Using the Decision Matrix for Better Decisions

Making Better Decisions – Using the Decision Matrix

by  Andrew Cooke, Growth & Profit Solutions

Decisions are made in a subjective and varied way, creating poor decisions and contributing to poor outcomes.  See how a simple tool can help you make better decisions – whether at business or home.

When making business decision we often find that we are reinventing the decision-process every time, and consistently allowing subjectivity to sway our decisions.  This is especially true in team or group environments where a person’s perceived position, authority or their ability to dominate the conversation can mean that their personal viewpoint carries disproportionate weight and effect.

So how can we reduce this subjectivity, yet maintain the debate and dialogue necessary to make a robust decision.  There is a simple, yet effective, tool – the Decision Matrix.

What is the Decision Matrix?

The Decision Matrix is a tool which reduces the subjectivity in decision-making by creating a series of selection filters.  The real value of the Decision Matrix lies in the conversation and discussion it engenders in the group when working through the process.  As such, it is this conversation which opens up the dialogue, creating a richer set of options to choose from, and a clear and consistent process when selecting with which option(s) to proceed.  In doing this the Decision Matrix enables the group or team to identify, agree on, weight and importantly take ownership of a set of factors that are seen by all as influencing that decision,

How the Decision Matrix Works – Step by Step

Having determined what the decision to be made is about you:

Step 1: Generate a list of the issues/options/alternatives that require a decision to be made.

As a group, having already determined what the decision is that is to be made, create a list of all the relevant issues, options or alternatives.

Step 2: Get your group or team to brainstorm the critical factors

This are the critical factors that would influence the selection of the issues/options/alternatives identified in Step 1.

Notes:

  • Criteria are both personal and business-focused, as such criteria have aspects that are both logical and emotional;
  • Don’t have too many criteria – this weakens the process and the choices made are more likely to be made on outlying factors – we would suggest no more than 10.

Step 3: Create Weightings for the Criteria/Factors

Having chosen the selection Criteria/Factors, you now need to weigh them individually to jointly total 100.  By doing this you are making it clear that not all criteria are equal – some have greater significance than others.  The more important the criteria the higher the weighting or score. The discussion in this area between the group or team members helps them to understand each other’s perspective, and to create a commonly agreed and shared understanding of how to evaluate the alternatives, and why in that way.

Step 3: Input the information from the above steps by:

  • Across the top of the chart create columns for each issue/option/alternative listed.  Label  the first column as “Weightings” and the second column as the “Do Nothing” choice.  For all subsequent columns put in each of the issues/options/alternatives.
  • Down the side of the chart create rows for each Criteria/Factor.
  • For each factor put the relevant weighting in its “Weighting” column.
  • For the “Do Nothing” column put a score in each factor at 50% of the weighting for the factor.  For example, if a factor had a weighting of 10 then the “Do Nothing” column for that factor would be scored as 5.  The total of all the factors for the “Do Nothing” column should add up to 50.

Step 4: Score Each Factor for All the Issues/Options/Alternatives Listed Across the Top

  • It is important to focus on one factor/criteria at a time and, in doing so, complete the grid row by row.
  • When scoring a factor note that you cannot score more than that factor’s weighting – for example, if a factor has a weighting of 12 then it cannot score 13 or more, the highest score it can be given is 12 – but it can always score less
  • When scoring start with the first factor, work your way across the row, and then repeat this with the next factor. This helps you to compare that factor against all the alternatives.

Step 5: Total the Scores for Each Issue/Option/Alternative

  • This will give you a score for each and the means by which to prioritise them, with the highest score being your first choice.

Notes for when using the Decision Matrix

Remember, this is a tool.  You may not agree with the result that you generate with this, in that case open up the discussion as to why and get others’ input.  Simply because this tool says that one alternative is your top priority does not mean that it should be so.

Decision Matrix – Worked Example:

In the example below the question is:

“Which of my main customers should I concentrate on to grow my business?”

  1. I have identified my 5 clients (Step 1).
  2. I have identified, with my group, the key criteria (Step 2) by which to evaluate my criteria.
  3. I have completed the decision matrix scores (Steps 3 – 5).
Decision Matrix

From this we can see the following:

  • The customer I should concentrate on growing my business is Customer 2.
  • However, Customer 4 is a close 2nd – being only 3 points behind.

