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.
|Alternatives||The various options or choices being considered.||Carefully identify and list all possible alternatives for the decision.||Choosing a supplier, selecting a location, hiring a candidate.|
|Criteria||The factors or criteria used to evaluate alternatives.||Define and prioritize criteria to ensure a systematic evaluation process.||Cost, quality, time, risk, sustainability, customer satisfaction.|
|Weighting||Assigning relative importance or weight to each criterion.||Reflect the significance of each criterion in the final decision.||Give higher weight to critical factors and lower weight to less important ones.|
|Rating||Assessing how well each alternative meets each criterion.||Use a consistent rating scale to score alternatives against criteria.||Use numerical scores or descriptive labels (e.g., Excellent, Good, Fair, Poor).|
|Scores||Calculating scores for each alternative based on ratings and weighting.||Multiply ratings by weights and sum them to calculate overall scores.||A higher score indicates a better fit for the decision.|
|Decision||Selecting the alternative with the highest overall score.||The alternative with the highest score is typically the recommended choice.||The selected supplier, the chosen location, the hired candidate.|
Understanding a decision matrix
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.
- 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.
- 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.
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