Multiple Criteria Decision Making

Nov. 10, 2016

When making decisions, there are usually multiple criteria that need to be considered. For example, when buying a house, these criteria might include price, size, location, etc. It is unlikely that the cheapest house will also be the biggest, or in the best location, so the home buyer will need to weigh these factors before making a decision. When buying stocks, the ones that have the potential of bringing the highest returns typically also carry the highest risk of losing money.

We make numerous decisions every day, using intuition to weigh multiple criteria implicitly. For the more important decisions, however, we should properly structure the problem and evaluate the criteria explicitly. Structuring problems well and considering the multiple criteria explicitly will lead to better decisions. This becomes even more important when making group decisions, where there are multiple decision makers.

Most people acknowledge the importance of relevant information when making decisions, but are unaware of the need for a logical approach to the decision itself. Research has shown that although the vast majority of everyday decisions made intuitively are adequate, intuition alone is not sufficient for making complex, more important decisions.

In general, the following logical steps should be followed when making important decisions:

  1. Identify all the criteria
  2. Weigh all of the criteria according to the goals.
  3. Assess each alternative on each criterion.
  4. Calculate and choose the alternative with the highest value.

Multiple Criteria Decision Making becomes even more important when making group decisions, where there are multiple decision makers. Suppose a company is looking to recruit a new employee, and there are multiple assessors involved in the decision-making process. Each of the assessors will need to follow the above steps: weighing the criteria, scoring each candidate in each criteria, and calculating an overall score.

A further complication in group decision making is that all individuals have their own natural scale for assigning scores. Some people might consider 5 out of 10 an average score, others might consider that a low score. So it is important to take this into account when aggregating the assessors’ scores.

Group discussions alone are inadequate for making important decisions. These discussions are often dominated by the leader and rarely facilitated. The leader sets the tone and is often not challenged. If the group starts down the wrong path they rarely look back. So alternative, logical approaches are vital.