DECISION MATRIX
“Most discussions of decision making assume that only senior executives make decisions or that only senior executives’ decisions matter. This is a dangerous mistake.”
– Peter Drucker, Strategy Guru
I’ve always had a thing for decision matrices. They can break down seemingly difficult decisions with ease. They can turn the subjective into objective numbers. They can elegantly align people that were once at odds with each other. As a strategic leader, you often have to rally and align a team around complex and hard decisions, which can be fraught with frustration, emotion, and confusion. Let decision matrices do a lot of the heavy lifting, turn the irrational into rational, and help you make the right decision.
What is a decision matrix?
A decision matrix is the evaluation of different options based on prioritized variables. Think about hiring somebody. You can go with your gut, but the typical best practice is to create a decision matrix to evaluate different candidates against each other. Before the interviews, you figure out what the most important dimensions are for the role. Then you put those in a simple spreadsheet with a scoring table so you can rate candidates on each dimension. Below is a simple example of a hiring decision matrix.
In the example, the most important dimensions of the role are functional experience, industry experience, problem solving skills, interpersonal skills, cultural fit & education.
This is a fancy example because each dimension is weighted to make some dimensions more important than others in the scoring of candidates. In this case, functional experience is weighted 3, while education is weighted 1, so for this role, functional experience is three times more important than education.
During the interviews, you would ask the appropriate questions to assess each candidate on each dimension and then score them. If multiple employees interview the candidates and there are differing opinions, then the team can quickly isolate which scores there wasn’t agreement on and debate those particular dimensions of the candidates.
Beyond hiring, decision matrices can and should be used to evaluate options for many decisions, including the selection of vendors or partners, IT systems, product features, acquisition targets, and strategic direction.
Below is an example of a decision matrix in choosing a software vendor.
Instead of a 5-point scale, this decision matrix is based on a 3-point scale of poor, adequate, and excellent. And, the feature set is the most important dimension with a weight of 4, while the product roadmap is the least important with a weight of 1. After all the scores are tallied, while it looks like vendor 2 & 3 are tied with non-weighted scores of 17 each when you multiply the weights and the scores of each dimension you get a clear winner in vendor 3.
Head-to-head decision matrix
Another form of the decision matrix is the head-to-head matrix. The vertical and horizontal axes are a list of the items to be compared. The lists are in the same order horizontally and vertically. The weightings for head-to-head comparisons are usually 1, 3, 9, 1/3, and 1/9.
The facilitator first establishes the criteria for comparisons. Then on each criterion, the group decides the rating by comparing the item on the vertical axis to the item on the horizontal axis. The meaning of the rating is 1 = the same, 3 = somewhat better than, 9 = significantly better than, 1/3 = somewhat worse than, and 1/9 = significantly worse than. Then the rows are added across. The columns added down will give the inverse answer.
Why are decision matrices important?
The semi-objective evaluation of options is crucial to decide on the right option objectively. I say semi-objective since most decision matrices have some dimensions that are more subjective than objective, which is fine since they provide a focus for debate.
I’ve introduced decision matrices into organizations that didn’t have them, and there is consistently a marked improvement in the speed, quality, collaboration, and alignment of decision-making. They objectify decisions as much as possible, removing the emotions, gut instincts, and politics that often muddle up good decision-making.
How do you implement decision matrices?
Here are some of the best practices when it comes to decision matrices:
Establish standard decision matrices
It’s best practice to establish standard decision matrices across an organization. There should be standards for vendor selection, partner evaluation, hiring, performance evaluation, investments, projects, and initiatives.
Collaborate on their creation
The creation of a decision matrix should be a collaborative effort, where the key decision-makers or leaders brainstorm, determine and decide on the core dimensions and scale of a decision matrix, as well as the process that will govern the use of the decision matrix.
Get the dimensions and weights right
A decision matrix is only as good as the dimensions and weights. Make sure you are covering all of the most important dimensions and they are MECE and at the same level of specificity. Then debate the dimensions and weightings until there is agreement. And, in different situations, the weighting can change. In the hiring example, the weighting should change for different types of jobs to accurately reflect the importance of the dimensions for the various jobs.
Document and train
Once you create a decision matrix, then create training materials on when and how to use the decision matrix, and train the appropriate people. You should also save important decision matrices for future reference.
DOWNLOAD THE DECISION MATRIX EXCEL WORKSHEET
To get you going on creating a decision matrix, download the free and editable Decision Matrix Excel Worksheet.
BIG PICTURE
WHAT IS STRATEGY?
BUSINESS MODEL
COMP. ADVANTAGE
GROWTH
TARGETS
MARKET
CUSTOMER
GEOGRAPHIC
GO TO MARKET
DISTRIBUTION
SALES
MARKETING
