A decision matrix helps leaders evaluate and prioritize all of their options when considering solutions to a difficult task. / Credit: LaunchExcel.com
Decision-making is a critical skill for business owners, leaders and managers. Such decisions have significant impact on the success of a business, whether it is deciding whom to hire or which new product to introduce.
Good managers use all the information at hand to make a carefully considered choice of action. Yet sometimes the factors are not easy to prioritize or evaluate. To help them make the best decisions possible in those situations, many leaders use a decision matrix. 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. Developed by Stuart Pugh, and also known as the Pugh method, 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. [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. Negative effect on the customer, 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," Tague wrote. "Since the next highest score is 18, the host problem probably should be addressed first."
Mind Tools has another example of a caterer trying to decide between four suppliers for its basic ingredients. The caterer is judging each supplier on five factors: cost, quality, location, reliability and payment options.
In this example, the caterer draws up a table and scores each option by how well it satisfies each factor on a scale of 0 to 3. They then decide the relative weights for each of the factors and multiply them by the scores already entered. The rows are then totaled up to see which supplier has the highest score and thus would make the best option.
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:
Further information on how to create and use a decision matrix can be found in the following articles:
- "What is a Decision Matrix?" (WiseGeek )
- "How to use a decision matrix to streamline your decision making process" (Time Management Guide )
- "A Structured Methodology for Group Decision Making" (Augmented Intelligence )
Additional reporting by Business News Daily contributor Marci Martin.
Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter .