Learn what a decision matrix is and how to use it for your business.
- A decision matrix is a series of values in columns and rows that allow you to visually compare possible solutions by weighing variables based on importance.
- A decision matrix can not only help you select the best course of action for your business, but it can also aid you in prioritizing tasks, problem-solving and crafting arguments to defend a decision you've already made.
- Use a decision matrix when you need to assess a situation from a logical viewpoint and you have enough comparable variables to weigh.
- This article is for professionals and business owners who want to visualize their decision-making process to help them make the best possible choice.
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, like a decision matrix.
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 multi-attribute utility theory, a decision matrix reduces subjectivity to help you draw a sound conclusion.
When you are faced with multiple choices and several variables, a decision matrix can clear up confusion and highlight considerations that may influence the outcome. This quantitative method 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.
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 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.
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 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.
How to create a decision matrix
When creating a decision matrix, Kurniawan said, it is important to understand the problem and its implications. Once you have identified these aspects, you can create your analysis with rows and columns.
List your decision alternatives as rows and the relevant factors affecting the decisions – such as cost, ease and effectiveness – as the columns. Establish a rating scale to assess the value of each alternative/factor combination. Usually, values are assigned as follows: High cost equals 1 and low cost equals 5, or low importance equals 1 and high importance equals 5. The scale must be consistent throughout the matrix.
Multiply your original ratings by the weighted rankings to get a score, and then add up all the factors under each option. The option that scores the highest is the winning choice or the first item to address.
You can use a whiteboard or write your weighted decision matrix on a piece of paper, but several websites offer templates. Here are a few online matrix templates to get you started:
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 its 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 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.
Tip: 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.
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.
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.
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 identifying 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.
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 it can also improve efficiency by prioritizing major issues, increase productivity and even boost profitability.
Business leaders can conduct this simple analysis in table format by making columns for item number, problem, root cause and score, and then filling in the rows with the corresponding information; this will give you a comprehensive view of the issues.
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.
Business News Daily editorial staff contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.