff. T.L . Saaty / Apphcation of the analync hierarchy processNo te the c losenes s o f the h um an jud gm ent to the t rue va lue . Severa l sim i la r exper im en ts have beenconduc ted to va l ida te the m easurem ent p rocedure . T he com par i son s ca le was com pared wi th num erouso the r s ca les and fo und to be the bes t ( inc luded in the book by Saa ty [15]) .

W hat i s no tewor thy f rom th i s s ensory exper im en t i s the observa t ion o r hypo thes i s tha t the observedin tens i ty o f i l lum ina t ion varies (approx im ate ly~ inverse ly w i th the square o f the d i s tance . T hus , judg m e nthas been ab le to cap tu re a l aw o f na tu re .3.4. Adaptive Process

T he h ie ra rchy m ethod enab les us to as ses s exp l ic i t ly the im pac t o f com plex i s sues invo lved in thedeve lo pm e nt o f long r ange s t r a teg ies . One o f the m os t power fu l charac te r i s ti cs o f the m e thod i s the r i chnes sof th e ins ight i t g ives f rom relat ively l i t t le inve s tme nt of t ime. An intens ive sess ion of several days d ura t ioncan p rov ide answers to p lann ing p rob lem s tha t had concerned m ana ger s fo r year s bu t w hich cou ld no t bear t iculated otherwise.

Because the asses sm ent p roces s fo rces par t ic ipa t ion , m anag er s becom e com m it ted to the ou tcom e; th i s ism an i fes t ly d i f f e ren t f rom a p lann ing p roces s in which the p lann ing s ta f f t akes the in i t i a t ive and in whichthe m an ager s a re b rough t in to r ev iew and approve the i r work . W e have f r equen t ly observed tha t thes t r eng th o f m anager ia l com m itm en ts to the r esu l t s o f p lann ing a re in d i r ec t p ropor t ion to the i r ac t ivepar t i c ipa t ion .

Another im por tan t f ea tu re o f the h ie ra rchy m ethod i s tha t i t l eads to a con t inuous r ev i s ion andim provem ent o f peop le ' s p lans and be l ie f s abou t ou tcom es . Fur therm ore , the p r io r i t i e s tha t have beendef ined by m anager s a t a pa r t i cu la r po in t in t im e p rov ide an exp l ic i t focus fo r s t a f f ac t iv i t i es be tweenp lann ing s es s ions . T he va lues as s igned to spec i f i c e lem en ts and the as sum pt ions which under l i e theas s ignm ents a re open to de ta i l ed eva lua t ion by the s ta f f . T hey can s ee the im por tance o f the in fo rm at ionthey provide and i ts p lace in the overal l s t ructure.

T he key po in t i s tha t the h ie ra rchy m ethod p rov ides a com m on language be tween m anager s and s ta f f .S ta f f p resen ta t ions can be m ad e to m anager s befo re s ta r t ing a l a te r roun d o f r ev iew ses s ions . T o the ex ten tthe in fo rm a t ion per suades m anager s , they wi ll change p r io r i ty as ses sm ents in the h ie ra rchy .

4. An Appl i cat ionT he h ie ra rchy m ethod was r ecen t ly app l ied to p lann ing fo r a m ajo r co rpora t ion which p roduces and

m arke t s a nu m b er o f consum e r goods , w i th one m ajo r p ro jec t dom ina t i ng it s s a les and p ro f i t s . For m an yyear s the com pany had been o rgan ized a round four s t rong func t iona l v ice -p res iden t s : p roduc t ion .m arke t ing , adm in is t r a t ion , and new bus ines s deve lopm ent . E ach o f these v ice -p res iden t s had com ple tea , l tonom y fo r h is pa r t i cu la r a rea , and there was l i tt l e coopera t ive in te rac t ion am on g them .

