Grid Analysis

INTRODUCTION

This document shows how to use Grid Analysis, which is a technique that helps to decide what is the best choice, among several options, to solve a problem or a specific issue. It will give you the right decision and show you why.

Grid Analysis uses a classic decision-making matrix to break down complex decisions into a step-by-step simple process that organizes your thinking. It gets right to the root of what matters most to you. Is a way to clear our doubts and sometimes reflects that the option which was considered as the best way, not was the most feasible.

GRID ANALYSIS

Grid Analysis (also known as Decision Matrix Analysis, Pugh Matrix Analysis or MAUT, which stands for Multi-Attribute Utility Theory) is a useful technique for making a decision. It is particularly powerful where you have a number of good alternatives to choose from, and many different factors to take into account. This makes it a great technique to use in almost any important decision where there isn’t a clear and obvious preferred option. Being able to use Grid Analysis means that you can make decisions confidently and rationally, at a time when other people might be struggling to make a desicion.

It is a rational model and is also classed as a visual decision tool.

When the complexity of the decision increases these decision making tools and techniques can prove useful. Especially as the number of options and criteria increase. There are typically multiple conflicting criteria that need to be evaluated in making decisions. Cost or price is usually one of the main criteria. Some measure of quality is typically another criterion that is in conflict with the cost. In purchasing a car, cost, comfort, safety, and fuel economy may be some of the main criteria we consider. It is unusual to have the cheapest car to be the most comfortable and the safest.

In portfolio management, we are interested in getting high returns but at the same time reducing our risks. Again, the stocks that have the potential of bringing high returns typically also carry high risks of losing money. In service industry, customer satisfaction and the cost of providing service are two conflicting criteria that would be useful to consider.

In our daily lives, we usually weigh multiple criteria implicitly and we may be comfortable with the consequences of such decisions that are made based on only intuition. On the other hand, when stakes are high, it is important to properly structure the problem and explicitly evaluate multiple criteria. In making the decision of whether to build a nuclear power plant or not, and where to build it, there are not only very complex issues involving multiple criteria, but there are also multiple parties who are deeply affected from the consequences.

Structuring complex problems well and considering multiple criteria explicitly leads to more informed and better decisions.

How to Use the Tool

The technique works by getting you to list your options as rows on a table, and the factors you need consider as columns. You then score each option/factor combination, weight this score, and add these scores up to give an overall score for the option. While this sounds complex, in reality the technique is quite easy to use.

Steps to use the tool:

 The first step is to list all of your options as the row labels on the table, and list the factors that you need to consider as the column headings.

 Next, work out the relative importance of the factors in your decision. Show these as numbers from, say, 0 to 5, where 0 means that the factor is absolutely unimportant in the final decision, and 5 means that it is very important. (It’s perfectly acceptable to have factors with the same importance.) We will use these to weight your preferences by the importance of the factor.

These values may be obvious. If they are not, then use a technique such as Paired Comparison Analysis to estimate them.

 The next step is to work your way down the columns of your table, scoring each option for each of the factors in your decision. Score each option from 0 (poor) to 5 (very good). Note that you do not have to have a different score for each option – if none of them are good for a particular factor in your decision, then all options should score 0.

 Now multiply each of your scores from step 3 by the values for relative importance you calculated in step 2. This will give you weighted scores for each option/factor combination.

 Finally, add up these weighted scores for each of your options. The option that scores the highest wins.

Example #1

A Caterer needs to find a new supplier

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