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Updated Jan 13, 2024

What Is a Decision Matrix? Definition and Examples

Learn what a decision matrix is and how to use it for your business.

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Sean Peek, Business Ownership Insider and Senior Analyst
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Running a business poses many challenges that require you to make many important decisions. Making those decisions can be as simple as weighing the pros and cons. However, sometimes it requires a more thorough decision-making process. In moments like those, entrepreneurs can turn to decision-making tools that help them analyze the situation and come to a conclusion. One of the most useful of these tools is known as the decision matrix.

What is a decision matrix?

A decision matrix is a quantitative method that can remove emotion as well as confusion to help you lead your business to success. Unlike a simple list of pros and cons, a decision matrix allows you to place a relative value on each factor and weigh them accordingly. It involves determining a list of criteria that influence a situation and then assigning a weight value (usually 0 through 5) to each. This can help you visualize the importance of each criterion as it relates to the situation or problem at hand.

Stuart Pugh, who was a professor and head of design at the University of Strathclyde in Scotland, created the decision matrix method to help in selecting design alternatives. Since then, the tool has evolved into a general decision-making aid, especially in the business world. Also known as the Pugh method, grid analysis or the multiattribute utility theory, a decision matrix reduces subjectivity to help you draw a sound conclusion.

Amie Devero, managing partner of Amie Devero Coaching & Consulting, said that a decision matrix is a useful tool to help people find more viable options when they believe they are faced with a binary choice.

“By creating a visible table to assess the options and then forcing ourselves to imagine an extra [option], we can see that there are many more possible outcomes and choices than we believe,” Devero told Business News Daily. “Then, we are choosing between good, better and best. That’s the most powerful position to be in as a business leader.”

Key TakeawayKey takeaway
A decision matrix is a simple tool you can use to make complex business decisions easier to manage by removing subjective feelings from the process.

How to create a decision matrix

Creating a decision matrix is relatively easy and only takes five simple steps. In the end, you’ll have a grid identifying the contributing factors to the situation or problem you’re trying to overcome, as well as possible decisions you may take to do so.

1. Establish table

To establish the table for your decision matrix, list your possible options as labels on the top row. Your labels for the first column should be the factors influencing the situation. So, for example, if you’re trying to decide whether to hire a new employee, you may establish your table as follows:

 

Hire new employee

Don’t hire new employee

Current employee workload

  

Ability to meet deadlines

  

Payroll expenses

  

2. Score the impact of each decision on your criteria

Once your table is set up, it’s time to determine how each decision would impact each criterion you’ve chosen. Using a scale of 0 through 5 (0 being negative to the decision, 5 being best for the decision) assign values to each. In the example above, your decision matrix may appear as follows:

 

Hire new employee

Don’t hire new employee

Current employee workload

5

0

Ability to meet deadlines

5

3

Payroll expenses

0

5

Here, hiring a new employee would be extremely positive for reducing your current employees’ workloads and improving your ability to meet deadlines. However, a big drawback would be increasing payroll expenses. Not hiring a new employee would be very bad for the current team’s workload and may slightly impact your ability to meet deadlines. However, the lack of additional payroll expenses is a major benefit.

3. Determine the weight of each criterion

Each criterion you’ve selected may not be as important as the next, so you’ll need to assign weight to each one before you can analyze your decision matrix. You can also do this on a scale of 0 through 5, 0 being the least important and 5 being the most important. In keeping with the example above, your matrix may look as follows:

 

Hire new employee

Don’t hire new employee

Current employee workload (weight = 3)

5

0

Ability to meet deadlines
(weight = 2)

5

3

Payroll expenses
(weight = 5)

0

5

Here, we’ve determined that payroll expenses are the most important factor in the decision, followed closely by each employee’s current workload. However, we’re not quite as concerned about our ability to meet deadlines, although that remains a somewhat important goal.

4. Multiply decision values by criteria weights

Multiply the values you’ve assigned to each decision by the weights you’ve assigned your criteria. The product is a weighted score for each decision. For our example above, it would work as follows:

 

Hire new employee

Don’t hire new employee

Current employee workload (weight = 3)

5 x 3 = 15

0 x 3 = 0

Ability to meet deadlines
(weight = 2)

5 x 2 = 10

3 x 2 = 6

Payroll expenses
(weight = 5)

0 x 5 = 0

5 x 5 = 25

5. Add up the weighted scores

The sum total of the weighted scores will help you see which decision you’re leaning towards. In our example, the total of the “hire new employee” column’s weighted score is 25, while the “don’t hire new employee” column’s sum is 31. In the end, while we were considering hiring a new employee to lighten the load on our other team members and improve our ability to meet deadlines, the weight of payroll expenses ultimately pushed us toward not hiring a new team member.

TipTip
Change the weights of each criterion in our example matrix and see how that changes our hypothetical decision. A lot rests on how you prioritize the factors affecting your condition, so assign weights wisely.

Example of a decision matrix

Decision matrices can be used in various situations, such as determining the best way to handle a customer service issue. For example, let’s use a decision matrix to determine the best location for a new restaurant.

In this example, a restaurant owner is considering four locations. She listed the factors she finds important and assigned a weight to each one based on their importance.

Rent is a factor, but she’s decided that market share, which determines how likely she is to get customers, is the most important issue. She values a location close to her home so that she can get there quickly to deal with any issues and she wants to be in an area where she can find reliable workers. However, these factors are not as important, so they receive lower weighted scores. She did not consider the floorplan because her restaurant equipment would fit in all locations and she intends to remodel anyway.

