Evaluation Matrix

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Cost reduction and profit improvement for businesses

Business Solutions - The Positive Way, Cost Reduction and Profit Improvement

 

 

 

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Cost reduction and profit improvement for businesses

Honing in on the best ideas or options.

Sometimes there are just too many choices but you have to make one anyway.  The evaluation matrix is a great decision making tool for evaluating and prioritizing among from 2 to 20 choices (see note for ideas on how to use it for more).  This article describes the tool and tells you how to use it.

The following is a simple evaluation matrix with six (6) options/choices listed down the far left column and four (4) criteria listed across the top row.  The options are those that we want to make choices from or rank in order of priority.  The options should be different enough from one another that a choice matters. 

Criteria are selected from those that are most important to us in making the choice.   The criteria are different from each other.  They must also be parallel to one another in terms of how you would rank them...a high or low numerical ranking should mean the same for each one...good or bad.  A good way to start is to develop or brainstorm a list of criteria and then select the ones that make the most sense for this choice. 

  Criterion A Criterion B Criterion C Criterion D
Option 1        
Option 2        
Option 3        
Option 4        
Option 5        
Option 6        

To use the evaluation matrix, decide on a ranking scale such as 1,3, and 5.  1 has the lowest desirability, 3 middle level, and 5 is the highest desirability.  Ask yourself "Will it...?" or "Does it...?" and score the option against the criterion. Work down each column to rank each option for the same criterion.   Then go to the next column/criterion.  This will reduce the possibility that you will favor one option over the others once you see how you rank it.  See how this matrix has been started.  In this case Options 1 and 4 are ranked low, Option 3 is ranked at the middle, and Options 2, 5, and 6 are ranked highly.

The example criterion we have chosen relate to how quickly the option could be accomplished and how big an impact it would have when done.  A higher score is better (shorter time to install, lower cost to accomplish, bigger benefit, more management support)

  Short Time
to Install
Low Cost to
Accomplish
Bigger
Benefit
Management
Support
Option 1 1 1 5 3
Option 2 5 5 5 3
Option 3 3 3 1 1
Option 4 1 3 5 1
Option 5 5 5 5 1
Option 6 5 1 5 5

Once the ranking is done, you may begin the analysis.  One approach is to total the scores for each option.  In this case, we see the following:

  Total Scores
Option 1 10
Option 2 18
Option 3 8
Option 4 10
Option 5 16
Option 6 16

The caution is that the totals alone (nor the process itself) will give you the one right answer!  This process allows you to narrow your choices and evaluate your options in an orderly manner.  We can see that Options 1, 3, and 4 seem to fall away from the top of the list because of their low scores.   And the remaining three are close together.  Now you have to decide what is more important and why.   Option 6 has the highest management support but will cost the most to accomplish.   Option 2 has the highest scores overall but is not as high in management support.   You might now, for example, show your analysis to management and see if you can create more support for Option 2.  Or as you can see, you can take other approaches to
"fix" the other choices and thus raise their desirability (scores).

Group approach

You can have the members of a group do their own rankings and then commingle the results onto one summary report.  Some choices may be obvious but where they are not, you have room for discussion.  Ask the individuals who ranked a particular choice the highest and lowest to explain their positions.  This discussion will help you reach understanding and consensus.  Yes, consensus does sometimes take longer but you will have reduced the number of options to debate if, for example, you work with only the top choices overall.  If someone feels strongly about a option that is not selected, they can let you know why.  Their reasons may be helpful in making further choices and rankings.

Examples of using the evaluation matrix

Example 1: A company needed to reduce their costs quickly to address profitability and cash flow problems.  A cross-functional team brainstormed options and created a list of 15 candidates.  The list looked good but they knew they didn't have enough time, money, or people to do all of them.  They decided on the most important criteria, created an evaluation matrix, and 5 people completed it.   The results from the 5 people were totaled and the group met to review the results.   The best options became clear from the matrix and the discussions.  Two options cost so much because of capital equipment requirements that they couldn't be taken on right away so they were set aside.  Five options gave relatively small benefits but were so quick and easy to implement that they were started right away (small amounts can add up quickly).  Another four options required a lot or work but had good payoffs so plans were created and they were started quickly.  Four ideas were discarded because they had problems.  The net result was that the team and the company focused their efforts in the right areas and  saved over $100,000 within three months.  And savings continued to flow from there.

Example 2: A major capital investment was required to increase capacity.  Five options were identified but the choice wasn't clear.  An evaluation matrix was constructed using criteria such as: total cost, time to construct, return on investment, capacity, quality, compatibility with existing equipment, and risk.   The engineers and management who were involved in the project each rated the options.  The evaluation and resulting discussion led to a choice of the second most costly option because its other benefits far outweighed the slight premium in capital cost.  Sometimes the choices are not as obvious as they seem.

Summary

The evaluation matrix allows you to quickly sort through options by identifying their relative strengths and weaknesses.  You can make choices based on that information and can even choose to modify the options to make them more acceptable.   This simple method organizes a lot of information into a powerfully compact presentation.   Knowledge is power and organizing it so people can have it is enabling.

The evaluation matrix is one of the powerfully effective tools used in Creative Problem Solving.

NOTE:  Unleashing the power of the evaluation matrix on tens, hundreds, or thousands of ideas can be accomplished by using an evaluation form for each of them.  Select criteria and weightings as appropriate and then apply the tool to each idea or option.  You can then sort and rank the outcome to help prioritize your work.

An example:  A company received dozens of ideas every other week for product development.  It was too time consuming to sort and rank all of the ideas in a weekly team meeting so a rating form was created.  Each idea was placed on a form that was circulated to the team.  Each member ranked the idea and the results were tallied.  Only ideas that had a minimum overall score were brought to the meetings for discussion.  Most ideas were set aside quickly.  A single product engineer then reviewed the "losers" to make sure good ideas weren't lost.

Hundreds of ideas were reviewed in this manner each year and the product team focused its energy only on those with the highest potential.

(c) 1998, 2008 Steven C. Martin, Business Solutions.  All rights reserved.

The contents of this paper are copyrighted and, as such, may be used for personal use only.  Duplication and/or commercial use of this material is expressly prohibited without written permission of the author.

 

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