Decision Matrix

Introduction 

In managing a business, planning personal goals, or solving everyday challenges, we are often confronted with complex decisions. Sometimes the choice is clear, but often it’s difficult to identify the best option. This is where the decision matrix comes into play as a helpful tool for decision-making. 

Definition, Representation & Application 

The decision matrix, also known as a priority matrix or decision grid, is a visual representation tool that aids in choosing among multiple options. It’s based on a table in which different options are evaluated based on predefined criteria. Each option receives points based on the degree of its alignment with each criterion. The total score of each option then serves as a guide for decision-making. 

Using a decision matrix is beneficial as it brings clarity and objectivity to the decision-making process. It transforms subjective impressions into a quantifiable assessment, helping to choose the most suitable option. This is particularly useful in situations where the criteria being evaluated vary widely or when multiple individuals are involved in the decision-making process. 

The application of a decision matrix is broad and encompasses both professional and personal contexts. It can be used to assess investment opportunities, determine the best location for a new office, identify the right candidate for a position, or even find the perfect holiday destination. 

Simply put, it can be applied in any situation where a decision needs to be made among multiple possible options, and the goal is to narrow down the alternatives through a utility analysis to reach the optimal solution. 

Different Types of Decision Matrices 

Decision matrices come in various forms, depending on the complexity of the decision to be made and the specific requirements of the decision-making process. Two of the most common types are the simple decision matrix and the weighted decision matrix. 

The Simple Decision Matrix 

The simple decision matrix, also known as a “pros and cons list,” is the most basic form of a decision matrix. This method is particularly useful when the number of options and criteria is relatively small. 

In this matrix, different options are listed along one axis, while the decision criteria are listed along the other axis. For each combination of option and criterion, an evaluation is provided, usually in the form of a binary assessment like “yes” or “no,” “good” or “bad,” “met” or “not met.” The option with the highest number of positive evaluations is considered the best option. 

The Weighted Decision Matrix 

The weighted decision matrix is used when decision criteria have varying levels of importance. In this case, each criterion is assigned a weight or score reflecting its relative significance. 

Similar to the simple decision matrix, the options and criteria are presented in a table. However, in this case, each option is not only evaluated against each criterion, but this evaluation is also multiplied by the weight of the respective criterion. The total score of each option results from the sum of these weighted evaluations. The option with the highest total score is considered the best. 

Decision: Simple or Weighted Decision Matrix? 

The choice between a simple and a weighted decision matrix strongly depends on the specific decision-making situation. The simple decision matrix is less complex and therefore easier and quicker to create. It’s ideal for straightforward decisions with few options and criteria, and when all criteria are considered equally important. 

On the other hand, the weighted decision matrix is ideal for more complex decision-making, where criteria have varying levels of importance. It requires more time and consideration to create but offers a more detailed and accurate analysis of options, making it the preferred choice for more complex decision-making scenarios. 

How to create a Decision Matrix? 

Creating a decision matrix can be done in seven simple and quick steps. The process is detailed below, along with examples for each step: 

1. Identify Options

First, all considered options need to be identified. These could be as diverse as choosing a new supplier, deciding on a course of study, or selecting a holiday destination. All options under consideration are recorded as rows in a table. 

2. Determine Criteria

After identifying the options, the next step is to define the criteria by which the options will be evaluated. Criteria can include objective factors like cost and time, as well as more subjective factors like aesthetics or personal preferences. The selected criteria are noted as columns in the table. 

3. Add Weights

Add Weights:  
When creating a weighted decision matrix, weights should be assigned to the criteria. This means assigning a relative importance to each criterion. These weights can be set on a scale, for instance from 1 to 5, with 5 representing the highest priority. 

4. Multiply Values by Weights:  

Now, each option is evaluated according to each criterion. This evaluation is then multiplied by the weight of the respective criterion. For example, if option “A” is rated 3 in terms of the “cost” criterion and “cost” has a weight of 5, then the weighted value would be 15 (3 x 5). 

5. Calculate Total Values

The weighted values for each criterion are then summed to obtain the total value for each option. This total value provides a quantitative indication of the attractiveness of each option. 

6. Create the Decision Matrix

Now, the decision matrix is complete. It should provide a clear overview of all options, criteria, weights, and total values. It’s important that the matrix is clear and easy to read.

7. Tips for Creating a Decision Matrix 

Some helpful tips for creating a decision matrix include: 

• Always use an odd number of weighting points to avoid ties. 

• Ensure that the criteria are independent of each other to avoid double counting. 

• Additionally, it’s useful to document the entire process to make the decision-making process comprehensible and transparent. 

The Decision Matrix in Practice 

The decision matrix has proven to be an extremely useful tool in a variety of practical application scenarios. Here are two specific examples of how it can be used in real-life situations. 

Example 1: Supplier Selection 

A company that needs to choose a new supplier could use a weighted decision matrix to make the optimal decision. 

The options would be the different suppliers, and the criteria could include aspects like price, delivery time, quality, and reliability. Weights would be assigned based on the relative importance of these criteria for the company. For example, price might have a higher weight if the company is particularly budget conscious. 

The matrix would then help to identify the option that best fits the company’s requirements and priorities. 

Example 2: Holiday Destination Selection 

A family selecting a holiday destination could use a simple decision matrix to make their choice. The options would be the various possible holiday destinations, and the criteria could include aspects like cost, distance, weather, and activities. 

Each family member could rate the options based on these criteria, and the matrix would help identify the destination that receives the most positive ratings. 

Advantages and Disadvantages of the Decision Matrix 

Like any tool, the decision matrix has its advantages and disadvantages. The most important ones are explained below. 

Advantages of the Decision Matrix: 

• Structure and Clarity: One of the greatest strengths of the decision matrix is the structure and clarity it brings to the decision-making process. It helps organise the process and makes the relevant factors visible at a glance. 

• Objectivity: The decision matrix can help minimise subjective or emotional factors and allows for the decision to be made based on a solid, objective foundation. 

• Comparability: By quantifying the options and criteria, the decision matrix allows for a direct comparison of different possibilities. 

• Traceability: The decision matrix enables clear documentation of the decision-making process, increasing transparency and traceability. 

Disadvantages of the Decision Matrix: 

• Simplification: While simplification is one of the main advantages of the decision matrix, it can also be a disadvantage. Complex or multidimensional factors may not be fully considered in the matrix. 

• Subjectivity in Weighting: In the case of the weighted decision matrix, determining the weights of the criteria can be subjective and may affect the objectivity of the process. 

• Time Consuming: Depending on the number of options and criteria, creating a decision matrix can be time-consuming. 

• Uncertainty and Risk: The decision matrix doesn’t account for uncertainty or risk. It doesn’t consider the probability of certain events occurring. 

Sources

• http://4managers.de/management/themen/entscheidungsmatrix/ (10.08.2017)

• http://asq.org/learn-about-quality/decision-making-tools/overview/decision-matrix.html (10.08.2017)