Use a Decision Matrix Template to Make Better Decisions

Making important decisions can be challenging, especially when multiple criteria need to be considered. A decision matrix, also known as a grid analysis, Pugh matrix, problem selection matrix, opportunity analysis, criteria rating form, or multi-criteria decision analysis tool, is a useful decision-making tool that can help you make the best choice by scoring options against clearly defined criteria. This article will walk through 7 simple steps to create a decision matrix template that will set you up for better decision-making success.

What is a Decision Matrix and Why Use One?

A decision matrix is a table that allows you to objectively analyze options based on predefined criteria. The matrix method is useful for making a rational decision when considering multiple factors.

Decision matrices provide a structured approach to decision-making by helping you break down a problem into its key components. A typical decision matrix includes columns that define and weight the criteria for analysis, and rows that score options against those weighted criteria. The scores are multiplied by the weights to produce overall scores that can be easily compared. The option with the highest total weighted score is the preferred choice.

Using a decision matrix brings several benefits:

• Makes the decision process more transparent and objective. Reduces bias by formalizing the process.

• Forces you to consciously think through your decision criteria. Clarify the factors upfront.

• Quantifies the tradeoffs between options. See the opportunity cost of choices.

• Provides justification for the final decision. Document the rationale behind the choice.

• Identifies areas where additional data is needed. Reveals uncertain criteria to focus on.

A decision matrix is useful anytime a decision needs to be made between multiple alternatives and there are several criteria to consider. It works for both simple everyday decisions and more complex business decisions. Common examples include:

• Deciding between job offers. Compare offers based on salary, growth opportunities, commute time, etc.

• Selecting a vendor or supplier. Score vendors on cost, quality, lead time, location.

• Determining which product or feature to develop. Prioritize based on customer need, cost, resources, and risk.

• Prioritizing a project portfolio. Rank projects based on strategic alignment, return on investment, resources required.

• Making capital purchase decisions. Justify expenditures based on financial return, operational needs, regulatory requirements.

• Prioritizing tasks. Evaluate daily to-dos on importance and urgency.

By formalizing the decision-making process, a decision matrix reduces bias and provides a defensible rationale for the final choice. Templates make it easy for anyone to start using this versatile tool.

7 Steps to Build Your Own Decision Matrix

Follow these 7 simple steps to create a customized decision matrix template that will lead to better decision outcomes:

Step 1: Define the decision objectives

First, clearly define the overall objectives. What decision are you trying to make? Write it down as the title at the top of the matrix.

For example, “Should Company X develop Product A or Product B?” Keep the end goal in mind as you build out the criteria and options.

Step 2: Identify the alternatives

Next, list out all the possible alternatives across the top row of the matrix. These will become the columns. Avoid limiting yourself here - come up with as many options as possible in this divergent thinking phase before evaluating their pros and cons.

Using the product development example, the columns might be:

• Product A

• Product B

• Both A and B 

• Neither A nor B

• Outsource development

• License technology

• Modify existing product

Cast a wide net for creative alternatives before narrowing down.

Step 3: Determine the criteria

Now it’s time to define the decision criteria that you will use to evaluate the options. The criteria become the rows of the matrix. Criteria should be factors that are important to the outcome and help distinguish between alternatives.

For a product development decision, criteria might include:

• Development costs. Both upfront and ongoing costs.

• Market size. The total addressable market for the product.

• Strategic fit. How it aligns with company goals and direction.

• Technical difficulty. Complexity of required technology and resources.

• Time to market. How quickly it can be launched.

Aim for 5-10 criteria to cover all the factors without overcomplicating. For each one, write a clear definition of how you will measure it. Avoid vague, subjective criteria if possible.

Step 4: Weight the criteria

With the criteria defined, the next step is to assign weights based on relative importance. Weights are typically on a scale like 1-3 or 1-5. A 3x weighting means that criterion is three times more important than one with a weight of 1.

In our product development example, strategic fit may be weighted 5x while development costs are 3x. Time to market could be less important at 1x. Adjust criteria weights based on your specific situation.

Weighting accomplishes two things:

1. It captures that some factors matter more than others.

2. It quantifies exactly how much more they matter.

Take care to assign weights carefully and thoughtfully. They significantly sway the final scores.

Step 5: Score the options

Now comes the analysis! For each option, assign a score from 1-5 for how well it meets each criterion. Use the criteria definitions from Step 3 to guide consistent scoring.

For example, if the market size for Product A scored a 5 but Product B only scored a 2, that indicates Product A has a much larger potential market.

