A decision making structure
One of my favourite people in the world, a lady called Louisa, who I haven't seen in years because she lives the other side of the world, once said to me “The problem with the opportunity of a lifetime is, if your mindset is right, they drop in your lap every every other week!”
Now, you might not believe that to be the case, but what I think the observation underscores is the fact that as a busy owner manager there are always numerous draws on your time and it's extremely difficult sometimes to get clarity on where your time, money and effort is best spent. It's difficult to prioritise what you concentrate on and execute. Too many choices creates confusion.
So, success is as much about what you say no to, as well as what you say yes to, and that in itself should be linked to your “mission, vision and values” and, most of all, your personal and professional purpose; from time-to-time we could do with a tool that helps us think through the options we have available and where to best spend our efforts. Decision Matrix Analysis is that tool.
Assuming you've squared away your purpose, Decision Matrix Analysis is a useful technique to use for making choices. It's particularly powerful where you have a number of good alternatives to choose from and many different factors to take into account. This makes it a great technique to use in almost any important decision where there isn't a clear and obvious preferred option. It essentially facilitates a direct comparison based on criteria which you get to define.
The first time I used a tool like this was when I worked in Gloucester developing a five year plan for Van Moppes IDP, the diamond tooling company I was working for at the time. We had the potential of eight different markets to pursue but only the resource is to cover two … and we needed to know where we'd get most bang for our buck.
An added bonus of the tool is that it's also not necessarily restricted to business. You can use it in your private life, in fact, I'm contemplating using it with my father to work through some retirement issues he has.
The idea of decision matrices is clearly not new, as a species we've been making decisions and weighing up options for millennia, but for the most part this is done informally in your head. Using the decision matrix simply allows you to question more rigorously the criteria you are using and indeed their weightings. As a result, the process can also be iterative, it requires a blend of science and art, so, if the result that you get from the first pass doesn't “feel right” part of the beauty of the tool is you can re-examine the components of the decision, adding and subtracting new components and in doing so rigorously examine what you are attempting to optimise for.
How to Use the Tool
The analysis works by getting you to define the objective or outcome you are seeking, then list the various options in a series of rows across the top of a table. Down the side of the table you list the factors being considered and then you weight those factors. You then score each option/factor combination, weight the score by the relative importance of the factor, and add these scores up to give an overall score for each option.
While this sounds complex, this technique is actually quite easy to use. We’ll now work through each of the steps.
Step one is possibly the hardest step. In order to get clarity about the outcome you want the first question has got to be “What is it specifically I am optimising for?” There is simply no way to evaluate the merits of one option against another without clarifying the objective you're trying to achieve.
List all of your options in the rows across the top of the table, and list the factors that you need to consider down the right hand side of the table. Typical factors might include; time, effort, cash / money, skills and any downsides. However, if you were buying a new PC or server factors to consider might include more granular considerations like; size, weight, processing speed, hard disk size and number and type of ports.
Some criteria are likely to be more important to you than others so with the PC / server example, size and weight may not be as important as processing speed and hard drive size. So, some factors are likely to be more important than others and this step seeks to define the relative importance of your factors chosen. Show these as numbers from, say, 1 to 5, where 1 means that the factor is less important and 5 means that it is very important. (In this instance, if the factor is zero because it has no importance it shouldn't really be in the matrix!)
Next, for each option work your way down the column of the table, scoring the option against each of the factors you have chosen. The scores are indicative, you could use 0 to 10, I tend to use 0 to 5 where 0 is poor and 5 very good. Some items might receive the same scores, so it’s not necessary to have a different score for each option. Factors taken into consideration will be dependent on the options being assessed. As an example, some years ago I used the technique to help someone decide on their next house move. They couldn't decide between two particular properties. We ranked criteria like mortgage payment, number of bedrooms, the size of the garden and the commuting distance, but the highest scoring criteria was whether the house had an 0208 or 0207 telephone number! Some folk obviously have some very strange criteria!
Now multiply each of your scores from step 3 by the values for relative importance of the factor that you calculated in step 4. This will give you weighted scores for each option/factor combination.
Finally, add up these weighted scores for each of your options. In an ideal world the option that scores the highest wins! You have now made your decision.
But hold on a moment… how many of us actually live in an ideal world? So, having undertaken the process it's now worth critically evaluating them against each other to determine if the scoring undertaken feels right. If it doesn't, I think it's perfectly legitimate to “finesse” the different components of the model and repeat the process until it does feel right. The decision matrix approach is as much an art as it is a science.
How does this fit with my management system?
There are a whole bunch of decisions that need making as part of running your business and your management system and many are both complex and profound including:
- Decision's around strategy and (in ISO speak) context
- Sales and marketing - which channels should we pursue?
- Recruitment - which person should we take on?
- Supplier selection - which supplier do we appoint?
All management systems (e.g. quality management systems (ISO 9000), environmental management systems (ISO 14000), information security management systems (ISO 27000) and health and safety management systems (ISO 45000)) now require the company address context. Sales and marketing is more the domain of the quality system but recruitment and supplier selection both fall under the auspices of all management systems. As a result, in all these cases, as well as many others, Decision Making Analysis has the potential to be useful.
Unless you are very lucky continually, it is extremely rare for a single solution to percolate to the top of all your decisions that perfectly solves all problems and simultaneously requires the least amount of money or effort. All decisions require sacrifice and trade offs. As Mr Keith Cunningham would say “You can have almost anything you want you just can't have everything you want”.
The decision matrix approach is therefore especially useful where complex and important decisions with long term implications are being made, as trying to weigh the pros and cons of those decisions in your head is both difficult and, almost certainly, foolhardy.
The ranking scheme chosen is, of course, highly subjective as it is based on the relative importance that you have placed on the various categories, but the tool is there to support your thinking about the viability and relative attractiveness of the various options available to you and your business.
Finally, we think, being able to use Decision Matrix Analysis means that you can take decisions confidently and rationally, at a time when other people might be struggling to make a decision at all.
Adapted from Keith Cunningham’s stunning book The Road Less Stupid
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