When our restaurateur ran the numbers, locations 3 and 4 emerged as the front-runners. 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 customers. Thus, not only is it the best by overall score, but the individual factors she values helped her justify the increased rent.

Keep in mind that a decision matrix is not the only decision-making tool available. For example, sometimes, a simple pros and cons list works. However, a decision matrix can shed light on the best choice for a decision in which there are multiple options and diverse features to consider.

Did You Know?Did you know
Consider using a decision matrix when there are several factors vying for your attention. It can help you to establish priorities and rank your criteria to arrive at the best possible decision.

When to use a decision matrix (and when not to)

A decision matrix can help you not only make complex decisions but also prioritize tasks, solve problems and craft arguments to defend a decision you’ve already made.

It is an ideal decision-making tool if you are choosing among a few comparable solutions with multiple quantitative criteria. Steve Kurniawan, a content specialist and growth strategist at Nine Peaks Media, said that there is a sweet spot for the number of variables each solution should have.

“When there are only two possible solutions that don’t involve too many variables, it’s better to use other decision-making tools,” he said. “On the other hand, if there are too many variables involved, the matrix can be very complex. In general, three to eight is the proper number [of variables] where a decision matrix is viable.”

The decision matrix process is best used when deciding on something that does not require a sense of emotion, as it is a logical tool by nature. For example, Devero said, the matrix is not ideal when choices are purely a matter of taste or style. However, she noted that it removes intuition, which is sometimes an essential factor.

“The [matrix] does remove some of the gut feelings that are often indicative of strong intuitions and can sometimes point to something valuable,” Devero said.

It’s best to use a decision matrix to assess a situation from a logical viewpoint and have enough comparable variables to conduct a weighted analysis.

The matrix can be used on its own or in tandem with other decision-making tools and techniques. For example, if you are choosing a course of action for a business strategy or deciding among scenarios for a long-term career plan, Devero believes that a decision matrix could be a useful tool. However, she advised against relying solely on it.

Key TakeawayKey takeaway
A decision matrix is best used when you need a purely logical solution. It is not ideal when emotion or personal preference is involved.

Alternative decision-making matrices

While it may be incredibly beneficial to making business decisions, the decision matrix described above isn’t the only option for determining which path to take. Here are four different analyses that weigh pros and cons, identify problems and solutions or demonstrate the cause and effect of decisions with added foresight.

SWOT analysis

A SWOT analysis (SWOT stands for strengths, weaknesses, opportunities and threats) is a simple business tool used to guide decision-making based on internal and external factors. A SWOT analysis should be performed by deeply involved team members and conducted collaboratively with a team of employees who hold different perspectives on the business to ensure the analysis is comprehensive.

Strengths and weaknesses in a SWOT analysis are internal factors you can control — like individual team members and your unique intellectual property, including what you know your competitors do better. Opportunities and threats, then, are external. Examples of opportunities in a SWOT analysis are trends you can capitalize on or competitors you can overtake; threats include your competition’s plans and resources.

Force-field analysis

For business leaders attempting to find the root cause of a problem (usually those that are workflow- or process-related), a force-field analysis can identify the cause and aid in crafting solutions.

To conduct a force-field analysis, you must first decide what the desired outcome is — whether it’s a goal, a vision or a better understanding of the current situation. Then, in parallel columns on either side of the “goal,” list the driving and restraining forces. Driving forces are favorable to the goal and restraining forces oppose it. Rate the forces and identify which ones have the most impact and which ones can be changed. Finally, strategize the changes you need to make to the forces and prioritize those changes to achieve the goal.

Pareto analysis

A Pareto analysis, commonly known as the “80/20 rule,” is best used by leaders eager to identify which solutions will have the biggest impact when implemented. This analysis not only determines problems but can also improve efficiency by prioritizing major issues, increase productivity and boost profitability.

Business leaders can conduct this simple analysis in a table format by making columns for item number, problem, root cause and score and then filling in the rows with the corresponding information, giving you a comprehensive view of the issues.

Ishikawa diagram

In the manufacturing and product development industries, an Ishikawa diagram can identify potential causes of disruption to workflows and processes. In addition to identifying the cause and effect of a method, innovators and entrepreneurs can use this diagram to help them design better products.

Analysis tools make hard decisions easier

Analysis tools like the decision matrix offer us exercises that can help us think through problems or decisions more effectively. By quantifying our choices and the factors influencing them, we can determine whether we’re even thinking about our decision in the right way. If so, these analysis tools can help reinforce our confidence that we’re making an informed choice. If not, we can rethink our approach to the decision or problem. Either way, these tools offer valuable insights for business owners who are working to grow their companies and guide their teams as best they can.

Tejas Vemparala contributed to this article. Some source interviews were conducted for a previous version of this article.

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Sean Peek, Business Ownership Insider and Senior Analyst
Sean Peek is the co-founder of a self-funded small business that employs more than a dozen team members. His years of hands-on entrepreneurial experience in bootstrapping, operations management, process automation and leadership have strengthened his knowledge of the B2B world and the most pressing issues facing business owners today. Peek uses his expertise to guide fellow small business owners and aspiring entrepreneurs in the areas of marketing, finance and software technology. Peek excels at developing customer bases and fostering long-term client relationships, using lean principles to drive efficiency and cost-saving, and identifying growth areas. He has demonstrated his business savvy through collaborations with Forbes, Inc., Entrepreneur and the U.S. Chamber of Commerce.
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