Be sure to score every option on every criterion. The completed rows and columns create a grid of intersecting scores.

Tips for effective scoring:

• Define scale clearly (e.g. 1 = fails criteria, 5 = fully meets criteria)

• Use full range of scores (avoid bunching around 3-4)

• Be consistent across options (don't skew high/low)

• Reference objective data where possible

Scoring thoroughly and accurately is crucial for the decision matrix to provide meaningful results.

Step 6: Calculate overall scores

Here’s where the magic of the decision matrix happens! For each option, multiply its score for a criterion by the weight of that criterion. This gives a weighted score.

Sum all the weighted scores for an option to get its overall score. The option with the highest total weighted score is the preferred choice based on the criteria defined.

Let's say Product A scored 5 for strategic fit (which was weighted 5x) so its weighted score would be 25 (5 x 5).

Compare total scores to make the best data-driven decision given the frameworks and weights applied.

Steps to calculate properly:

1. Multiply score x weight for each criteria

2. Sum the weighted scores per option

3. Rank options by total weighted score

Double check math before finalizing scores! Formulas tools in Excel can automate calculations.

Step 7: Conduct a sensitivity analysis

A sensitivity analysis checks how changes to criteria weights impact the overall outcome. Because not all weights are certain, it's good to test different weighting scenarios.

Rerun the calculations using different weights that favor certain criteria. If the preferred option remains the same, the decision is more robust. If scores change a lot, that shows where there is greater uncertainty in criteria importance.

Steps for sensitivity analysis:

1. Adjust weights to strongly favor specific criteria

2. Recalculate overall option scores

3. Compare new rankings to original decision

4. Repeat for different criteria weightings

Sensitivity analysis identifies influential criteria and can guide additional data collection.

Real World Examples of Decision Matrix Applications

To see decision matrices in action, here are two examples across different contexts:

Employee Hiring Example

Criteria: Related experience, education, cultural fit, required salary

Alternatives: Candidate A, B, C

This matrix compared the top 3 candidates for a role based on weighted hiring criteria. It provided an objective measure of which candidate matched the role requirements best.

Analysis: Candidate B had the most relevant experience (scored 5) which was weighted heavily (5x). They received the highest total score.

IT Vendor Selection Example

Criteria: Cost, customer service, implementation time, features

Alternatives: Vendor 1, 2, 3

The company scored IT solutions against their key purchasing criteria. The matrix showed Vendor 2 as the best choice based on feature set and service quality relative to cost.

Analysis: Vendor 2 scored highest on features (5) which was a critical criterion (5x weight). It ranked first despite higher cost.

Useful Decision Matrix Templates

Using a pre-built decision matrix template can make it even easier to get started. Here are some free Excel and Word templates to download:

• Basic decision matrix template (Vertex42) - Simple matrix with basic formulas

• Weighted decision matrix template (Smartsheet) - Allows weighting and multipliers 

• Decision matrix analysis template (Cogmap) - Charts weighted scores for easy visualization

• Decision matrix for Word (Microsoft) - Simple matrix in Word document format

These templates provide the matrix structure and formulas. Simply plug in your own criteria, options, and weights.

Tips for customizing any template:

• Add/delete criteria and options as needed

• Adjust weighting scales

• Format fonts, colors, cell sizes

• Include graphics or dividends between sections

Leverage templates as a starting point then tailor to your specific needs.

Conclusion and Key Takeaways

Decision matrices provide a straightforward, objective approach to making tough choices involving multiple criteria. By scoring options against weighted factors, you can identify the best data-driven decision.

Here are some key tips for using a decision matrix successfully:

• Give every criteria a clear definition and scale

• Use weighting to capture relative importance

• Be consistent when scoring options against criteria

• Double check formulas and totals

• Test different weighting scenarios through sensitivity analysis

• Document the rationale behind the final decision

With the right criteria framework, decision matrices take the emotion out of decision making. A template gives you a head start on this versatile business tool. Use this simple 7 step process to build your own successful decision matrix today!

Some final thoughts:

• Decision matrices work for many types of decisions beyond business uses

• The quality of the outcome depends on the input criteria and weighting

• It's a tool to support decision making, not replace human judgement

• Templates simplify the process but real-world decisions are often more dynamic

• Sensitivity analysis is key to test assumptions

In summary, a decision matrix can be a valuable part of an effective decision-making workflow. Leverage this flexible tool to make better, more objective choices moving forward.