Further Uses of the Decision Matrix

I may want to use this to decide that I want to focus only on customers who score more than 70 points.  Again, Customer 2 is the only one to achieve this (with 71 points).

However, I can use the Decision Matrix to ask the question of Customer 4, which is marginal with a score of 68 – “Which factors for Customer 4 can I increase their score so that the total is above 70?”.

For example, if you could raise their score on Prompt Payment to an 8 then Customer 4 would then score 70 points and would be focused on as a result.

This then raises the question of “How do I improve Customer 4’s ability to pay promptly?”  This could involve, for example, getting the customer to pre-pay future orders or to reduce their arrears with your company.

As such the Decision Matrix not only helps you to prioritise, but to drive actions to help you realise the outcomes you are looking for.

However, making a good decision does not mean that you will get a good outcome.  To learn more on this read “Leadership & Decision-Making”.

How will you use this tool?  What decisions can this help you with?

Share your ideas, insights and experience.  Share the knowledge, share the wealth!

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

The More Choice You Have, The Less There Is

Giving greater choice does not mean more will be chosen! 

Most people believe that having a choice is good. The belief here is that choice gives us freedom, so if we have more choices we have more freedom, the better it is for our lives.

But some research has found that this is not necessarily the case. Researchers set up in a shop and presented an array of tasty jams and enticed shoppers to buy a jar. In one version, there were six varieties shown to shoppers. In another, there were 24 jams. The second, larger array attracted more traffic. But the smaller array led to ten times more purchases.  The researchers concluded that sometimes we feel overwhelmed by the number of options available to us.

Having too much choice has two negative effects on people. Firstly, paradoxically, is that too much choice produces paralysis, rather than liberation. With so many options to choose from, people find it very difficult to choose at all. Think of comparing retirement plans or different car insurance policies.

Second, there are significant opportunity costs you incur, that is when you choose one option you try to assess the costs of what you have foregone i.e. the benefits you will not realize for the options you have not chosen.  Because people are naturally afraid of making a wrong decision so you perceive more of the costs of your choice than the benefits, and you are less satisfied with the alternative that you have chosen.

The implications for the paradox of choice hold equally true for your customers, your suppliers, your employees and others as they do for you.  So if you want to avoid your customers suffering from “analysis paralysis”, and for them to value the benefits of what they choose to buy from you, there are two things to do:

  • Give them limited choices – rather than asking them to compare offerings with many features and attributes keep them focused on the key ones that are important to them.
  • Use three options – for some reason, people find it easier to choose when they have three options to select from.  Provide them with three distinct offerings, and make the similarities, overlap, and difference clear and relevant. Make it easy for them to decide.

The paradox of choice is part of who and what we are. Learn to work with it rather than to circumvent it.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Negotiating Better Projects

3 Elements to Negotiating Better Deals

by  Andrew Cooke, Growth & Profit Solutions

How you can use scope, budget and timescales to get to the customer’s needs, and to create better deals more quickly.

When negotiating with clients or prospects over potential work there are three aspects to consider which are common to any piece of work – whether it be consulting, selling services, manufacturing or production.  The three elements are the scope of the work, the time for the work to be done, and the cost of the work.

Let’s look at them each in more detail:

Scope – this is the similar to having a “frame” around a picture.  It defines the extent of the work to be done and provides the focus and limits for that piece of work.  Equally important it defines what work is not going to be done – that is anything that is not within the scope lies outside it.

Timeframe – this is when the work will be done.  It establishes when the work is to be done by, the outcomes realised and the level of urgency for the client or prospect.  If there is a short timeframe, then additional resources may be required to complete the work within the agreed timescale, or other work may be delayed or impacted as a result.  This needs to be considered when negotiating this with the client or prospect.

Cost – this is how much is the client or prospect willing to pay, or how much you are going to charge them given scope and timeframes that have been agreed.

So how do you negotiate with the client or prospect around these three elements?  Let’s look at a fictitious conversation to illustrate how to use this.

