Indices are commonly used to help with strategic issues, particularly in
cases where you have factors that cannot be incorporated into a financial model.
For example, a company may be looking a possible sites for a new facility. It
first decides what factors are important in the decision and weights them such
that the weights add up to 100%. For each possible site, it gives a rating on
some scale--perhaps a scale to 1 to 5, where 5 is best. It then multiples the
ratings by the weightings and adds the result to get an index rating for each
site.
Let's say you decide to use the following factors for choosing a topic:
- Inherent Interest: Do you find this topic interesting--or does it seem pretty dull?
- Job Relevance: How much relevance does it have to your present job, or to the job you want to get?
- Availability of Information: Does it seem like it will be relatively easy to find information--or is it likely to be hard to get for one or more reasons: confidentiality, the need to interview people who may be hard to get hold of, information available only in an out-of-way location?
- Clear Focus: Is it easy to draw a clear boundary around the project--or is it likely to keep spreading into new areas?
- Ability to Contribute: How easy is it for you to do something original--or will you have to struggle to keep the thesis from becoming a book report?
Next you give each of these factors a weight. The weights should be the same for all topics.
Then for each possible topic, you give a rating for each factor. For example, if a topic is very interesting, you might rate it a 5.
Finally you multiply the weights by the ratings and add the result to get an index.
The table below shows the possible results for one topic. A topics with a
high overall index would be more likely candidates for your thesis than one with
a low index.
| Factors: Topic A | Weight | Rating | Index | |
| a | Inherent Interest | 20% | 4 | .8 |
| b | Job Relevance | 15 | 3 | .45 |
| c | Availability of Information | 20 | 4 | .8 |
| d | Clear Focus | 25 | 1 | .25 |
| e | Ability to Contribute | 20 | 2 | .4 |
| Totals | 100% | 2.75 | ||
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