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How to Use a Decision Matrix for Your Business

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Last editedMar 20212 min read

What is the matrix? Apart from a science fiction film franchise? It’s a method for your business to facilitate faster, and better informed decision-making based on pertinent data. Business analysts, small business owners, and senior managers have to make quick decisions all the time; the outcomes of these can have a lasting impact on their operations, profitability, and customer relationships. 

Decision-making can be compromised by subjectivity and fatigue. Your inherent gut instinct can be at odds with what the available data is trying to tell you. A decision matrix can lead to faster and more reliable decision-making that keeps your company agile and prevents analysis paralysis.    

What is a decision matrix?

A decision matrix analysis (also known as a grid analysis and a Pugh matrix analysis) is an easy way to visualize the available options. You keep a series of values in a table of columns, which outlines the criteria for each possible decision and ranks them based on the most favorable outcomes for the company. 

The decision matrix analysis was first created by Professor Stuart Pugh, head of design at Scotland’s University of Strathclyde. It’s more than just a list of pros and cons. It’s a tool that conditions decision-makers to come up with more alternative courses of action and map out the potential consequences, benefits, and caveats for each.

What are the benefits of a decision matrix?

Decision-making can be crippling, especially when the impact of your decisions can have serious negative consequences for your operations and your profitability. It’s easy to become paralyzed by the gravity of the decision ahead of you, and your actions can be driven by emotion rather than astute analysis of the available data. 

A decision matrix analysis can help by:

  • clarifying and prioritizing the options available to you

  • helping you to explain and justify decisions to higher-ups and stakeholders

  • reducing decision fatigue

  • preventing subjectivity and personal biases from unduly influencing the process

When should you use a decision matrix?

A decision matrix can come in handy whenever you need to make a decision that can have a lasting impact for your business. Examples may include choosing a software vendor, or an outsourced IT support provider. A decision matrix can also help in prioritizing tasks and operations, or when justifying a decision that you’ve already made to higher-ups, investors, and other stakeholders. 

Wherever the “right thing” isn’t immediately clear, a decision matrix can be useful. 

Creating a decision matrix

A decision matrix is extremely simple to create. You can use a simple table generator, a whiteboard, and dry erase pen, or even something as simple as a paper and pen. 

The first step to creating a decision matrix is understanding the problem at hand, and its implications for your operations.

Identify several factors that could influence each possible decision. These are your columns. Each available option is used as a row. For instance, let’s say your business is looking for a vendor to provide raw materials for your manufacturing operation. Your decision matrix might look something like this:

Cost 

Quality 

Location 

Reliability 

Payment Options

Total 

Supplier 1

1

1

2

1

3

8

Supplier 2

1

3

2

2

1

9

Supplier 3

2

2

1

3

2

10

Supplier 4

3

3

2

3

1

12

You assign a value for each of these factors (columns) from 1 to 3. However, depending on your operation, some of these factors may be more of a priority to you than others, so these factors need to be weighted in terms of importance to you.

This is what is knowns as a weighted decision matrix, and you can see an example below:

 

Cost 

Quality 

Location 

Reliability 

Payment Options

Total 

Weights

4

5

1

4

3

Supplier 1

4

5

2

4

9

24

Supplier 2

4

15

2

8

3

32

Supplier 3

8

10

1

12

6

37

Supplier 4

12

15

2

12

3

44

Each factor has a weighting value from 1 to 5 based on its importance. When this is combined with the original value it creates a total value that makes the right choice objectively clearer.

We can help

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