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What Is a Decision Matrix?

Osmand Vitez
Osmand Vitez

A decision matrix is a quantitative method a company can use to rank factors and select the best opportunity among several options. This scientific approach is not necessary for all decisions. Major changes to business operations, however, can call for this process. Steps include defining the solution and setting priorities, then points are assigned, calculated, weighted, and totaled. Using this method for each option reviewed results in total scores for all options, with the highest score indicating the ideal one a company should choose.

An ideal solution is one that meets or nearly meets all the needs and wants of a company. Owners and managers have the task to define the characteristics they desire in a new business opportunity. The decision matrix requires this as the first step because the framework for the remaining decision process begins here. Both internal and external factors can influence the ideal solution a company looks for to complete its business operations. This process can take the longest time as owners and managers must have a clear vision for each option to choose from.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

Setting priorities with each option typically involves setting weights to each characteristic for the first stage. The decision matrix needs percentages for each characteristic in order to provide an end score for different options. These weights may be subjective; owners and managers can place figures like 10, 15, or 25 percent next to each factor in an option. The most important factors have higher weights. All percentage weights should add to 100 percent for each option in the decision-making process.

Company leaders must assign points as the third part of the decision matrix. A basic scale is one to 10, with higher point values indicating more favorable factors among different options. Each factor in a decision outcome must have a score. Assigning one as a score should be for factors that bring the least value to the final outcome. Using five indicates that a factor does not significantly impact the final outcome as the factor’s inclusion is average.

With weights and numbers assigned, decision makers must calculate the score for each possible outcome. This involves multiplying the percentages against the assigned numbers for each factor. Once completed, the total of all scores is necessary. The result is a number that owners and managers can compare for all options. The option with the highest score represents the best decision opportunity, assuming no bias exists in the decision matrix rating system.

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