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What Is a Decision Matrix? Definition and Examples

Business News Daily Editor
Business News Daily Editor

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 allows you to visually compare possible solutions by weighing their 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.

Running a business poses many challenges that require you to make many important decisions. Making those decisions can be as simple as weighing a pros and cons list; however, sometimes they require a more thorough decision-making process, like a decision matrix. 

Stuart Pugh, professor and head of design at the University of Strathclyde, first created the decision matrix method to help in selecting design alternatives. Since then, the tool has evolved to be a general decision-making aid, especially in business. Also known as the Pugh method, grid analysis or the multi-attribute utility theory, a decision matrix reduces subjectivity to help you make 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 factor into the final 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 importance on each factor and weigh them accordingly.

Amie Devero, managing partner of Amie Devero Coaching and Consulting, said 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, 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."

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 debating between a few comparable solutions that each have multiple quantitative criteria. Steve Kurniawan, content specialist and growth strategist at Nine Peaks Media, said 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 you're deciding on something that does not require a sense of emotion, as it is a logical tool in nature. For example, Devero said, the matrix is not great when choices are purely a matter of taste or style. She noted that it removes the layer of intuition that 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," said Devero.

It's best to use a decision matrix when you need to assess a situation from a logical viewpoint and have enough comparable variables to make a weighted analysis.

The matrix can be used on its own, or in tandem with other decision-making tools and techniques if you are deciding on a solution that has less distinct options. For example, if you are choosing courses of action in business strategy or deciding between scenarios for a long-term career plan, Devero said a decision matrix can be a useful component, but she advised against relying solely on it.

How to create a decision matrix

When creating a decision matrix, Kurniawan said, it is important to start by understanding 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. It is important that the rankings are consistent throughout the matrix. For example, if you are looking at pain points, be sure to word each issue so that it gets more points the worse it is, and vice versa when looking at benefits.

Multiply your original ratings by the weighted rankings to get a score, then add up all the factors under each option. 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 weighted decision matrix, but several websites have templates. Here are a few online matrix templates to get you started:

Example of a decision matrix

Decision matrices can be used in a variety of situations, such as determining the best way to expand or 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 set of criteria to be.

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 visit quickly if there are problems, and she wants to set up where she can find reliable workers; however, these factors are not as important, so they receive a lower weighted score. She did not consider floor plan, because she found all of them equal in that regard 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 customers. Thus, not only is it the best by overall score, but the individual factors she values help 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, for a decision where you have multiple options and diverse features to consider, a decision matrix can shed light on the best choice.

Additional reporting by Carlyann Edwards, Karina Fabian and Marci Martin.

Image Credit: scyther5 / Getty Images
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Business News Daily Editor
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