Making good decisions is the foundation of every successful finance or business project, maximizing the efficiency of every day’s work.
At the beginning of a New Year, it is helpful to evaluate your ability to make quick, effective decisions so you can make this year exceptional.
Successful people make decisions fast then stick to them, especially in the face of adversity. On the other hand, those who deliver average results take a lot of time to make their choices. They procrastinate over decision-making and, having finally opted for a path forward, they start to hesitate when experiencing the first obstacles.
So how can we make constructive decisions that will propel us towards our goals?
The major challenge is that, oftentimes, we have no useful structure to guide us through choosing the best option.
Making a decision costs us so much energy. Have you heard about entrepreneurs such as Mark Zuckerberg who minimize their wardrobe to limit the number of decisions they need to make every day?
There is even a popular term known as ‘decision fatigue’ that encapsulates how difficult and draining decision-making can be. For instance, we make better and faster choices in the morning, when we have more energy, and tend to make poorer decisions in the late afternoon as our energy starts to deplete.
Fortunately, there are useful tools available that can enhance our ability to make productive decisions. Here is my favorite: the decision matrix.
Let’s imagine, for example, that you need to choose a bank account. There are dozens of different offers and you want to choose the one that best suits your needs. How can you go about making this decision?
Step one
List all bank account providers you definitely want to consider.
Barclays
Revolut
Lloyds
Step two
Write down the most important factors for you when it comes to your ideal bank account. What features might it have? What criteria must your future bank account meet?
Client service
Good online access
Trust
Step three
Create your decision matrix.
| Criteria | Weighting | Barclays | Revolut | Lloyds | |||
| Score | Total | Score | Total | Score | Total | ||
| Client service | |||||||
| Online | |||||||
| Trust | |||||||
| TOTAL | 0 | 0 | 0 |
Step four
Score your choices.
I use a scale from 1 to 5, where 1 means I absolutely don’t like it, and 5 means it is excellent (if you prefer you can rate on a scale from 0 to 5, or even 0 to 10).
Step five
Consider for a moment how you would prioritize your chosen criteria. What is more important for you – client service, online access, or trust?
You now need to assign a weighting to each of your criteria based on your priorities. In this case, the most important factor is trust, followed by online access, and then client service.
This is what the table looks like after rating each opting and assigning weightings:
| Criteria | Weighting | Barclays | Revolut | Lloyds | |||
| Score | Total | Score | Total | Score | Total | ||
| Client service | 3 | 3 | 9 | 1 | 3 | 3 | 9 |
| Online | 2 | 4 | 8 | 4 | 8 | 4 | 8 |
| Trust | 5 | 1 | 5 | 5 | 25 | 3 | 15 |
| TOTAL |
Step six
Add up a total score for each of your potential choices.
You can now make a rational decision. The best option for your needs is the one with the highest score.
| Criteria | Weighting | Barclays | Revolut | Lloyds | |||
| Score | Total | Score | Total | Score | Total | ||
| Client service | 3 | 3 | 9 | 1 | 3 | 3 | 9 |
| Online | 2 | 4 | 8 | 4 | 8 | 4 | 8 |
| Trust | 5 | 1 | 5 | 5 | 25 | 3 | 15 |
| TOTAL | 22 | 36 | 32 |
To keep it simple in this example, I’ve only chosen three potential banks and three criteria.
However, you can use the decision matrix to explore more options and/or more criteria.
You can apply the same method to choose a profitable business idea, an insurance company, or a new investment opportunity. It can even help you decide where to spend a holiday or host a birthday party!
It makes sense for you to practice making decisions, so you can quickly take steps towards achieving your goals. Some of the decisions you make may not be for the best in the end, but this should never stop you from constantly improving your decision process.
