How to use a Decision Matrix to Make Difficult Decisions

In business and even everyday life, we are often called upon to make difficult decisions which involve a variety of parameters. A decision matrix will help you identify the most critical and important actions to take.

To make a decision matrix begin by listing the actions or decisions you must make. Then make several columns to the right of these entries. Label these columns with the types of benefits that you would expect from these choices.

For example, I may need to decide what I want to do with a tax refund. Lets say my choices are the following: buy a big screen tv, put the money in a CD, buy an engagement ring for my girlfriend, get new tires on my car. For simplicity lets make my expected benefits or column headers Quality of Life, Long Term Value, and Productivity. you may very well have other column headers such as Strategy, Cost, Difficulty or others depending on the type of decisions you must make.

Now we need to place values in the remaining cells. Use a scale of 1 to 5 where 5 has the greatest positive effect and 1 has the least positive effect. For example; I would say the big screen tv would get a 2 for quality of life, because the more time I spent watching it, the less I would accomplish. however it would probably get a 2 or 3 in the Long Term Value Column because it may be useful for many years and I could sell it if I ever needed to. The CD and the engagement ring would both get a 5 in the long term value column because they do not lose their value. The tires could get a variety of values depending on if I needed the tires for safety reasons because my current tires were worn out, or if I just wanted a different look for my car.

This is how my decision matrix looks now filled out:

Decision | Quality of Life | Long Term Value | Productivity | Total
Big Screen TV - 2, 3, 1
Put Money in CD - 2, 5, 2
Buy Engagement Ring - 4, 5, 4
Buy New Tires - 2, 1, 3

Now we can total the columns and find out what the best decision is for me. Before we do that thought, just a s a side note, you can weight the various benefits by assigning a mutiplier to them according to your preferences, but for now we will just assume each column of benefits will be treated as equal. With the totals calculated, my best decision is evident:

Decision | Quality of Life | Long Term Value | Productivity | Total
Big Screen TV - 2, 3, 1, 6
Put Money in CD - 2, 5, 2, 9
Buy Engagement Ring - 4, 5, 4, 13 (Best Decision)
Buy New Tires - 2, 1, 3, 6

This solution works out well, my current tires are ok - so buying them now would be about as useful as buying the TV. Buying the engagement ring and getting married could have the most positive effect on my future, and if my girlfriend says no, I can still return the ring and go with the CD and make some interest.