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Annals of Operations Research

, Volume 154, Issue 1, pp 51–68 | Cite as

Transparent prioritisation, budgeting and resource allocation with multi-criteria decision analysis and decision conferencing

  • Lawrence D. Phillips
  • Carlos A. Bana e Costa
Article

Abstract

Managers in both for-profit and not-for-profit organisations continually face the task of allocating resources by balancing costs, benefits and risks and gaining commitment by a wide constituency of stakeholders to those decisions. This task is complex and difficult because many options are present, benefits and risks are rarely expressed as single objectives, multiple stakeholders with different agendas compete for limited resources, individually optimal resource allocations to organisational units are rarely collectively optimal, and those dissatisfied with the decisions taken may resist implementation. We first explain three current approaches to resource allocation taken from corporate finance, operational research and decision analysis, and we identify a common mistake organisations make in allocating resources. The paper then presents a technical process, multi-criteria portfolio analysis, for balancing the conflicting elements of the problem, and a social process, decision conferencing, which engages all the key players during the modelling process, ensuring their ownership of the model and the subsequent implementation. This socio-technical process improves communication within the organisation, develops shared understanding of the portfolio and generates a sense of common purpose about those projects that will best realise the organisation’s objectives. The paper concludes with lessons we have learned from actual practice.

Keywords

Managerial decision making Multi-criteria decision analysis Resource allocation Prioritisation Budgeting Commons dilemma Equity Real-world applications System design Procurement Capital planning Capital budgeting 

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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Lawrence D. Phillips
    • 1
  • Carlos A. Bana e Costa
    • 2
  1. 1.Operational Research Group, Department of ManagementLondon School of Economics and Political ScienceLondonUK
  2. 2.Centre of Management StudiesInstituto Superior TécnicoLisbonPortugal

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