Decision Matrix Analysis: Overview & How to Use for Business
Not every business decision ends up being a simple decision. In fact, most of the time they’re complex decisions. Sometimes, it might be easier to have a simple tool to help make these decisions. One of these tools is the decision matrix analysis. While the name sounds complicated, the tool itself is easy to use, once you’ve learned how. If you need help making business decisions, keep reading!
Here’s What We’ll Cover:
What is a Decision Matrix Analysis?
A decision matrix analysis is a decision-making tool that’s commonly used in business. It is known by quite a few different names:
- Pugh matrix analysis
- Decision grid analysis
- Opportunity analysis
- Decision matrix method
Because it’s known by so many names, it may not be clear what it is, though. Depending on the type of decision you’re making, and the person that’s making the decision with you, it can be called any of these names.
The matrix itself is used after a list of weighted decisions has been created. The decision matrix analysis helps you prioritize the options that you’ve defined.
When Should This Tool Be Used?
This tool should be used in the decision-making process in a number of scenarios. Use it when:
- A list of options needs to be narrowed down to a single choice
- A decision must be made based on a list of criteria
- After a list of decisions has been reduced to a manageable number, and the remaining options are difficult to choose from
When it comes to businesses, there are a variety of scenarios that will benefit from this tool. If you need to choose the next task to work on, using a decision-making tool like this matrix can help. It can also help you choose the next product to develop or work on after evaluation criteria have been assigned.
Why is This a Good Method for Making Decisions?
This decision-making tool is not great for urgent decisions, but it's excellent for other types of decisions. It can help you make the right choice for a complicated decision. It also allows you to make a rational decision after things criteria have been evaluated.
How to Use the Decision Matrix Analysis
If you’re ready to start making better choices when it comes to complex business decisions, check out how to use the analysis below!
Step 1: Determine Your Criteria
When you’re getting ready to make a decision matrix analysis, determine what your criteria will be. Criteria to consider are cost, time, product details, etc. It really depends on what you’re trying to make a decision about.
Step 2: Rank the Criteria and the Decisions
Once you’ve assigned all the criteria and applied it to your outcomes, it’s time to rank them. Criteria can be placed on a simple 0 (poor) to 5 (great) scale. This lets you determine how important something is, or how unimportant it is. All decisions should have all of the criteria ranked. If a decision ranks low on all counts, then all 0s can be applied.
Step 3: Determine the Hierarchy of Decisions
Apply the rankings to all criteria surrounding your decisions. It’s okay if criteria have the same ranking. It can actually be pretty common when you start assigning your values. This makes decision making very easy.
Step 4: Add the Values and Average Them
When you’ve ranked your criteria for the decisions, you can begin to average them. For example, if you have 4 criteria, you’ll add up all of the figures. Then, once you’ve gotten your total you divide by 4. The average will give you the scores assigned to your decisions.
Step 5: Make Your Decision
This is the time when you finally get to make your decision! You’ve completed the analysis, and all of your decisions have been ranked. You now just need to pick the one with the highest score. A decision matrix analysis makes business decisions easy.
Things to Remember
Sometimes, a decision that seems otherwise fantastic may rank low due to one bad criteria. You may have to decide if the poor criteria should factor into the decisions. While the matrix is a great way to determine which decisions are best, it doesn’t have to be the final say.
Some of the decisions when it comes to running a small business can be difficult. Through the use of a decision matrix analysis, you can make these decisions easier. If you need assistance for other business functions, be sure to check out our resource hub!