Using the Analytic Hierarchy Process (AHP) to Select and ... fileProcess (AHP) Practical Example -...
Transcript of Using the Analytic Hierarchy Process (AHP) to Select and ... fileProcess (AHP) Practical Example -...
Богданов и партнеры
Богданов и партнеры 1
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Ricardo Viana Vargas, MSc, CSM, [email protected]: rvvargas
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Using the Analytic Hierarchy Process
(AHP) to Select and Prioritize
Projects in a PortfolioProject Management 2011: Working with the Project Customer
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Ricardo Viana Vargas, MSc, CSM, PMP
Ricardo Viana Vargas is a project, portfolio and risk management specialist. During the past 15 years, he has been responsible for over 80 major projects in various countries in the areas of petroleum, energy, infrastructure, telecommunications,
information technology and finances, comprising an investment portfolio of over 18 billion dollars.
He was the first Latin American volunteer to be elected Chairman of the Board for the Project Management Institute (PMI), the largest project management organization in the world with close to 500,000 members and certified professionals in 175
countries.
Ricardo Vargas has written ten books on project management, published in Portuguese and English, which have sold over 200,000 copies throughout the world. In 2005 he received the PMI Distinguished Award for his contribution to the
development of project management and the PMI Professional Development Product of the Year award for the PMDome®
workshop, considered the best project management training solution in the world.
He is a project management professor for various MBA courses, and actively participates on editorial boards for specialized journals in Brazil and the United States. Vargas is a recognized reviewer of the PMBOK Guide, the most important reference in
the world for project management, and also chaired the official translation of PMBOK into Portuguese.
He is a chemical engineer and holds a master’s degree in Industrial Engineering from UFMG (Federal University of Minas Gerais). Ricardo Vargas also holds a Master Certificate in Project Management from George Washington University and is
certified both as a Project Management Professional (PMP) by PMI and as IPMA-B by the International Project Management
Association. He attended the Program on Negotiation for Executives at Harvard Law School.
Over an eleven year timeframe, which began in 1995, Ricardo, in conjunction with two partners, established one of the most solid Brazilian businesses in the area of technology, project management and outsourcing, which had a staff of 4,000
collaborators and an annual income of 50 million dollars in 2006, when Ricardo Vargas sold his share of the company to
dedicate himself on a fulltime basis to the internationalization of his project management activities.
He is a member of the Association for Advancement of Cost Engineering (AACE), the American Management Association (AMA), the International Project Management Association (IPMA), the Institute for Global Ethics and the Professional Risk
Management International Association (PRMIA).
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Богданов и партнеры
Богданов и партнеры 2
Agenda of Session
Importance of Project
Selection and Prioritization
Examples of Criteria for
Prioritization
Analytical Hierarchy
Process (AHP)
Practical Example -Portfolio of
ACME
Conclusions
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Project Selection / Prioritization
Challenge - Ability to choose the most
correct and consistent alternatives in such a
way that strategic alignment is maintained.
Possible Definitions for Low Costs
Possible Definitions for High Benefits
Cheaper More profitable Less resource needs Greater return of investment Easier to be executed Increase in the number of customers Less complex Increase in competitiveness Less internal resistance Improvements for the society Less bureaucratic Increase in Market Share Less risks (threats) Executives and shareholders happier
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Богданов и партнеры
Богданов и партнеры 3
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Examples of Criteria Used In the Prioritization
Financial Strategic
Risks Urgency
Stakeholder commitment
Technical knowledge
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Analytic Hierarchy Process
Богданов и партнеры
Богданов и партнеры 4
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
The Comparation Scale (Saaty Scale)
ScaleScaleScaleScale Numerical Numerical Numerical Numerical RatingRatingRatingRating
ReciprocalReciprocalReciprocalReciprocal
Extremely PreferredExtremely PreferredExtremely PreferredExtremely Preferred 9999 1/91/91/91/9 Very strong to extremely 8 1/8
Very strongly preferredVery strongly preferredVery strongly preferredVery strongly preferred 7777 1/71/71/71/7 Strongly to very strongly 6 1/6
Strongly preferredStrongly preferredStrongly preferredStrongly preferred 5555 1/51/51/51/5 Moderately to strongly 4 ¼
Moderately preferredModerately preferredModerately preferredModerately preferred 3333 1/31/31/31/3 Equally to moderately 2 ½
Equally preferredEqually preferredEqually preferredEqually preferred 1111 1111
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
ACME Portfolio Example
Богданов и партнеры
Богданов и партнеры 5
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Comparison Matrix – First Level
