One of the biggest struggles faced by business owners, leaders and managers is decision making. When faced with more than one possibility to choose from, a decision matrix can help clear up any confusion about the options and highlight points that may factor in the final call. This quantitative method helps determine the ideal solution for the organization to meet its goals, needs and wants.
BusinessDictionary.com defines a decision matrix as "a table used in evaluating possible alternatives to a course of action." Its purpose is to help business leaders assess and arrange all of their options, especially when there isn't a clear, preferred option. Also known as the Pugh method (named for creator Stuart Pugh), a decision matrix helps take the subjectivity out of the decision that needs to be made by carefully weighing all of the factors and criteria that are used to make a final conclusion.
"The use of a weighted decision matrixand rudimentary analysis provide a simple tool set for rapid group decision making on complex subjects," Don Kraphohl, an analytics analyst at Rakuken Marketing, wrote in a blog post. [See Related Story: Decision-Making Techniques and Tools]
Creating a decision matrix
To make and use a decision matrix, you'll need to create a chart. The different decision alternatives are listed as the rows, and the relevant factors affecting the decisions, such as cost, ease and effectiveness, are listed as the columns. Then, establish a ratings scale to assess the value of each alternative/factor combination. Each combination should also be given a weighted ranking to determine how important that factor is in the final decision.
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 decision that should be made or the first item addressed.
Decision matrix example
Decision matrices can be used in a wide variety of situations. In a book excerpt on ASQ.org, author Nancy Tague provides an example scenario of a restaurant that is deciding which aspect of the overall problem of long customer wait times to tackle first. They first identified four "problem" options: customers waiting for the host, the waiter, the food and the check. These would be placed in the rows of their decision matrix.
The relevant criteria about the problems, which would be placed in the columns, are: customer pain, ease to solve, effect on other systems and speed to solve. Customer pain, the most important factor for the restaurant, is given a weighted ranking of 5, while the others are given either a 1 or 2. Next, each factor combination is given a 3 (high), 2 (medium) or 1 (low).
In Tague's example matrix, the effect on customer pain is medium, because the restaurant ambiance is nice, so it is given a 2. Since the problem would not be easy to solve because it involves both waiters and kitchen staff, it is given a 1. Additionally, the problem will take a while to solve, since the kitchen is cramped and inflexible, so it is also given a 1.
These ratings are then multiplied by the weighted rankings for those criteria. Each row of scores is then added up to come up with a final tally. "Customers' wait for host" has the highest score at 28, which indicates that this problem should be addressed first.
Below, we have recreated a simplified version of the matrix described by Tague:
Decision matrix templates
For businesses interested in incorporating the decision matrix into the decision-making process, templates can be found on a variety of online sites, including:
Additional reporting by Chad Brooks.