I like to be generous!  I tell the prospect that they can choose any two out of the three elements and I will have the third.  Thus, for example, the prospect may say “I want to do everything (scope), and I need to do it quickly in the next six weeks (short timeframe)”.

This leaves me with the cost element.  I then say “OK, this will cost you at least $75,000 to do all that by then” (note: I do not give firm numbers yet as I do not have all the information I need, but I can give them an indication what they might expect the cost to be).

The prospect then may say:

 “That is too expensive for me.  Can’t you reduce it?”

I reply, as you will guess, “If you are not happy with the cost, then pick any two of the three elements”.

And so you start again…..

This process allows the prospect to determine what is really important for them, and for you to begin to understand this where they may have some flexibility or not.  This helps to open up the conversation so you really understand what they need, by when and why.

Think how you might use this with your prospects or clients.  Try out the different combinations of choices that might occur and prepare for them.  This will give you an easier way to focus the negotiation process, control the conversation and to make progress.  Let’s face it – two out of three ‘ain’t bad!

What works for you in getting to your client’s needs, timing and budget?  Share your thoughts ideas and experience here.

Share the knowledge, share the wealth!

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

The Freedom and Choice Dilemma

Choosing your own way, and choosing to be free of interference from others in doing so 

What does freedom mean to you?  You will come up with many answers covering many concepts, situations or contexts – but they all fall into one of two categories: freedom from and freedom to.

  •  Freedom to” – this is the freedom to attain certain outcomes and realize our full potential (an ability)
  • “Freedom from” – the absence of others (or things) forcibly interfering with the pursuit of our goals

One must be free in both senses to obtain full benefit from making a choice. You need to have the ability to choose an option and not be prevented from choosing it by any external force. If you go too far to either freedom from or freedom to then your opportunities are limited. So people tend to favor a balance between the two extremes.

Some people, however, tend to lean more one way than another:

  • Freedom From “I am a slave to no man”

Here you see yourselves and others as having high personal control. You tend to favor this as it provides more opportunities to attain personal goals, and because it rewards your effort. Here you have an internal locus of control; you believe you control your life.

This is also known as negative freedom as it is freedom from external interference that prevents you from doing what you want when you want to do it. These restrictions are placed on you by other people. The more negative freedom you have, the fewer the obstacles that exist between you and doing whatever it is you desire.

  • Freedom To “I am my own master”

You believe that your success is primarily determined by external factors, not you. You believe that no amount of effort can guarantee your success. You have an external locus of control.

This is also known as positive freedom, the freedom to control and direct your own life. Positive freedom allows you to consciously make your own choices, your own purpose, and to shape your life; you act instead of being acted upon.

Negative and Positive Freedom Illustrated

Imagine a man driving a car. He comes to a crossroads. There is no traffic light, no police roadblock, and no other cars; the driver is free to turn whichever way he wants to, and he decides to turn left. This is negative freedom; the driver is free from restrictions which force him to go one way or the other. 

But what if the driver turned left because he needed to stop at a convenience store to get cigarettes, and he stopped even though it would mean missing an important appointment? It was his addiction that was really steering the car. This shows a lack of positive freedom; the driver lacked the freedom to do what he really wanted – to get to the appointment on time.

The freedom you have and enjoy varies and is both positive and negative at different times. These types of freedom are not polar opposites, if you are one you are not other, but rather express a blend of freedom you may create or experience for yourself as shown in the continuum.

To view or download a PDF version of this blog click here.

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

When Should You Procrastinate?

When procrastinating can be a good thing to do….. 

What do you think of when I say the word “procrastination” to you?  Often we look at procrastination we see it as something that we do but should not – it is about creating delay, avoiding work, or putting off those things that we don’t want to do so we can do that which we like or want to do. Often when doing so we feel guilty.

But procrastination is not black or white, but shades of gray. Let me explain.

I see three types of procrastination which are dependent on what you are doing instead of what you could be working, these are:

  1. nothing,
  2. something less important, or
  3. something more important.

