How Do I Make a Decision That Involves a Lot of Variables?
Q. I own a business and I have a big decision to make. I could decide to do one of four things, but I can’t pursue more than one of them. There are a variety of different things that I would like to accomplish. In other words, I have multiple objectives, but they are not equally important to me. Every time I try to think about my options, I get confused. I just can’t balance all of the variables in my head. Do you know of any tools or analytic techniques that could be helpful?
A. We frequently use a process called Grid Analysis that we believe could help you. Here’s how it works. We suggest using an Excel spreadsheet, although you could accomplish the same thing with paper, pencil and calculator.
Head the left-most column of your spreadsheet “Options.” Leave a couple of blank rows beneath the heading. Below the blank rows in the “Options” column, list all of the things you could decide to pursue on different rows. You said there were four choices, but are there more? Is there a hybrid solution comprised of portions of one or more of the four options you have already identified that might work? Is there a completely new solution that you haven’t explored yet? Have you considered the “do nothing” option? Our point in asking these questions is to push your thinking. Make sure that you have considered all reasonable options.
Head the columns to the right of the “Options” column with the things you are trying to accomplish, the things that are important to you -- your “Objectives.” Again, push yourself to think of everything that matters. You might include things such as “Economic Rewards,” “More Time with my Family,” “Good for my Employees,” etc. -- whatever is important to you.
Now, score each of your “Options” on how well it delivers on each “Objective.” We use a scale of 1 to 5 (with 5 being the best score and 1 being the worst score). But, you could obviously choose to use a different scale. Place the scores under the appropriate column in the row of the option you are scoring.
You mentioned that the things you are trying to accomplish aren’t of equal importance to you. Great, we’ll assign a weighting to each of the “Objectives” based on how important it is to you. Use one of the rows that you left blank under the row containing the column headings. In the “Options” column, label the row “weighting.” In this row, under each of the columns headed with the “Objectives,” place a number that reflects the relative importance of each. We use a scale of 1 to 5 (with 5 being the most important and 1 being the least important). Again, you can use a different scale if you like.
Note, regardless of the scale you use, it is important that the high end of the Score scale indicate the “Options” that perform best on this “Objective.” In the same way, the high end of the “Weighting” scale must indicate the “Objectives” that are the most important. If you get one of these backward, it can lead to an incorrect result.
Head the first empty column to the right of the objectives, “Score.” You’ll have to build a formula that can be long, but is quite straightforward. In the cell that is under the column headed “Score” in the row that contains the first “Option,” insert the following formula, = (Objective #1 Score * Objective #1 Weight) + (Objective #2 Score * Objective #2 Weight) + (Objective #3 Score * Objective #3 Weight)… Continue this formula until you have multiplied the score of each objective in the row in which you are working by its weight and added all of the products together. Obviously, if you are using a pencil and paper, you’ll do this calculation by hand.
Repeat this process for each objective.
In theory, the “Option” with the highest score is the best choice. We say, “in theory” because no analytic technique will spit out a guaranteed correct answer to your problem. Instead, what this technique will do is to help you focus on the components of your decision that are the most important.
Play around with the sensitivities. If you had scored something a “4” rather than a “3,” would the answer change? Suppose the “Weighting” on one of the “Objectives” was a bit higher or a bit lower, would it matter? Understanding the components of your decision that have the most effect on the result will help you focus your thinking on the things that are important. If, after more thought about those things to which the result is sensitive, you change your assessment, refine the scores and weights.
With important decisions like the one you face, our best advice is to refine the Grid Analysis, reach your conclusion and sleep on it. If in a day or two you are still happy with your answer execute, if not, you may need to think things through again.