Decision Matrices Business Economics

Decision Matrix Definition: a chart used by decision makers to aid in identifying the best option for a situation by identifying the factors on which the options should be evaluated, known as evaluation criteria, weighting each of the factors based on its relative importance to the final decision, and scoring each option on the each criterion.

Example

Purpose Facilitates decision-making by helping to systematically identify, analyze, and rate relationships among information Aids in narrowing the selection of options when there are multiple dimensions to a decision

Usefulness Determining which project to choose Identifying the features to include in a product/service Evaluating a solution to a problem Developing a plan

Methods Used to Evaluate Criteria Establish a consistent rating scale for each criterion (i.e., the most favored choice would get the top rating, rather than some getting the lowest and others the highest).

Methods Used to Evaluate Criteria Rank-order each option as to how well it meets each criterion. Multiply each option’s rating by the weight, and total the scores

Methods Used to Evaluate Criteria Identify the criteria, assign a weight to each criterion; select one of the options as a baseline to which all other options will be compared, using a scale of –1, 0, and +1. If an option is better than the baseline, it receives a +1; the same as the baseline, it receives a 0; and if it’s worse than the baseline, it receives a –1. Total the scores for each option to identify the option with the most points.

Techniques to Shorten List Straight voting – a process in which each participant votes for his/her favorite option; one person one vote Multi-voting – a process in which each participant ranks his/her favorite/preferred option; the votes for each option are recorded and totaled; option receiving the most votes is the one the group will go with

Criteria Often Used Effectiveness Feasibility Capability Cost Time required Support provided Ease of implementation

Procedures Determine and record the criteria that will be used to evaluate the options in the first column of the chart Determine and record the relative importance of each option to the final decision in the second column Assign a weight to each criterion based on its relative importance (i.e., use a scale of 1 to 5)

Procedures, con't Write down the options from which you will choose across the top of the chart Score each criterion for each option using a range or scale (i.e., 1-5, 6-10, etc) Multiple the scores by the weight assigned each alternative on the basis of its importance, total the numbers, and record the total at the bottom of each option Compare the totals for each option to identify the highest scoring option

Activity