T he p res iden t wan ted to inc rease the co rpora te r a te o f g rowth . H e r ea l ized tha t the com pan y ' s r esourceshad to be coord ina ted to deve lop ac t iv i t i es beyond the t r ad i t iona l dependence on one dom inan t p roduc t .T o do th is , the com pan y reo rgan ized . T he four func t iona l a reas were sp l i t up and n ine new v icepres idenc ieswere es tab l ished . E ach v ice -p residen t had decen t ra l i zed opera t ing r espons ib i l i ty fo r h i s a rea . A corpo ra tep lann ing com m it tee was fo rm ed cons i s t ing o f the p res iden t and the n ine v ice -p res iden t s . T h is com m it teewas to focus on es tab l i sh ing co rpora te g rowth ob jec tives and was to deve lop exp l ic i t s tr a teg ies fo r ach iev ingthe object ives .

A l though the r eo rgan iza t ion he lped p ro tno te co rpora te p lann ing by r em oving som e obs tac les , thec o m m i t t e e m e c h a n i s m p r o v e d i n a d e q u a t e t o i n s u r e a c o o r d i n a t e d c o r p o r a t e p l a n n i n g p r o c e s s f o r t h ecom pany . T he co rpora te p lann ing com m it tee in i ti a ted a s e ries o f r ev iews o f the d iv i s iona l p lans tofam i l i a r i ze a l l the v icepres iden t s w i th the p la nn in g i ssues addres sed b y o the r d iv i s iona l a reas an d to p rov idea per spec t ive f rom which the v ice -o res iden t s cou ld toge ther def ine p lann ing i s sues . I t had p rec i s e ly theo p p o s i t e e f fe c t. M e m b e r s o f t h e c o r p o r a te p l a n n i n g c o m m i t t e e b e g a n t o s p e n d m o r e a n d m o r e t i m e o n t h ede ta i l s o f each o ther ' s p lans .

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J.R. Emshoff,, T.L . Saaty / Apphca non o f the analytw hwrarchy proce~.l 139A s t h i s p roc e s s w a s go i ng on , t he c o rpora t e p l a n n i n g s t af f , c ons i s t i ng o f e c onomi s t s a nd O .R . pe op l e ,

foun d t he mse l ve s w i t h l i t tl e me a n i ngfu l w ork t o oc c upy t he i r t i me . The re fo re , t he 5 I ,~ .~ ~ de ve l ope c o n o m i c f o r e c a s t in g m o d e l s w h i c h t h e y f el t sh o u l d b e o f s o m e b e n e f i t t o t h e c o r p o r a t e p l a n n i n g p r o ce s s.H ow e ve r , t he s t a f f w a s ope ra t i n g w i t h l it t le o r no ma n a ge r i a l d i re c t ion f rom t he c om mi t t e e .

T h u s , t h e i n i t i a l a t t e m p t s a t o r g a n i z a t i o n a l c h a n g e w e r e u n s u c c e s s f u l . T h e c o m p a n y w a s n o c l o s e r t oh a v i n g a c o r p o r a t e p l a n n i n g p r o c e s s t h a n i t h a d h a d w i t h t h e p r e v i o u s s t r u c t u r e : f u r t h e r m o r e , t h ed a y - t o - d a y o p e r a t i n g e f f i ci e n cy h a d b e e n s u b s t a n t i a l ly r e d u c ed .4.1. The test

A r e p r e s e n t a ti v e s et o f m a n a g e r s w h o w e r e a c t iv e p a r t i c ip a n t s i n t h e c o r p o r a t e p l a n n i n g c o m m i t t e e a n dc o r p o r a t e p l a n n i n g s t a ff m e t i n a n i n te n s iv e t w o - d a y p l a n n i n g s e s s io n u s i n g t h e h i e r a r ch y m e t h o d t o s ee i fi t c o u l d p r o d u c e a g r e e m e n t a m o n g t h e g r o u p o n k e y c o r p o r a t e p l a n n i n g i s s u e s . T h e r e s p o n s i b i l i t y f o rrun n i n g t he a c t ua ! s es s i on w a s g i ve n to ou t s i de c onsu l t a n t s w ho c oord i na t e d t he s c he du l e o f d i s c us s i on a ndd e c i s i o n - m a k i n g a s t h e m e e t i n g p r o gr e s se d . H o w e v e r , t h e d e c is i o ns w e r e m a d e e n t i r el y b y t h e c o m p a n yr e p r e s e n t a ti v e s w h o p a r t i c ip a t e d .

