When a business finds itself unable to make a choice, a decision matrix allows it to identify the best way forward.
To assist in this process, the matrix evaluates a set of options against a set of criteria to visually compare potential solutions. A value is assigned to each cell in the matrix by weighting each variable based on relative importance. This allows businesses to identify the factors that matter most and then mathematically identify the most appropriate decision.
The decision matrix can also be used in task prioritization and to support or defend business cases where a decision has already been made.
Creating a decision matrix in practice
Creating a decision matrix is a relatively simple process. Here is how a business can get started.
1 – Brainstorm the criteria
Come up with a list of appropriate criteria. To get a holistic interpretation, involve as many stakeholders as possible.
2 – Refine the list
Refine the criteria list according to factors that the relevant stakeholders deem important. If a consensus cannot be reached, consider using a method like multi-voting.
3 – Assign relative weights
To each criterion, assign a relative weight based on importance. Many businesses distribute 10 points among the criteria, with those deemed more significant attracting a higher share of the total points.
For example, consider a budget airline wanting to expand into new cities by creating a list of destination airports. Using the decision matrix, the airline assigns 6 points to airport taxes, 3 points to pre-existing competition, and 1 point to the average terminal wait time.
4 – Create the matrix
Create the matrix such that the decision alternatives occupy rows, and factors affecting the decision occupy columns.
In the case of the airline company, the decision alternatives are the airports it has identified for possible expansion.
5 – Evaluate each decision against the criteria
To measure the value of each decision alternative/factor combination, establish a rating scale.
One popular option is to use a 1, 2, 3 scale where 1 = low, 2 = medium, and 3 = high.
Regardless of the scale chosen, it must be consistent across all cells in the matrix. This can be done by wording the criteria in such a way that a higher rating is more beneficial to the business. Rating scales can also be established where a higher rating is more detrimental to the business.
The latter would be ideal for the budget airline company, using lower values to denote airports that would be more suited to their low-cost business model.
6 – Multiply each option’s rating by the weight
Lastly, multiply each option by the predetermined weight and then add the points together for each.
For example, airport A may have high taxes, low competition, and medium average terminal wait time. In the decision matrix, this would result in a total score of 23 which could then be compared to the total score of other airports.
Depending on how the matrix is created, the option scoring highest may not necessarily represent the wisest decision. But it does provide valuable guidance for analysis teams on where to focus their efforts, encouraging meaningful discussion and stimulating new perspectives or solutions.
Key takeaways
A decision matrix allows businesses to make complex decisions by considering a range of weighted criteria.
Decision matrices help prioritize decision making or support decisions that have already been made. They are also useful when a business needs to make sense of large amounts of conflicting, complex, or unrelated information.
A decision matrix can be created in six relatively simple steps, allowing decision-makers to create matrices with customizable inputs specific to company goals or objectives.
Key Highlights:
Definition of Decision Matrix: A decision matrix is a tool used for evaluating and prioritizing a list of options based on specific criteria. It is particularly valuable when a decision needs to be made from multiple options using multiple factors.
Use Cases of Decision Matrices:
Narrowing down options to a single choice.
Making decisions based on various criteria.
Simplifying a list of criteria for decision-making.
Understanding Decision Matrices:
Decision matrices aid businesses in making informed choices by visually comparing potential solutions against criteria.
Each cell in the matrix is assigned a value based on the importance of the criteria, helping identify the most suitable decision mathematically.
Decision matrices can also be applied to task prioritization or to validate business cases where a decision is already made.
Creating a Decision Matrix:
Brainstorm Criteria: List relevant criteria, involving stakeholders for a comprehensive perspective.
Refine Criteria: Modify the list based on stakeholders’ inputs, possibly using techniques like multi-voting.
Assign Weights: Assign relative weights to each criterion to reflect its importance. Total weights are often set at 10 points.
Construct Matrix: Arrange decision alternatives as rows and criteria as columns.
