Business leaders have access to more information than ever before – yet, ironically, it can be harder than ever to make a decision. When faced with multiple choices and countless variables, a decision matrix can clear up confusion about the options and highlight points that may factor into the final call. This quantitative method can remove emotion, as well as confusion, so you can guide your business effectively.
MindTools.com defines a decision matrix as a tool to help you make good decisions when you must weigh difficult-to-compare factors. Rather than a simple list of pros and cons, a decision matrix allows you to place importance on each factor. Also known as the Pugh Method (named for creator Stuart Pugh), a decision matrix helps remove subjectivity in order to make a sound conclusion.
However, that does not mean you should rule out your gut feeling. MindTools suggests comparing the matrix winner against your intuition's choice.
"If it's different, consider why that is and reflect on the scores and weightings that you applied. This may be a sign that certain factors are more important to you than you initially thought," a MindTools video on decision matrices advises.
A decision matrix can help in group scenarios as well, said Don Krapohl, an analytics architect at Rakuten Marketing.
"The use of a weighted decision matrix and rudimentary analysis provide a simple toolset for rapid group decision-making on complex subjects," Krapohl wrote. [Need help making a business decision? Try these techniques and tools.]
Creating a decision matrix
Decision matrices can help not only in selecting the best option, but also in prioritizing tasks, problem-solving or even crafting arguments to defend a decision you've already made.
List your decision alternatives as rows, and the relevant factors affecting the decisions, such as cost, ease and effectiveness, as the columns. Then, establish a ratings scale to assess the value of each alternative/factor combination. Be sure that the rankings are consistent – if, for example, you're looking at pain points, be sure each issue is worded so it gets more points the worse it is.
Next, multiply your original ratings by the weighted rankings to get a score. All of the factors under each option should then be added up. The option that scores the highest is the winning choice or the first item to work on.
You can get a whiteboard or piece of paper and freehand your matrix, but several websites have templates. Here are a few:
Decision matrix example
Decision matrices can be used in a variety of situations, from determining the best way to expand to the best way to tackle a customer service issue. Here we use a decision matrix to determine the best location for a new restaurant.Credit: Karina Fabian
In this example, a restaurant owner is considering four locations. She listed the factors she finds important and assigned weights that reflect how important she considers each aspect to be. Rent is a factor, but she's decided market share, which determines how likely she is to get customers and regulars, is the most important issue. She also values someplace closer to her home so she can visit if there are problems, but it's a nice-to-have feature, not a vital one. Also important is the employee base – she wants to set up where she can find reliable workers. She did not consider floor plan, because she found all of them basically equal and intends to remodel anyway.
When our restaurateur ran the numbers, Locations 3 and 4 come up as close winners. However, looking at the individual numbers helped solidify her decision. Location 3, while the most expensive, offers the greatest opportunity to find qualified employees and attract diners. Thus, not only is it the best by overall score, but the individual factors she values help her justify the increased rent.
A decision matrix is not the only decision-making tool available. Sometimes, a simple pros and cons list works. An if/then decision tree can help you predict the consequences of choices. However, for a decision where you have multiple options and seemingly diverse features to consider, a decision matrix can shed light on the best choice.
Additional reporting by Chad Brooks and Marci Martin.