Group decision-making tools for managerial accounting and finance applications

Abstract

To deal with today's uncertain and dynamic business environments with different background of decision makers in computing trade-offs among multiple organizational goals, our series of papers adopts an analytic hierarchy process (AHP) approach to solve various accounting or finance problems such as developing a business performance evaluation system and developing a banking performance evaluation system. AHP uses hierarchical schema to incorporate nonfinancial and external performance measures. Our model has a broader set of measures that can examine external and nonfinancial performance as well as internal and financial performance. While AHP is one of the most popular multiple goals decision-making tools, multiple-criteria and multiple-constraint (MC2) linear programming approach also can be used to solve group decisionmaking problems such as transfer pricing and capital budgeting problems. This model is rooted by two facts. First, from the linear system structure's point of view, the criteria and constraints may be “interchangeable.” Thus, like multiple criteria, multiple-constraint (resource availability) levels can be considered. Second, from the application's point of view, it is more realistic to consider multiple resource availability levels (discrete right-hand sides) than a single resource availability level in isolation. The philosophy behind this perspective is that the availability of resources can fluctuate depending on the decision situation forces, such as the desirability levels believed by the different managers. A solution procedure is provided to show step-by-step procedure to get possible solutions that can reach the best compromise value for the multiple goals and multiple-constraint levels.