Evaluate Alternatives: Rate each decision alternative against the criteria using a consistent rating scale (e.g., 1-3 scale).
Weighted Calculation: Multiply each alternative’s rating by the weight and sum the scores to get a total score for each alternative.
Value of Decision Matrices:
Decision matrices enable businesses to make sense of complex decisions by considering weighted criteria.
They are useful for prioritizing decisions and providing clarity in situations with conflicting, complex, or vast amounts of information.
Key Takeaways:
A decision matrix helps evaluate options based on criteria, guiding informed decision-making.
The matrix is created by assigning weights to criteria, evaluating alternatives against criteria, and calculating weighted scores.
Decision matrices can be customized to align with specific business goals and objectives.
Case Studies
Case Study 1: Choosing a Vendor for Software Development
Background: A tech startup is in the process of selecting a vendor for software development. They have received proposals from three potential vendors and need to make an informed decision based on various criteria.
Criteria:
Cost: The total cost of the project.
Expertise: Vendor’s experience and expertise in similar projects.
Timelines: Proposed project timeline for completion.
Quality: Quality of work delivered by the vendor.
Communication: Effectiveness of communication with the vendor.
Decision Matrix:
Criteria
Weight (out of 10)
Vendor A
Vendor B
Vendor C
Cost
3
8
7
9
Expertise
4
7
9
8
Timelines
2
8
7
9
Quality
5
7
8
9
Communication
1
8
9
7
Evaluation:
Vendor A: (38) + (47) + (28) + (57) + (1*8) = 108
Vendor B: (37) + (49) + (27) + (58) + (1*9) = 117
Vendor C: (39) + (48) + (29) + (59) + (1*7) = 122
Decision: Based on the weighted scores, Vendor C emerges as the preferred choice with the highest total score of 122, indicating the best overall fit for the project.
Case Study 2: Selecting a Marketing Strategy
Background: A retail company is deciding between two marketing strategies to promote its new product line. They need to evaluate the options based on several criteria to make an informed decision.
Criteria:
Reach: Potential audience reached by each strategy.
Decision: Both Strategy A and Strategy B have the same total score of 138. Therefore, the decision should involve further analysis or considerations beyond the decision matrix to determine the most suitable marketingstrategy.
Case Study 3: Selecting a Supplier for Raw Materials
Background: A manufacturing company is in the process of choosing a supplier for raw materials essential for its production process. They have received proposals from three potential suppliers and need to assess each option based on various criteria.
Criteria:
Price: Cost of raw materials provided by the supplier.
Quality: Quality of the raw materials supplied.
Reliability: Supplier’s track record for timely deliveries and consistent supply.
Flexibility: Supplier’s ability to accommodate changes in order volumes or specifications.
Customer Service: Level of customer support and responsiveness provided by the supplier.
Decision: Based on the weighted scores, Supplier C emerges as the preferred choice with the highest total score of 182, indicating the best overall fit for the company’s raw material supply needs.
Case Study 4: Selecting a Location for a New Office
Background: A growing company is considering opening a new office in a different city to expand its operations. They need to evaluate potential locations based on various criteria to make an informed decision.
Criteria:
Cost of Living: Affordability of living expenses in the city for employees.
Talent Pool: Availability and quality of skilled professionals in the area.
Infrastructure: Quality of transportation, internet connectivity, and other essential infrastructure.
Market Potential: Potential for business growth and market demand in the city.
Quality of Life: Overall quality of life, including factors like healthcare, education, and recreational opportunities.
Decision Matrix:
Criteria
Weight (out of 10)
City A
City B
City C
Cost of Living
3
8
7
9
Talent Pool
4
7
9
8
Infrastructure
5
8
9
7
Market Potential
2
9
8
7
Quality of Life
6
8
7
9
Evaluation:
City A: (38) + (47) + (58) + (29) + (6*8) = 160
City B: (37) + (49) + (59) + (28) + (6*7) = 161
City C: (39) + (48) + (57) + (27) + (6*9) = 164
Decision: Based on the weighted scores, City C emerges as the preferred location with the highest total score of 164, indicating the best overall fit for establishing the new office.
