What is MCDA?
MCDA, also known as MCA and MCDM, stands for Multi-Criteria Decision Analysis or Multi-Criteria Decision Making and is a method that allows decisions to be made where tangible and intangible things need to compared to get a result.
With MCDA things that can be counted, such as the number of birds in the sky, can be compared with things that are the result of opinions, such as the skill of the flying birds. It is most commonly used in business to compare tangible assets, such as cash in the bank, with intangible assets such, as customer loyalty and reputation, and other things like environmental and community outcomes.
Who is MCDA for?
MCDA will be of value to anyone who needs to make a complex decision where there are a number of alternatives and especially where the decision has to be based on both tangible and intangible criteria. MCDA becomes more helpful as the number of alternatives increases and as the criteria become more complex.
The use of MCDA is valuable to anyone who, for example, is considering purchasing a house, boat, car, business, or any other substantial asset.
MCDA is of particular importance to companies that need to make decisions where social and environmental outcomes have to be compared with cost. Thus, it can underpin an organisation’s sustainability reporting under say the United Nations Sustainable Goals, it can effectively prioritise the organisation’s transformation initiatives, and effectively prioritise it’s asset maintenance efforts. Additionally, it can help with things like complex procurements, panel selections, and complex recruitments.
Why is MCDA important?
- MCDA removes emotion from the decision making process so the result is likely to be a better decision than without MCDA.
- MCDA has been known to help in making decisions with thousands of alternatives and hundreds of criteria.
- Because MCDA produces a relative value of each alternative it can be used to rank alternatives from the most attractive to least attractive
How does MCDA help with ESG?
ESG by its very nature of Environmental, Social, and Governance requires tangible assets like cost to be compared to intangible outcomes like environment and social outcomes to arrive at a decision of what to do or how to behave. Thus, ESG enforces companies to behave ethically and sustainably and also requires them to report on their decisions and behaviour.
MCDA offers the proof that the way in which the organisation takes decisions are entirely ethical, transparent, and sustainable. If your MCDA tool is as powerful as AppO you will even be able to integrate your customer’s opinions of what your decisions mean to them in your decision making process. Of course, this means you could also include any stakeholder opinions such as shareholders and investors, employees, professional bodies, vendors etc.
Among the many advantages arising from integrating MCDA into ESG is improved allocation of capital to project costs, the improved allocation of capital to the long-term sustainability of plant and equipment, limiting stranded assets as the result of premature write-downs, reducing the risk of falling behind competitors that have invested in being less energy hungry, avoiding poor returns from longer-term investments at risk of environmental issues, managing cost by lowering energy and water consumption, limiting waste disposal costs, and potentially limiting unnecessary waste and packaging costs.