MCDA - ALLOCATING RESOURCES

In many organisations resources are allocated sub-optimally. One reason for this fact is the so-called Commons Dilemma. Although individuals (or corporate sub-division) use their shares of resources optimally, the allocation of the limited resources for the division as a whole is inefficient.

A Multiple-Criteria Decision Analysis (MCDA) can aid decision-makers to allocate resources efficiently. An MCDA offers insights how to change budgets in order to allocate each monetary unit according to the highest benefit/cost ratio. An MCDA can, for example, be used to prioritize research & development activities in companies or government agencies. As well an MCDA can aid decision-makers to select complex marketing or distribution strategies or to develop complex organisational strategies for NGOs, companies or governmental organisations.

Similar to the selection of alternatives with MCDA, the methodology “MCDA - Allocating Resources” is based on conflicting criteria. When a bank, for example, wants to decide where to open new branches or close some branches, the criteria “Increase in profit”, “Customer friendliness” and “Risk” may be the most relevant ones. An MCDA to allocate resources now can aid the decision-makers to develop different budgeting options in the different budgeting areas. The bank’s four area divisions (North, West, South, East) could serve as these budgeting areas. Within each of the areas the decision-makers define several options (for example: close all branches in the area, close branches A & B, status quo, open branch at location C, open branch at location C & D, etc.). All options in all areas are now scored based on the criteria. After assessing the weights between the criteria and the weights between the different areas, a computer model can show efficient resource allocations. Based on the results of the analysis, often organisational benefits can be increased significantly without a raise in costs only by re-allocating resources.

Conditions to apply of an MCDA to allocate resources:

• Available resources are limited (not all possible budgeting options can be realized)
• Necessity to select or develop a possible allocation of organisational resources
• Availability of some decision criteria (possibly in conflict with each other)