Decision matrix, Pareto analysis and other effective tools for making smart business decisions

Decision making is the highest responsibility for executives and managers. About three billion important decisions are made by managers each year. That’s more than eight million decisions in a single day, including weekends. Just imagine how many of these decisions are made reflexively. Managers can’t keep track of all their decisions the same way they track their Starbucks receipts or measure conversion rates. That is the reason why 98% of them, no matter how qualified, eventually make a poor decision.

One incorrect decision is all it takes to destroy the reputation of a business or lead a company to financial ruin. In 2009, the management of General Motors decided to continue manufacturing larger vehicles despite trends favoring smaller cars. This led GM to declaring bankruptcy later that year. The University of Massachusetts-Dartmouth investigated the problem of decision-making and offered the following seven steps to improve it:

  1. Identify the nature of the decision you have to make
  2. Collect critical information
  3. Think about alternatives
  4. Organize the alternatives according to priority
  5. Select among the alternatives
  6. Start implementing the alternative you’ve selected
  7. Review the results of the decision you’ve made


What can managers do to make better business decisions?

Among all tools and techniques that are used today to improve decision-making skills, we’ve selected some of the most interesting and effective.

Decision tree.This scheme illustrates all the possible outcomes of a decision you’re going to make. It doesn’t matter if the tree is drawn by hand or using special software.


SWOT analysis. With this technique, you assess all the strengths, weaknesses, opportunities and threats of your future decision.


Multivoting. This method is used when many people are involved in a situation that requires a decision to be made. Multivoting helps whittle down the list of possible outcomes.

Problem: Customer Dissatisfaction with a Service

  • Reduce the price for serviceReduce the price for service
  • Hire more customer support professionalsHire more customer support professionalsHire more customer support professionalsHire more customer support professionals
  • Create bonus/referral systemCreate bonus/referral systemCreate bonus/referral systemCreate bonus/referral systemCreate bonus/referral systemCreate bonus/referral system
  • Create more contentCreate more contentCreate more content


Conjoint analysis. This technique helps business leaders identify customer preferences while making decisions. Research determines what people really like and value in your services. Based on the info you get from the research, you make a decision regarding your product.

Which of these smartphones would you choose?

  • ModelRAMStorageBattery
  • iPhone X3GB64GB / 256GB2716 mAh
  • Samsung Galaxy S94GB64GB / 128GB3000mAh / 3500mAh
  • Google Pixel 24GB64GB / 128GB2700 mAh


Pareto analysis. If you have to make a lot of decisions, this method helps you set priorities. You see what decisions must be made first by adding a score to all of them.


Decision matrix. With this method, you can assess all options of the decision you intend to make. First, you will have to create a table. In the first column you place the options of the decision and in the first row you place all factors that may influence your decision. You provide this table to the users who score the options and determine which factors are the most important. Due to the final score, you will see which option is the best for you.

What payment service would you choose for your business?

  • OptionAvailabilitySecurityEasy-to-useTotal score
  • Payoneer1010828
  • Square791026
  • Stripe88925


PEST analysis. PEST stands for political, economical, social and technological factors. With this method, you examine external factors that help predict future business trends.


Decision making can be very impulsive. Many people make decisions first. Only after will they assess outcomes and benefits. In business, this is unacceptable. Learn to be rational and use these techniques to reframe problems and make more evidence-based decisions.



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