Comparison’s Table
Decision Matrix
Criteria Matrix
Prioritization Matrix
Type
Decision-making tool for evaluating and prioritizing options based on multiple criteria.
Framework for assessing alternatives against predefined criteria.
Tool for ranking or prioritizing items based on their importance or relevance.
Purpose
To assist individuals or teams in making informed decisions by systematically evaluating options against criteria.
To provide a structured approach to evaluating alternatives based on specific criteria.
To help prioritize items or tasks based on their relative importance or impact.
Key Components
– Options: Represent potential choices or solutions to a problem or decision. – Criteria: Factors or attributes used to assess and compare options. – Weighting: Assigns importance or priority to each criterion based on its relative significance. – Scoring: Rates each option against each criterion to quantify its performance. – Total Score: Calculates the overall score for each option based on the weighted scores.
– Alternatives: Represent different options or choices available for consideration. – Criteria: Define the factors or attributes used to evaluate and compare alternatives. – Scoring: Rates each alternative against each criterion to assess its performance. – Total Score: Calculates the total score for each alternative based on the scoring results.
– Items: Represent tasks, projects, or initiatives that require prioritization. – Criteria: Define the factors or attributes used to assess the importance or relevance of each item. – Ranking: Ranks each item based on its performance against the criteria. – Total Score: Calculates the overall score or ranking for each item based on the prioritization results.
Application
Used to facilitate decision-making processes by comparing options and selecting the most suitable one.
Utilized to evaluate alternatives objectively and make data-driven decisions.
Applied to prioritize tasks, projects, or initiatives based on their relative importance or impact.
Focus
Focuses on evaluating and comparing options against multiple criteria to identify the best solution or course of action.
Focuses on assessing alternatives based on predefined criteria to determine their suitability or effectiveness.
Focuses on ranking or prioritizing items based on their importance or relevance to achieve specific goals or objectives.
Benefits
– Provides a systematic approach to decision-making. – Facilitates objective evaluation and comparison of options. – Allows for transparent and collaborative decision-making processes.
– Enhances decision-making by considering multiple criteria and eliminating bias. – Enables objective evaluation and comparison of alternatives. – Supports informed decision-making based on data and evidence.
– Helps prioritize tasks or projects based on their importance or impact. – Streamlines resource allocation and focus efforts on high-priority items. – Improves efficiency and effectiveness by aligning actions with strategic goals.
Examples
– Selecting a supplier/vendor based on factors such as cost, quality, and reliability. – Choosing a project management methodology based on criteria like scope, time, and budget constraints. – Evaluating potential investments or business opportunities using financial metrics, market analysis, and risk assessment.
– Assessing software solutions based on criteria such as functionality, usability, and scalability. – Comparing job candidates during the recruitment process using criteria like qualifications, experience, and cultural fit. – Evaluating strategic options or business strategies based on criteria such as market potential, competitive advantage, and resource requirements.
– Prioritizing tasks or projects based on their alignment with organizational goals or strategic objectives. – Ranking potential initiatives or investments based on their potential impact or return on investment (ROI). – Identifying key areas for improvement or focus based on criteria like urgency, importance, and feasibility.
The SFA matrix is a framework that helps businesses evaluate strategic options. Gerry Johnson and Kevan Scholes created the SFA matrix to help businesses evaluate their strategic options before committing. Evaluation of strategic opportunities is performed by considering three criteria that make up the SFA acronym: suitability, feasibility, and acceptability.
The Hoshin Kanri X-Matrix is a strategy deployment tool that helps businesses achieve goals over the short and long term. Hoshin Kanri is a method that seeks to bridge the gap between strategy and execution. Strategic objectives are clearly defined and the goals of every level of the organization are aligned. With everyone moving in the same direction, process coordination and decision-making ability are strengthened.
