Decision Making Chart for Small Business Decisions

Published: Aug 16, 2004

Introduction

This method is derived from more complex models from the realm of management science.

While there may be more accurate matrices and models for complex decision making, this method is simple enough to encourage the small business manager to readily use it for most major decisions. While its not high tech -- it works!

Use it often. Speed and accuracy improve with practice.

The discipline developed by using this chart is soon transferred to all your decision making whether it is a split-second one or one resulting from many hours of group discussion.

How the Decision Making Chart Works

The Decision Making Chart consists of two main areas. 1)The Options available. 2) The Criteria for making the decision.

The chart enables you to isolate your examinations of each option relative to each criterion.

Under each Option a score is given to each of the criteria. This score is your opinion, on a scale of 1 to 10, on how the option meets the requirements of the criterion.

For example, if the criterion was the color blue and the option was the exact shade of blue you had in mind, you would give it a score of 10. Whereas, if there was only a hint of blue you would give it a score of 2 or 3.

In addition to rating the criteria of each option, the criteria are also assigned a subjective value, on a scale of 1 to 5, indicating their importance in the final decision.

For example, Criterion A is given a value of 5 to indicate it is a strong or mandatory condition in any selection. Whereas Criterion C is relatively less important, it is given a value of 2.

A weighted value is obtained by multiplying the criterion value(1-5) by the option's score(1-10).

The Total Weighted Value is the sum of the weighted values across the row.

Generic Sample		Criteria A	Criteria B	Criteria C	Total Weighted Score
Generic Sample		5	4	2	Total Weighted Score
Option 1	Score	8	6	3
Option 1	x weight	40	24	6	70
Option 2	Score	7	9	9
Option 2	x weight	35	36	18	89
Option 3	Score	9	2	3
Option 3	x weight	45	8	6	59

According to the Total Weighted Scores, your first choice should be Option 2 with the highest weighted score. Option 1 is your second best choice and Option 3 the third choice.

Recall that all the elements contributing to the Total Weighted Score were arbitrarily assigned by you. Therefore, you are advised to review the consequences of scores, values and the multiplying and cumulative effects on the final outcome. You may wish to revise some and recalculate, especially, if you are new at this method. Another option is to change the width of the scale (1-10 and 1-20) or input fractional values.

Sample of a Car Purchase Decision

Options and criteria are fewer than a real world situation in order to save space here.

Car Purchase		Front leg room	Bucket seats, 4way adjust	Power windows etc.	A/C split vents	Cruise Control	Warranty >3yrs	Total Weighted Score
Car Purchase		5	5	4	3	3	2	Total Weighted Score
Chevy Salsa	Score	8	6	7	4	8	10
Chevy Salsa	x weight	40	30	28	12	24	20	154
Ford Quasar	Score	9	8	10	8	6	8
Ford Quasar	x weight	45	40	40	24	18	16	183
Dodge Arbit	Score	6	9	5	6	4	2
Dodge Arbit	x weight	30	45	20	18	12	4	129

There is no perfect car. But, the Ford Quasar came closer to your wish list on the factors that mattered most to you.

How do you mark the scores?

Take Air Conditioning as a sample feature.

You want separate temperature settings for the driver and the front seat passenger. You want effective vent distribution to maintain those temperatures. The Chevy Salsa(4) did not have separate temperature settings. The salesperson embellished the superior distribution adjustments saying, that as a result, separate temperature settings were not necessary and would add to the cost. On the other hand, the Ford Quasar(8) had both features with slight shortfall on the vent adjustments.

What about price?

This gets a little tricky. The best method is to set an expected price and an acceptable variation from that price. You can then ascribe positive and negative values based on variation from your expected price.

For example your expected price for a new car is $16,000. Your acceptable variation from that price is $500. For every $500 above $16,000, you would assign a negative score of 1. For every $500 below $16,000, you would assign a positive score of 1.

Car	Price	Acceptable Variance	Price Score
Chevy Salsa	$15,000	$500	+2
Ford Quasar	$17,500	$500	-3
Dodge Arbit	$14,500	$500	3

After determining the Price Score you then assign a weight for the Price Score (based on how important price is to you) and add the Weighted Price Score into your totals. In this example we chose a weight of 5.

Car Purchase		Price Factor	Total Weighted Score (previous table)	Final Score
Car Purchase		5	Total Weighted Score (previous table)	Final Score
Chevy Salsa	Score	2
Chevy Salsa	x weight	10	154	164
Ford Quasar	Score	-3
Ford Quasar	x weight	-15	183	168
Dodge Arbit	Score	3
Dodge Arbit	x weight	15	129	144

As you can see in the example the Chevy and Ford are now very similar. The Ford scores better in the features you desire but the Chevy has the advantage in price. At this point you may wish to re-evaluate your scores and their respective weights.

Sample of Deciding on an Activity

In this sample we are deciding on which one of four trade shows we will participate in.

Assume travel and entrance costs are comparable.

Trade Show		Previous Attendance Record	Confirmed Presenter List	Seminar Topics	Nearby Business Opportunity	Extra-curricular Activities	Business Services	Total Weighted Score
Trade Show		5	5	4	3	2	1	Total Weighted Score
Las Vegas	Score	9	9	6	2	10	6
Las Vegas	x weight	45	45	24	6	20	6	146
Long Beach	Score	7	9	5	9	3	4
Long Beach	x weight	35	45	20	27	6	4	137
Chicago	Score	8	7	7	10	7	9
Chicago	x weight	45	35	28	30	14	9	161
Miami	Score	6	8	4	4	8	7
Miami	x weight	30	40	16	12	16	7	121
Seattle	Score	5	6	9	8	4	10
Seattle	x weight	25	30	36	24	8	10	133

Pack your bags for Chicago. Or, check your setting, scores and calculations.

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