Out of the above three types, I would suggest that the last – doing something more important – is good procrastination.  Why is this? Procrastination is not just about what you do or not do, it is not even just about the priorities (or lack of) that you have, rather it is about the opportunity cost of how you spend your time. Opportunity cost is about the benefits you could have received but have foregone by choosing one alternative over another. In terms of procrastination, when you choose to spend your time doing on one alternative then you forego the benefits that you could have realized from choosing another.  This is important, as time is a scarce resource – once you have used it you can never get it back. No matter how rich, how powerful, or how smart you are we only have 24 hours in a day, 60 minutes in an hour and 6o seconds in a minute. Time spent can never be regained!

If you are a good procrastinator you focus on the important stuff and put off the “small stuff” – those things which do not really matter and which do not progress you in what you are looking to achieve. By doing this the benefits you have not realized from doing the small stuff are outweighed by the benefits you have realized from doing the important stuff – this is why it is good procrastination, it is the best use of your time. If you focus on the small stuff then you are doing better than if you are doing nothing, but not as well as if you were working on the important stuff; and if you do nothing, then you incur higher opportunity costs as you have failed to use that time to realize any possible benefits. So good procrastination is about avoiding the smaller stuff to focus on the important work.

So how do you know if you are spending your time most effectively and that you are exercising good procrastination and not a form of bad procrastination? Ask yourself this one question:

“What’s the best thing you could be working on, and why aren’t you?

The kicker here is the second part of the question! You need, to be honest with yourself and to identify the barriers that are making it hard for you to do so. I always use the Five Whys tool where you take the initial statement and then ask “Why?” up to five times – this helps you to identify what the root of the problem is that needs to be dealt with, rather than dealing with just the symptom.  For example:

“I don’t know where to start on this project”

Why?

“Because I am not sure of what the outcomes are I am looking for”

Why?

“Because I have not determined what is in the scope of the project”

Why?

There are several ways I could approach this project.

Why?

“Because my boss wants a variety of things but I don’t know what is important to her”

Ah-hah! – the underlying problem, or the root of the problem, is that you don’t know what the boss wants to achieve from the project – not that you don’t know where to start. So the action for you is to go and talk to your boss – this will help you get started and stop procrastinating!

The process of good procrastination is simple, but it is not easy – this is why so many people slip into habits of bad procrastination instead. Use this approach to help you and see the benefits come to you over time.  So when are you going to start doing this?

To view or download a PDF version of this blog click here.

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How to Use Frames to Control Conversations

Frames are a powerful tool that allows you to define how a situation, event or occurrence can be viewed.  If you set the frame, you control the conversation; if you control the conversation, you can control the relationship; and if you control the relationship, you control the business opportunity.

A framework in the same way as the frame around a picture.  A good picture frame draws you into the picture so you can focus on it, and enhances the picture, without being apparent itself.

  1. Provides focus – so you are able to focus your clients, via your use and control of language, on what you see to be as the pith of the matter
  2. Reduces mental clutter – make it easier to identify what you need to focus on
  3. Helps to gain agreement
  4. Accelerates movement and progress
  5. Provides control

Inside of the frame is what is important, what is outside is what is not important as shown in the picture below.

Framing

Framing a Situation

For example, you may be behind budget by $20m.  You could frame this in a couple of different ways, and how you frame it will affect and determine how you perceive and act on this.

  • Frame 1 – As a Problem: We have a target of $200m for the year and we are currently behind by $20m. We should have made $150m by this point in the year, but we have only made $130m. This means that we now have to make $70m before the year end.  We need to work harder to get more deals in.
  • Frame 2 – As an Opportunity: We are working hard and well in a difficult market. We are $20m shy of where we currently want to be and need to make $70m by the year-end.  How can we leverage what we have already done?  How can we work with other areas to help them and us accelerate the time it takes to do deals and increase the average deal size?

You can see in the second frame provides a positive, optimistic and creative context from which to drive the conversation and generate innovative ideas and actions. This helps to inspire and motivate people.  The first frame is negative, pessimistic and looks at doing more of the same (which isn’t working well as they are behind budget). This is more judgmental and is likely to lower morale.

Think how you can frame things to engage and include others in what you are trying to do and to share this technique with your people, in turn, A powerful frame can help to shape the perception, interpretation and how people engage with the situation, occurrence or event.

To view or download a PDF version of this blog click here.

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.