T h e c o n s u l t a n t s p r o p o s e d a b a s i c h i e r a r c h i c a l s t r u c t u r e f o r b o t h t h e f o r w a r d a n d b a c k w a r d p l a n n i n gproce sses (see F ig . 3 and 4) .The s t ruc t u re s o f t he fo rw a rd a nd ba c kw a rd p l a nn i ng h i e ra rc h i e s w e re a r r i ve d a t a s fo l l ow s : In t hef o r w a r d p r o c e s s w e a s k ed : " W h o a r e t he a c t o rs w h o i n f lu e n c e th e p r o j e c t ed f u t u r e o f t h e c o m p a n y ? " O noc c a s i on t he re a re o t he r l e ve l s be t w e e n t he f i r st a nd t he s e c ond . F o l l ow i n g t he a c t o r s w e ha ve a l e ve l o f t heob j e c t i ve s o f e a c h o f t he a c t o r s . W e t he n i de n t i f i e d a s e t o f e xp l o ra t o ry s c e na r i os t ha t w ou l d re su l t i f e a c ha c t o r w e re t o pu rsue h i s ow n ob j e c t i ve s unmi ndfu l o f t he o t he r s . I t i s f rom ( t he c onve x c one o f ) t he sesc e na r i os t ha t t he l og i c a l o r c ompos i t e fu t u re s w ou l d be c ons t ruc t e d . F o r de t a i l o f how t o do t h i s s e e [15 ] .

T h e p r i o r i t y n u m b e r s i n t h e b o x e s a r e t h e e i g e n v e c t o r c o m p o n e n t s o b t a i n e d b y p r i o r i t i z i n g i n a s i n g l epa i rw i se c omp a r i son ma t r i x t he r e l a ti ve i mp or t a n c e o f t he a c t o r s w i t h r e spe c t t o t he i r i n f l ue nc e i n sha p i ngt he fu t u re o f t he c om pa ny . A t t he ne x t l e ve l t he ob j e c t i ve s o f t he a c t o r s (no t a l l show n i n t he d i a g ra m ) w e rep r i o r i t i z e d i n s e pa ra t e ma t r i c e s a c c o rd i ng t o t he i r i mpor t a nc e t o t ha t a c t o r . The e i ge nve c t o r r e su l t s fo r e a c ha c t o r a re t h e n m ul t i p l i e d by t he p r i o r i t y o f t he a c t o r . O b j e c t i ve s o f l ow p r i o r i t y a re l e ft ou t a n d on l y t hei mpor t a n t one s (10% or more i n t h i s c a se ) a re i nc l ude d a nd show n i n t he d i a g ra m. F i na l l y t he fou re xp l o ra t o ry s c e na r i os a re p r i o r i t i z e d i n s ix s e pa ra t e m a t r i c e s , one fo r e a c h su rv i v i ng ob j e c t ive a c c o rd i ng t ot he g re a t e r l i ke l i hood t ha t t he y w ou l d be a c onse que nc e o f t ha t ob j e c t i ve . Ea c h o f t he s i x r e su l t i nge i ge nve c t o r s i s w e i gh t e d by t he p r i o r i t y o f i t s c o r re spond i ng ob j e c t i ve a nd t he re su l t s a re a dde d fo r e a c hsc e na r i o t o g i ve t he ove ra l l p r i o r i t y o f t he s c e na r i o . W e ha ve no t gone i n t o t he de t a i l o f how t o c ons t ruc tt he c om pos i t e fu t u re i n w h i c h t he d i f fe re n l c ha ra c t e r i s t ic s o f t he i nd i v i dua l s c e na r i os , a re e m pha s i z e da c c ord i ng t o t he i r p r i o r i t i e s by us i ng a s e t o f s t a t e va r i a b l e s de sc r i b i ng t he s c e na r i os .