The Kepner-Tregoe matrix was created by management consultants Charles H. Kepner and Benjamin B. Tregoe in the 1960s, developed to help businesses navigate the decisions they make daily, the Kepner-Tregoe matrix is a root cause analysis used in organizational decision making.
The Eisenhower Matrix is a tool that helps businesses prioritize tasks based on their urgency and importance, named after Dwight D. Eisenhower, President of the United States from 1953 to 1961, the matrix helps businesses and individuals differentiate between the urgent and important to prevent urgent things (seemingly useful in the short-term) cannibalize important things (critical for long-term success).
An action priority matrix is a productivity tool that helps businesses prioritize certain tasks and objectives over others. The matrix itself is represented by four quadrants on a typical cartesian graph. These quadrants are plotted against the effort required to complete a task (x-axis) and the impact (benefit) that each task brings once completed (y-axis). This matrix helps assess what projects need to be undertaken and the potential impact for each.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived by whether the market is new or existing, and the product is new or existing.
The Kraljic matrix is a framework that analyzes and classifies a company’s supplier base.
Kraljic’s matrix is used by purchasers to maximize supply security/minimize supply risk and reduce costs. In so doing, it encourages them to see procurement as a strategic activity and not one that is simply transactional.
The Kraljic matrix is divided into four quadrants based on varying degrees of supply risk and profit impact. Each quadrant defines a type of supply item and a strategy that reduces risk and cost. The quadrants encompass leverage items, bottleneck items, non-critical items, and strategic items.
The product-process matrix was introduced in two articles published in the Harvard Business Review in 1979. Developed by Robert H. Hayes and Steven C. Wheelwright, the matrix assesses the relationship between The stages of the product life cycle (from ideation to growth or decline) and The stages of the process (technological) life cycle.
The Mendelow stakeholder matrix is a framework used to analyze stakeholder attitudes and expectations and their potential impact on business decisions.
A requirements traceability matrix (RTM) is a vital part of the lifecycle of any embedded system, helping organizations ensure their products are safe and meet intended standards. While the matrix has long been associated with medicine, technology, and engineering, the approach works well for any project regardless of industry. A requirements traceability matrix is a tool used to identify and maintain the status of project requirements and deliverables.
The value/effort matrix is a feature prioritization model used to build effective product roadmaps. The value/effort matrix allows product managers to prioritize their product backlog using a confident, structured approach. The product team learns how to plan an effective roadmap, identify boundaries of work, and differentiate between needs and wants.
A decision matrix is a decision-making tool that evaluates and prioritizes a list of options. Decision matrices are useful when: A list of options must be trimmed to a single choice. A decision must be made based on several criteria. A list of criteria has been made manageable through the process of elimination.
The grand strategy matrix was created by American business theorist Paul Joseph DiMaggio in 1980. The matrix, which first appeared in the Strategic Management Journal, was initially used as a strategic option tool for managers. The grand strategy matrix helps organizations develop feasible alternative strategies based on their competitive position and the growth of their industry.
Simon’s satisficing strategy is a decision-making technique where the individual considers various solutions until they find an acceptable option. Satisficing is a portmanteau combining sufficing and satisfying and was created by psychologist Herbert A. Simon. He argued that many individuals make decisions with a satisfactory (and not optimal) solution. Satisfactory decisions are preferred because they achieve an acceptable result and avoid the resource-intensive search for something more optimal.
The RAPID framework is a tool used to help businesses make important decisions. The RAPID framework was developed by global consultancy firm Bain & Company, which noted that “high-quality decision making and strong performance go hand in hand.”
The Foursquare Protocol is an ethical decision-making model. The Foursquare Protocol helps businesses respond to challenging situations by making decisions according to a code of ethics. It can also be used to help individuals make decisions in the context of their own moral principles. It consists of four steps: gather the facts, understand previous decisions, assess the degree of similarity to past events, and assess yourself.
The DACI Decision-Making Framework was developed by software company Intuit in the 1980s. The DACI Decision-Making Framework assigns and then displays the responsibilities of the individual when making decision. DACI stands for driver, approver, contributor, and informed.
The Lightning Decision Jam (LDJ) is a means of making fast decisions that provide quick direction. The Lightning Decision Jam was developed by design agency AJ&Smart in response to the inefficiency of business meetings. Borrowing ideas from the core principles of design sprints, AJ&Smart created the Lightning Decision Jam.
The multi-criteria analysis provides a systematic approach for ranking adaptation options against multiple decision criteria. These criteria are weighted to reflect their importance relative to other criteria. A multi-criteria analysis (MCA) is a decision-making framework suited to solving problems with many alternative courses of action.
The Cynefin Framework gives context to decision making and problem-solving by providing context and guiding an appropriate response. The five domains of the Cynefin Framework comprise obvious, complicated, complex, chaotic domains and disorder if a domain has not been determined at all.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
The SWOT analysis is commonly used as a strategic planning tool in business. However, it is also well suited for personal use in addressing a specific goal or problem. A personal SWOT analysis helps individuals identify their strengths, weaknesses, opportunities, and threats.
The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.
A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.
A Blindspot Analysis is a means of unearthing incorrect or outdated assumptions that can harm decision making in an organization. The term “blindspot analysis” was first coined by American economist Michael Porter. Porter argued that in business, outdated ideas or strategies had the potential to stifle modern ideas and prevent them from succeeding. Furthermore, decisions a business thought were made with care caused projects to fail because major factors had not been duly considered.
A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.
Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.
A SOAR analysis is a technique that helps businesses at a strategic planning level to:
Focus on what they are doing right.
Determine which skills could be enhanced.
Understand the desires and motivations of their stakeholders.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.
A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.
Hickam’s dictum is the counterargument to Occam’s razor. Whereas Occam’s razor is a heuristic that tends to narrow down decision-making to the simplest variables, Hickam’s dictum believes a situation must be tackled by looking at multiple variables.
Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.
Occam’s broom was first proposed by South African microbiologist Sidney Brenner who proposed that inconvenient facts that do not fit into someone’s hypothesis or serve their agenda are swept aside or hidden. Occam’s broom is a principle stating that inconvenient facts are hidden or obscured to draw important conclusions or argue points.
Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.
The theory behind the principle-agent problem was developed by Harvard Business School Professor Michael Jensen and economist and management professor William H. Meckling. The principle-agent problem describes a conflict in priorities between a person or group and the representative authorized to make decisions on their behalf.
The TDODAR decision model helps an individual make good decisions in emergencies or any scenario with a high degree of uncertainty. TDODAR is an acronym of the six sequential steps that every practitioner must follow, comprising: time, diagnosis, options, decide, act/assign, review.
The Mendelow stakeholder matrix is a framework used to analyze stakeholder attitudes and expectations and their potential impact on business decisions.
The Foursquare Protocol is an ethical decision-making model. The Foursquare Protocol helps businesses respond to challenging situations by making decisions according to a code of ethics. It can also be used to help individuals make decisions in the context of their own moral principles. It consists of four steps: gather the facts, understand previous decisions, assess the degree of similarity to past events, and assess yourself.
In general, terms, go/no-go decision making is a process of passing or failing a proposition. Each proposition is assessed according to criteria that determine whether a project advances to the next stage. The outcome of the go/no-go decision making is to assess whether to go or not to go with a project, or perhaps proceed with caveats.
The OODA loop was popularized by U.S. Air Force fighter pilot Colonel John Boyd to describe maneuver warfare during the Korean War. The OODA loop is a four-step approach to decision making where strategies must be adjusted quickly. Those four steps comprise observe, orient, decide, and act.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
