Posted by: magnussonllc | August 25, 2009

Decision Making Tools: Paired Comparison

Paired Comparison Analysis helps you to work out the importance of a number of options relative to each other. It is particularly useful where you do not have objective data to base this on. This makes it easy to choose the most important problem to solve, or select Apples and orangesthe solution that will give you the greatest advantage. Paired Comparison Analysis helps you to set priorities where there are conflicting demands on your resources. It is also an ideal tool for comparing “apples with oranges” – completely different options such as whether to invest in marketing, a new IT system or a new piece of machinery. These decisions are usually much harder than comparing three possible new IT systems, for example.

Follow these steps to use the technique:

  1. List the options you will compare. Assign a letter to each option.
  2. Mark the options as row and column headings on the worksheet.
  3. Note that the cells on the table where you will be comparing an option with itself have been blocked out – there will never be a difference in these cells!
  4. The cells on the table where you will be duplicating a comparison are also blocked out.
  5. Within the remaining cells compare the option in the row with the one in the column. For each cell, decide which of the two options is more important. Write down the letter of the more important option in the cell, and score the difference in importance from 0 (no difference) to 3 (major difference).
  6. Finally, consolidate the results by adding up the total of all the values for each of the options. You may want to convert these values into a percentage of the total score.

As a simple example, an entrepreneur is looking at ways in which she can expand her business. She has limited resources, but also has the options she lists below:

  • Expand into overseas markets
  • Expand in home markets
  • Improve customer service
  • Improve quality

Firstly she draws up the Paired Comparison Analysis table in Figure 1:

Figure 1: Example Paired Comparison Analysis Table (not filled in):

 

Overseas Market (A)

Home
Market (B)

Customer
Service (C)

Quality
(D)

Overseas Market
(A)

Blocked Out
(Step 3)
     

Home Market
(B)

Blocked Out
(Step 4)
Blocked Out
(Step 3)
   

Customer Service
(C)

Blocked Out
(Step 4)
Blocked Out
(Step 4)
Blocked Out
(Step 3)
 

Quality
(D)

Blocked Out
(Step 4)
Blocked Out
(Step 4)
Blocked Out
(Step 4)
Blocked Out
(Step 3)

Then she compares options, writes down the letter of the most important option, and scores their difference in importance. An example of how she might do this is shown in figure 2:

Figure 2: Example Paired Comparison Analysis Table (filled in):

 

Overseas Market (A)

Home
Market (B)

Customer
Service (C)

Quality
(D)

Overseas Market
(A)

 

A,2

C,1

A,1

Home Market
(B)

   

C,1

B,1

Customer Service
(C)

     

C,2

Quality
(D)

       

Finally she adds up the A, B, C and D values, and converts each into a percentage of the total. This gives these totals:

  • A = 3 (37.5%)
  • B = 1 (12.5%)
  • C = 4 (50%)
  • D = 0.

Here it is most important to improve customer service (C) and then to tackle export markets (A). Quality is not a high priority – perhaps it is good already.

Key points:

Paired Comparison Analysis is a good way of weighing up the relative importance of different courses of action. It is useful where priorities are not clear, or are competing in importance. The tool provides a framework for comparing each course of action against all others, and helps to show the difference in importance between factors.

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