The ba c kw a rd p roc e s s h i e ra rc hy i s c ons t ruc t e d a s fo l l ow s : A se t o f de s i re d s c e na r i os a re i de n t i f i e d a ndpr i o r i t i z e d a c c o rd i ng t o t he i r de s i ra b i l i ty a nd fe a s i b i li t y . In t he ne x t l e ve l t he p rob l e m s a nd opp or t un i t i e sw hi c h a re t he ke y t o t he se s c e na r i os a re de ve l ope d . Th i s i s fo l l ow e d by a l e ve l o f a c t o r s w ho c on t ro l t he sep rob l e ms a nd f i na l l y by a l e ve l o f c ompa ny po l i c i e s w h i c h a re pe rc e i ve d t o a f fe c t t he a c t o r s t o so l ve t hep rob l e ms a nd a t t a i n t he s c e na r i os . The p r i o r i t i z a t i on i s a s be fo re e xc e p t one mus t be c a re fu l t o a sk t heque s t i ons i n t he p rope r d i re c t i on a s t he fo rw a rd p roc e s s i s de sc r i p t i ve (o r p re d i c t i ve ) w h i l e t he ba c kw a rdproc e s s i s pe r sc r i p t i ve . In t he fo rw a rd p roc e s s one e xa mi ne s t he i mpor t a nc e o f t he e l e me n t s i n a l e ve l a s ac onse que nc e o f e a c h e l e me n t i n t he ne x t l e ve l a bove . In t he ba c kw a rd p roc e s s t he que s t i on s e e ks t od e t e r m i n e t h e r e l at iv e i m p o r t a n c e o f t h e e l e m e n t s i n c o n t r i b u t i n g t o a n e l e m e n t a bo v e .

A s po i n t e d ou t e a r l i e r , i n o t he r a pp l i c a t i ons , t he h i gh p r i o r i t y po l i c i e s o f t he ba c kw a rd p roc e s s ( a s ame a ns fo r op t i m i z i ng t he s e l e c t i on o f be s t po l ic i e s ) c a n b e a dde d t o t he e x i s t i ng po l i c ie s o f t he fo rw a rdproc e s s a n d p r i o r i t i z a t i on o f t he fo rw a rd p roc e s s i s r e pe a t e d a t t he l e ve l o f po l ic i e s (o l d a n d ne w ) t o t e s tt he i r e f fe c t ive ne s s t o s t e e r t he l og i c a l o r c o mp os i t e fu t u re c hose n ( i n t he s e nse o f s a t i s fy ing ) t o t he de s i re dfu t u re . The de s i re d fu t u re s c e na r i o c a n be syn t he s i z e d f rom t he e xp l o ra t o ry s c e na r i os o f t he ba c kw a rdproc e s s i n a ma nne r a na l ogous t o t he c ons t ruc t i on o f t he c ompos i t e s c e na r i o o f t he fo rw a rd p roc e s s b r i e f l y

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142 J.R . E msh off , T .L Saa ty / Application of the analytac hierarchy processm ent ioned here . T he backward p roces s cou ld be var ied accord ing to the r e la t ive em phases p laced on i t sdes i r ed s cenar ios and to the d i f f e ren t po l ic ies tha t cou ld be c rea t ive ly su rm ised and tes ted fo r h igh p r io r i tycon t r ibu t ions . T he com bined fo rw ard-b ack wa rd p rocess i s a use fu l too l fo r t es t ing the e ff ec tiveness o f newpol ic ies in p rodu c ing des i r ed ou tcom es .

Inc iden ta lly , the cons i s tency o f the s e t o f judgem ents fo r an en t i r e h ie ra rchy m ay be com puted (b ym ul t ip ly ing each index by i t s co r respond ing p r io r i ty and ad d ing over a l l such p rodu c t s ) an d i t s accep tab i l -i ty i s as ses sed by fo rm ing i ts r a t io w i th a co r respond ing va lue wi th the s am e p r io r i t i e s bu t w i th the averageind ices fo r the m at r ices o f co r respond ing s izes w i th r ando m ly genera ted judgm ents . A va lue o f a round 10%or l es s is cons idered accep tab le . T he average cons i s tency ind ices fo r r ando m ly g enem led m at r ices o f s ize nare as follows:

Siz eo f ma tr ix i 2 3 4 5 6 7 8 9 10Avera ge cons is tency 0 0 0 .58 0 .90 1 .1 2 1 .24 ! .32 1 . 41 1 .45 1 .49index

In the ac tua l p rocedure o f h ie ra rchy as ses sm ent and p r io r i t i za t ion , each l eve l o f a h ie ra rchy was dea l twith individ ual ly . At any pa r t icular level of the hierarchy, a set of e lements relevant to the pla nn ing processa t tha t pa r t i cu la r l eve l was p resen ted to the com pany ' s m anagem ent g roup . T he e lem en ts were d i s cus sedfor completeness and relevance. Once the f inal l is t was agreed upon, the process of pr ior i t izat ion wasconducted. When the copmlete pr ior i t izat ion process was f in ished for a par t icular level , pr ior i t ies wereob ta ined by us ing an on- l ine com pute r t e rm ina l . W i th th i s in fo rm at ion , dec i s ions were m ade as to therelat ive importance of co~nponents at the next level of the hierarchy. The pr ior i t ies of each element areind ica ted in the d iag ram s (F igs . 3 and 4 ) .

Forward p roces s conc lus ions can be sum m ar ized as fo l lows :(1 ) T he p ro jec ted fu tu re sugges ts a succes sfu l concen t ra t ion by the com pany o n the deve lopm e nt o f the

bus iness area that has made i t successful in the pas t . Some effor ts for in ternat ional d ivers if icat ion wil l takep lace , bu t these w i l l be d r iven m ore by the f a i lu re o f dom es t ic m arke t s to deve lop r ap id ly than by thea t t r ac tivenes s o f in te rna t iona l iza t ion . T he p ro jec ted fu tu re ind ica tes a d i s t inc t pos s ib i l ity tha t the dom es t icma rket w il l not p rovid e a n accept :,~ .!e grow th rate , pr im ar i ly becau se of e i th er supp l ier or gov ernm entact ions .

(2 ) T he ac to r s m os t s ign i f i can t to the com pany ' s p ro jec ted fu tu re a re ( in o rder o f im por tance) : thecom pany ' s own v ice -p res iden t s , the m ajo r f inanc ia l inves to r s in the com pany , the governm ent , and r ag"m ate r ia l supp l ie r s . P rod t ic t consum ers were no t cons idered to be par t i cu la r ly s ign i f i can t in the p ro jec tedfu tu re , im ply ing tha t pu rchas ing hab i t s wou ld no t change un les s the re were new ac t ions by the com pan yitself .

(3 ) T he po l icy and ob jec t ives o f the key com pan y m ana ger s were o r ien ted f ir s t toward com pany succes sand then per sona l success , im ply ing tha t the deve lopm ent o f ex i s t ing func t iona l a reas has a h igh p r io r i ty aslong as tha t l eads to accep tab le g rowth fo r the com pany as a w ho le . F inanc ia l inves to r s were though t to bem ot iva ted p r im ar i ly by r i sk m in im iza t ion and s econdar i ly by m ax im iza t ion o f inves tm en t r e tu rn . T hegovernm ent des i r ed po l i t i ca l con t ro l , deve lopm ent , and r evenue in tha t o rder . Supp l ie r s were as sum ed toseek p ro f i t r e tu rn and were no t pa r t i cu la r ly loya l to the cus tom ers who purchased the i r p roduc t s : hence ,r isks of supply avai labi l i ty exis ted.