Stakeholders CStakeholders CStakeholders CStakeholders C FinancialFinancialFinancialFinancial StrategicStrategicStrategicStrategic Other CriteriaOther CriteriaOther CriteriaOther Criteria Stakeholders Stakeholders Stakeholders Stakeholders CCCC 1 1/5 1/9 1 FinancialFinancialFinancialFinancial 5 1 1 5 StrategicStrategicStrategicStrategic 9 1 1 5 Other CriteriaOther CriteriaOther CriteriaOther Criteria 1 1/5 1/5 1 ToToToTotal (Sum)tal (Sum)tal (Sum)tal (Sum) 16161616....00000000 2222....40404040 2222....31313131 12121212....00000000 ResultsResultsResultsResults Stakeholders CStakeholders CStakeholders CStakeholders C 1/16 = 0.063 0.083 0.048 0.083 FinancialFinancialFinancialFinancial 5/16 = 0,313 0.417 0.433 0.417 StrategicStrategicStrategicStrategic 9/16 = 0.563 0.417 0.433 0.417 Other CriteriaOther CriteriaOther CriteriaOther Criteria 1/16 = 0.063 0.083 0.087 0.083
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Priority vector – Eingenvector (Average)
EigenEigenEigenEigenvvvveeeectorctorctorctor (Calculation)(Calculation)(Calculation)(Calculation) EigenEigenEigenEigenvvvvectorectorectorector Stakeholders CStakeholders CStakeholders CStakeholders C [0.063+0.083+0.048+0.083]/4 =0.0693 0000....0693069306930693 (6,93%)(6,93%)(6,93%)(6,93%) FinancialFinancialFinancialFinancial [0.313+0.417+0.433+0.417]/4 =0.3946 0000....3946394639463946 (39,46%)(39,46%)(39,46%)(39,46%) StrategicStrategicStrategicStrategic [0.563+0.417+0.433+0.417]/4 =0.4571 0000....4571457145714571 (45,71%)(45,71%)(45,71%)(45,71%) Other CriteriaOther CriteriaOther CriteriaOther Criteria [0.063+0.083+0.087+0.083]/4 = 0.0789 0000....0789078907890789 (7,89%)(7,89%)(7,89%)(7,89%)
Богданов и партнеры
Богданов и партнеры 6
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Inconsistency Index and Ratio
EigenEigenEigenEigenvvvvectorectorectorector 0.0684 0.3927 0.4604 0.0785 Total (Sum)Total (Sum)Total (Sum)Total (Sum) 16.00 2.40 2.31 12.00 MaximumMaximumMaximumMaximum EigenEigenEigenEigenvvvvalue alue alue alue ((((����))))
[(0.0684 x 16.00)+(0.3927 x 2.40)+(0.4604 x 2.31) + (0.0785 x 12.00)] = 4.04
�� =�� −
− 1
�� =�� −
− 1=
4.04 − 4
4 − 1= 0.0143
�� =��
��< 0.1 ~ 10%
NNNN 1 2 3 4 5 6 7 8 9 10 RIRIRIRI 0 0 0.58 0.9 1.12 1.24 1.32 1.41 1.45 1.49
Random Consistency Index (Saaty)
�� =0.0143
0.9= 0.0159 = 1,59%
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Results for the First Level
Богданов и партнеры
Богданов и партнеры 7
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Second Level of Criteria
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Second Level – Comparison Matrix
Stakeholders CommitmentStakeholders CommitmentStakeholders CommitmentStakeholders Commitment CriteriaCriteriaCriteriaCriteria Team Team Team Team
CommitmentCommitmentCommitmentCommitment Organizational Organizational Organizational Organizational CommitmentCommitmentCommitmentCommitment
Project Manager Project Manager Project Manager Project Manager CommitmentCommitmentCommitmentCommitment
Team Team Team Team CommitmentCommitmentCommitmentCommitment
1 3 1/5
Organizational Organizational Organizational Organizational CommitmentCommitmentCommitmentCommitment
1/3 1 1/9
Project ManagProject ManagProject ManagProject Manager er er er CommitmentCommitmentCommitmentCommitment
5 9 1
FinancialFinancialFinancialFinancial CriteriaCriteriaCriteriaCriteria Return of Return of Return of Return of
InvestmentInvestmentInvestmentInvestment Profit (US$)Profit (US$)Profit (US$)Profit (US$)
Net Present Net Present Net Present Net Present ValueValueValueValue
Return of Return of Return of Return of InvestimentInvestimentInvestimentInvestiment
1 1/5 1/5
Profit Profit Profit Profit (US$)(US$)(US$)(US$)
5 1 1
Net Present Net Present Net Present Net Present ValueValueValueValue
5 1 1
Богданов и партнеры
Богданов и партнеры 8
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Second Level – Comparison Matrix
Strategic CriteriaStrategic CriteriaStrategic CriteriaStrategic Criteria Compete in Compete in Compete in Compete in
International International International International MarketsMarketsMarketsMarkets
Internal Internal Internal Internal ProcessesProcessesProcessesProcesses
ReputationReputationReputationReputation
Compete in Intern. Compete in Intern. Compete in Intern. Compete in Intern. MarketsMarketsMarketsMarkets
1 7 3
Internal Internal Internal Internal ProcessesProcessesProcessesProcesses
1/7 1 1/5
ReputationReputationReputationReputation 1/3 5 1
Other CriterOther CriterOther CriterOther Criteriaiaiaia Lower Risks for Lower Risks for Lower Risks for Lower Risks for
the Organizationthe Organizationthe Organizationthe Organization UrgencyUrgencyUrgencyUrgency
Internal Technical Internal Technical Internal Technical Internal Technical KnowledgeKnowledgeKnowledgeKnowledge
Lower Risks for the Lower Risks for the Lower Risks for the Lower Risks for the OrganizationOrganizationOrganizationOrganization
1 5 1/3
UrgencyUrgencyUrgencyUrgency 1/5 1 1/7
Internal Technical Internal Technical Internal Technical Internal Technical KnowledgeKnowledgeKnowledgeKnowledge
3 7 1
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Second Level - Results
Богданов и партнеры
Богданов и партнеры 9
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Global Goal
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Example of Projects for Priorization - ACME
Move to a new office facility
New ERP system
Opening of an office in China
Development of a new
Product Intl. Market
IT infrastructure Outsourcing
New local Marketing Campaign
Богданов и партнеры
Богданов и партнеры 10
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
rProjects Comparison Matrix -Team Commitment Criterion (1 of 12)
Team CommitmentTeam CommitmentTeam CommitmentTeam Commitment New New New New
OfficeOfficeOfficeOffice ERPERPERPERP
Implem.Implem.Implem.Implem. Chinese Chinese Chinese Chinese OfficeOfficeOfficeOffice
InternInternInternIntern.... ProductProductProductProduct
IT IT IT IT OutsourcOutsourcOutsourcOutsourc....
Local Local Local Local CampaignCampaignCampaignCampaign
New New New New OfficeOfficeOfficeOffice
1 5 3 1/3 9 7
ERPERPERPERP Implem.Implem.Implem.Implem. 1/5 1 1/5 1/7 1 1/3
Chinese Chinese Chinese Chinese OfficeOfficeOfficeOffice
1/3 5 1 1/3 7 3
InternationalInternationalInternationalInternational ProductProductProductProduct 3 7 3 1 5 5
IT IT IT IT OutsourcingOutsourcingOutsourcingOutsourcing
1/9 1 1/7 1/5 1 1/3
New Local New Local New Local New Local CampaignCampaignCampaignCampaign
1/7 3 1/3 1/5 3 1
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Results - Team Commitment Criterion (1 of 12)
Богданов и партнеры
Богданов и партнеры 11
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Repeat the process
for the other 11 criteria
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Final priority evaluation of the Project “Move to a New Office”
CriteriaCriteriaCriteriaCriteria Priority Priority Priority Priority WeightWeightWeightWeight
Alternative Alternative Alternative Alternative WeightWeightWeightWeight
ProductProductProductProduct
Team CommitmentTeam CommitmentTeam CommitmentTeam Commitment 0,0122 0,2968 0,0036 Organizational CommitmentOrganizational CommitmentOrganizational CommitmentOrganizational Commitment 0,0048 0,0993 0,0005 Project Manager CommitmentProject Manager CommitmentProject Manager CommitmentProject Manager Commitment 0,0514 0,1586 0,0082 Return on Investment (ROI)Return on Investment (ROI)Return on Investment (ROI)Return on Investment (ROI) 0,0357 0,0296 0,0011 Profit (US$)Profit (US$)Profit (US$)Profit (US$) 0,1785 0,0315 0,0056 Net Present ValueNet Present ValueNet Present ValueNet Present Value 0,1785 0,0366 0,0065 Improves Ability to Compete in International MarketsImproves Ability to Compete in International MarketsImproves Ability to Compete in International MarketsImproves Ability to Compete in International Markets 0,2988 0,1033 0,0309 Improves Internal ProcessesImproves Internal ProcessesImproves Internal ProcessesImproves Internal Processes 0,0331 0,1903 0,0063 Improves ReputationImproves ReputationImproves ReputationImproves Reputation 0,1284 0,0421 0,0054 Lower Risks (Threats) for theLower Risks (Threats) for theLower Risks (Threats) for theLower Risks (Threats) for the OrganizationOrganizationOrganizationOrganization 0,0219 0,2994 0,0066 UrgencyUrgencyUrgencyUrgency 0,0056 0,0553 0,0003 Internal Technical KnowledgeInternal Technical KnowledgeInternal Technical KnowledgeInternal Technical Knowledge 0,0510 0,4796 0,0243
ResultsResultsResultsResults 0,09920,09920,09920,0992
Богданов и партнеры
Богданов и партнеры 12
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Final Results for the 6 Projects
“PMI” is a registered trade and service mark of the Project Management Institute, Inc.
©2010Permission is granted to PMI for PMI® Marketplace use onlyUsing AHP to Select and Prioritize
Projects in a Portfolio
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Pro
ject
Ma
na
ge
me
nt
20
11
: W
ork
ing
wit
h t
he
Pro
ject
Cu
sto
me
r
Conclusions
AHP is a mathematical tool to support the decision.
AHP supports the team to qualify decisions.
Software applications like Expert Choice are “required”.
Final message - Decision making presumes a broader and more complex
understanding of the context than the use of any specific technique.
Богданов и партнеры
Богданов и партнеры 13
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
ricardo.vargas@macrosolutions.com.brwww.ricardo-vargas.comricardo.vargasrvvargas [email protected]
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Thanks a lot!
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
Visit
www.ricardo-vargas.com
to access other presentations,
podcasts, videos and technical
content about project , risk and
portfolio management.
© BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS