A decision matrix is a scientific approach that companies can use to rank factors and select the best opportunity among several options. It involves defining the solution, setting priorities, awarding points, calculating scores, and selecting the option with the highest score.
A decision matrix is a quantitative method that 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, may require this process. The steps include defining the solution and setting priorities, then points are awarded, calculated, weighted and added up. Using this method for each option, the results were reviewed into 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 of a company’s needs and requirements. Owners and managers are tasked with defining the characteristics they want in a new business opportunity. The decision matrix requires this as a first step because the framework for the rest of the decision making starts here. Both internal and external factors can influence the ideal solution a company seeks to complete its business operations. This process can take longer as owners and managers need to have a clear vision for each option to choose from.
Setting priorities with each option typically involves setting weights for each characteristic for the first stage. The decision matrix needs percentages for each characteristic in order to provide a final score for different options. These weights can be subjective; owners and managers can place figures such as 10, 15 or 25 percent next to each factor in an option. The more important factors have higher weights. All percentage weights should add up to 100 percent for each option in your decision making process.
Company executives must award points as the third part of the decision matrix. A basic scale is from 1 to 10, with higher point values indicating more favorable factors across different options. Each factor in the outcome of a decision must have a score. Assigning one as a score should be for the factors that bring the least value to the final result. Using five indicates that a factor has no significant impact on the final result because 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 numbers assigned for each factor. Once completed, the total of all scores is required. 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 that there are no errors in the decision matrix evaluation system.
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