In con t ras t to th i s, the m ajo r conc lus ions fo r the backw ard p lann ing p ro jec t ion a re as fo l lows :(1 ) In te rna t ion a l expans ion i s s een as a h igh ly des i red fu tu re .(2 ) T he m ajo r p rob lem s r e levan t to ach iev ing the des i r ed fu tu re a re (a ) com pe t i t ion in dom es t ic and

in te rna t io na l m arke t s , (b ) r i sk invo lved in inves ting in new p roduc t s and m arke t s , a nd ( c ) po l i t i ca l andsoc ia l p rob lem s . For the des i r ed fu tu re , the supp ly o f r aw m ate r ia l and o rgan iza t iona l deve lopm ent a rejudg ed to be l ess s ign i f i can t than o ther p rob lem s .

(3 ) T he m os t s ign i f i can t ac to r s tha t w ou ld a f f ec t the ou tcom e o f the des i red fu tu re a re ( in o rder o fim por tanc e) : the governm ent , inves to rs , com pet i to r s , and the com pany ' s m anag em e nt . I t i s s ign i f ican t tha tthe governm ent appeared to be the key ac to r in c rea t ing des i r ed change . A lso , the com pany ' s own

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J.R. Emshoff, T.L Saaty / Apph catwn of the ana!ytw hierarchy process 143m a n a g e m e n t , w h i c h w a s t h e m o s t i n f l u e n t ia l a c t o r in t h e f or w a r d p r o c e s s , i s m u c h l e s s i m p o r t a n t h e r e.

( 4 ) C o u n t e r p o l ic i e s b y c o m p a n y m a n a g e m e n t w e r e d is c u s s ed b r ie f ly b e c a u s e o f t i m e l i m i ta t io n s .H o w e v e r , t h e f in d i n g s w e r e t h a t t h e r e i s u r g e n t n e e d f o r ( a ) fu r t h er k n o w l e d g e , a n a l y s i s a n d u n d e r s t a n d i n go f t h e b e h a v i o r o f k e y e x t e r n a l s t a k e h o l d e r s , ( b ) a m e t h o d f o r e v a l u a t i n g r i s k a n d r e t u r n s o n a l t e r n a t i v en e w g r o w t h s t r a t eg i e s, a n d ( c ) d e v e l o p i n g m e t h o d s f o r e x e r t i n g g r e a t er i n f l u e n c e o v e r e x t e r n a l f a c to r s t h a th a v e a m a j o r i m p a c t o n t h o s e f u t u r e c o u r s e s w h i c h t h e c o m p a n y m i g h t d e s ir e t o p u r s u e .

5 . C o n c l u s i o nI n g e n e r a l , s p a c e l i m i t a t i o n s d o n o t p e r m i t u s t o d i s c u s s a l l o f t h e r e q u i r e m e n t s a n d i t e r a t i v e e v a l u a t i o n s

t h e c o m p a n y m a d e u s i n g t h is m e t h o d o l o g y . T h e r e w a s i m p l e m e n t a t i o n o f t h e f in d i n g s b y r e d ir e ct in gc o r p o r a t e p r i o r i t ie s a n d s t r a t e g ie s . I n p a r t i c u l a r , n e w s t r a t e g y i n i t i a t i v e s h a v e b e e n t a k e n w i t h t h eg o v e r n m e n t , t h e m a j o r a c t o r t o i n f l u e n c e i n t h e b a c k w a r d p r o c e s s . T h e g o v e r n m e n t h a s r e s p o n d e df a v o r a b l y t o t h e s e i n i t i a t i v e s .

A g o o d i l lu s t r a t io n o f t h e c o m m i t m e n t s o f t h e p a r t i c ip a n t s t o t h e p r o c e s s w a s a n i n c i d e n t t h a t o c c u r r e da t t h e e n d o f o n e o f o u r s t u d i e s f o r a m i l i t a r y g r o u p . A f t e r c o m p l e t i n g a l m o s t t w e n t y h o u r s o f w o r k u s i n gh i e r a r c h i e s , t h e m i l i t a r y l e a d e r , a n A d m i r a l , m e t h i s w i f e a n d s a t d o w n t o t a l k a b o u t a n e w b o a t t h e y w e r et h i n k i n g o f b u y i n g . H e l a i d t h e p r o b l e m o u t t h r o u g h a h i e r a rc h i c al s t r u c tu r e a n d j o i n t l y w i t h h i s w i f e w e n tt h r o u g h t h e p r i o ri t iz a t i o n p r o c e s s t o a s se s s p u r c h a s e o p t i o n s . H e b o u g h t t h e b o a t t h a t w a s s u g g e s t e d b y t h eh i e r a r c h y !

R e f e r e n c e s[ i ] ! . Ansoff , Corporate StrateD' (McG raw-H il l , New York, 1975).[2] G .T. Caidwell , Corpo rate plan ning in Can ada: A n overview, Conference Board o f Cana da (1975).[3] F.E. E mery and E .L. Trist , Towards a Soctal Ecology (Plenum, New York, 1975).[4] J .R. Em shoff and T.L. Sa aty, Priorit ized h ierarchies as a v ehi c l e fo r long range p lanning, Whar ton Apph ed Research ( 'en te r ,

Un iversi ty of Penn sylvan ia (1977).[5] P. Lorange and R.F. Vancii , Strategw Planning System (Prent ice-Hall , Englewood C hffs, N J, 1977).[6] W.E. Lucado, Corpo rate plan ning - a current status report , Managerial Planmng (Nov.-Dec., 1974).[7] M.L. Mace, The president and corporate planning, Harva rd Business Rev. (Ja n.- Feb., 1965).[8] T.L. Saaty and J. Alexander, The forward and backward processes of confl ict analysis , Behavwrai Scl. 22 (1977) 87-98.[9] T.L. Saaty and J. A lexander, Stabi l i ty analysis o f t h e forward-backw ard process , Behavioral Scl. 22 (1977) 375-382.[ 10] T.L. Saaty and J.P. Bennett , A theo ry o f a na l y t i ca l h i era rchi e s a ppl i ed to poli t ical candidacy, B:'havtoral Sct. 22 (1977) 237-245.[ i l ] T.L. Saaty and J.P. B ennett , Terrorism: P at terns fo r neg o t i a t i o ns ; Three ca se s tudi e s thro ug h hierarchies and holarchies, S tudyfo r the Arms Cont ro l an d Disarmam ent Agency (1977). Also: Fac ing Tomorrow's Ter ror is t inc ident Today, U.S. Depar tment ofJust ice, LEAA, Washington, DC 20531, pp. 28-31.[12] T.L. $aaty, A scal ing me tho d fo r pr i or i ti e s in hierarch ical structures, J. M ath. Psychology 15 (3) (1977) 234-281.[13] T.L. Saaty, H igher educat ion in the United States (1985-2000): Scenario con struct ion using a hierarchical framework w ~theigenvector weighting, Socio-Economic Planning Sci. 19 (1976) 251-263 with P.C. Rogers.[14] T.L. Saaty, Theory o f m e a s u r e m e n t o f impacts and interact ions in systems, lnternatwnal Conference on Apphed General .~'~tem.~Research: Recent Developments and Trends, Bing hamto n (1977); also in: R . Cavallo, Ed., Systems Methodologr in Social ScienceResearch (Kiuw er-Nyho f f , The H ague, 1982).[ 15] T.L . S aaty The Analytic Hierarchy Process (McGraw-Hil l , New York, 1980).[16] T.L. Saaty, Decision Ma king for Leaders (Lifet ime Learning Publications, a division of Wadsworth, Belmon t, 1982).[17] T.L. Saaty and L. Vargas, The Logic of Priorities (Kluw er-Ni jhof f , The Hague , 1981).[18] G.A . Steiner and H. SchoUhamm er, Pi tfal ls in mult i -nat ion al long range planning, Long Range Planmng (April, 1975).