Employee Performance Evaluation Using the Analytic Hierarchy Process

Article excerpt

ABSTRACT

Managers do not look forward to giving performance reviews and there is no exception to that rule. Every year managers struggle with finding just and fair way to allocate salary increases to their department. They want to find a way that will reward the best performers by given them the largest salary increases for the years. Identifying the best performers is a very subjective task. So, managers are always searching for a way to make this task as objective as possible. This research will utilize the AHP to deal with the performance evaluations and merit increases for a local firm in the state of Indiana. More specifically, the research will help the managers in assigning weights to the most important factors used in the evaluation process.

INTRODUCTION

"The groans of the managers echo the halls as the reminder comes that it's time once again for annual performance reviews,"(Molta, 1997). Managers do not look forward to giving performance reviews and there is no exception to that rule. Every year managers struggle with finding a way to be fair with the salary increases that are allocated to their department. They want to find a way that will reward the best performers by given them the largest salary increases for the years. Identifying the best performers is a very subjective task. So, managers are always searching for a way to make this task as objective as possible

The Analytic Hierarchy Process (AHP) would seem to be an effective tool to use in this decision process. The overall decision process is complex and involves consideration of both objective and subjective factors. AHP would seem to be a useful means to deal with this complexity, force determination of factor weights and evaluations, and provide empirical basis for a sound conclusion. AHP may serve as a means to deal with the current frustration found in this decision-making process and assist managers in making better decisions.

This research will utilize the AHP to deal with the performance evaluations and merit increases for a local firm in the state of Indiana. More specifically, the research will help the managers in assigning weights to the most important factors used in the evaluation process. An application of the technique will be used in the Management Information System (MIS) department of the firm.

ANALYTIC HIERARCHY PROCESS

"AHP is about breaking a problem down and then aggregating the solutions of all the sub problems into a conclusion. It facilitates decision making by organizing perceptions, feelings, judgments, and memories into a framework that exhibits the forces that influence a decision. In the simple and most common case, the forces are arranged from the more general and less controllable. The AHP is based on the innate human ability to make sound judgments about small problems."(Saaty, 1994).

"The analytic hierarchy process is a flexible model that allows us to make decisions by combining judgment and personal values in a logical way," (Saaty, 1994). By reducing the decision to a series of simple comparisons, then calculating the results, the AHP helps arrive at the best decision for allocation of salary increase dollars. In simplified terms the process followed is to determine what factors are significant; place the factors and alternatives in a decision hierarchy; perform calculations to determine the weighted score.

AHP has been applied successfully in many areas of decision-making. The technique has been applied in: synthesizing group decisions (Gass & Rapcsak, 1998); auditing tax declarations (Iwasaki & Tone, 1998); total quality (Wang, Xie, &Goh, 1998); global locations (Badri, 1999); new product screening (Calantone, Benedetto,& Schmidt, 1999); university resource allocations (Kwak & Lee, 1998); and ethical decision making (Ido, 1998) to name just a few. The technique has also been used in the healthcare area such as; choosing a hospital (Javalgi, Rao, & Thomas, 1991); cancer treatment decisions (Kimbore, 1999); and healthcare information resource planning (Lee & Kwak, 1999). …