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No matter what position you hold, from the board room to the mailroom, you make decisions every day.
And the end result in business is directly linked to the quality of the decisions made at each point along the way.
So, not surprisingly, decision-making is a universally important competence in business. Some decisions clearly have a greater impact on the business than others, but the underlying skill is the same: the difference is in the scope and depth of the process you go through to reach your decision.
One reason why decision-making can be so problematic is that the most critical decisions tend to have to be made in the least amount of time. You feel pressured and anxious. The time pressure means taking shortcuts, jumping to conclusions, or relying heavily on instinct to guide your way.
Kepner-Tregoe: Taking the Guesswork out of Decision-Making
In your organization, you've probably heard of someone who made it all the way to VP by relying on his gut to make decisions. At the other extreme is the guy who simply can't make a decision because he analyzes the situation to death. The bottom line is, you have to make decisions, and you have to make good decisions. Poor decisions are bad for business. Worse still, one poor decision can lead to others, and so the impact can be compounded and lead to more and more problems down the line.
Thankfully, decision-making is a skill set that can be learned and improved on. Somewhere between instinct and over-analysis is a logical and practical approach to decision-making that doesn't require endless investigation, but helps you weigh up the options and impacts.
One such approach is called the Kepner-Tregoe Matrix. It provides an efficient, systematic framework for gathering, organizing and evaluating decision-making information. The approach was developed by Charles H. Kepner and Benjamin B. Tregoe in the 1960s and they first wrote about it in the business classic, The Rational Manager (1965). The approach is well-respected and used by many of the world's top organizations including NASA and General Motors. [1]
The Kepner-Tregoe Approach
The Kepner-Tregoe approach is based on the premise that the end goal of any decision is to make the "best possible" choice. This is a critical distinction: the goal is not to make the perfect choice, or the choice that has no defects. So the decision maker must accept some risk. And an important feature of the Kepner-Tregoe Matrix is to help evaluate and mitigate the risks of your decision.
The Kepner-Tregoe Matrix approach guides you through the process of setting objectives, exploring and prioritizing alternatives, exploring the strengths and weaknesses of the top alternatives, and of choosing the final "best" alternative. It then prompts you to generate ways to control the potential problems that will crop up as a consequence of your decision.
This type of detailed problem and risk analysis helps you to make an unbiased decision. By skipping this analysis and relying on gut instinct, your evaluation will be influenced by your preconceived beliefs and prior experience – it's simply human nature. The structure of the Kepner-Tregoe approach limits these conscious and unconscious biases as much as possible.
The Kepner-Tregoe Matrix comprises four basic steps:
- Situation Appraisal – identify concerns and outline the priorities.
- Problem Analysis – describe the exact problem or issue by identifying and evaluating the causes.
- Decision Analysis – identify and evaluate alternatives by performing a risk analysis for each and then make a final decision.
- Potential Problem Analysis – evaluate the final decision for risk and identify the contingencies and preventive actions necessary to minimize that risk.
Going through each stage of this process will help you come to the "best possible choice", given your knowledge and understanding of the issues that bear on the decision.
How to Use the Tool
The Kepner-Tregoe Matrix is an in-depth approach that can be supported by detailed instruction and worksheets. As an overview of the approach, the following steps show the general principles of how the Kepner-Tregoe approach can apply to a decision-making situation:
1. Prepare a decision statement.
- This is a general overview of what the decision is expected to achieve (the key objective).
- The statement should discuss the action that is required and the result that is desired.
2. Establish strategic requirements ("Must Haves").
- What "musts" will the final decision provide, allow for, include, etc.? For example: we must have 10 percent cost saving, we must include four color choices, the rope must hold 200 lbs.
- These requirements are absolute – there is no compromise.
3. Establish operational objectives ("Want to Haves").
- What do you "want" the final decision to support?
- By identifying the wants you can rank the alternatives according to which ones satisfy the most, or most important, wants.
4. Identify the restraints (Limits).
- What are the things that will limit your ability to do exactly what you want/need?
- These are typically resource constraints like money, materials, and time.
5. Rank the operational objectives and assign relative weights.
- For each "want", assign a rating of 1 – 10 based on the degree of importance.
Objective
Weight
Want 1
8
Want 2
7
Want 3
9
Want 4
10
6. Generate a list of alternatives.
- Think of as many alternative courses of action as you can. Don't be too concerned that they all meet the "musts" and "wants" you just defined. You will rank these alternatives in the next step.
- Brainstorming is a good approach for generating your list of alternatives.
7. Assign a relative score for each alternative.
- First, eliminate any alternatives that do not meet the "musts" – these are not worth considering any further.
- For the first alternative, go through each objective (want) and rate how well the alternative satisfies it using a 1 – 10 scale.
- Multiply the weight of the objective by the satisfaction rating to come up with a weighted score for each objective.
- Add the weighted scores to determine the total weighted score.
- Repeat the process for each alternative.
Objective
Weight
Alternative A
Satisfaction Rating
Weighted Score
Want 1
8
4
32
Want 2
7
8
56
Want 3
9
9
81
Want 4
10
7
70
Total Weighted Score of Alternative A
239
8. From the total weighted score for each alternative, rank the top two or three alternatives.
- Remember to make sure that the alternatives you choose meet all the "must" criteria.
9. For the top alternatives, generate a list of potential problems (adverse effects) for each.
- Rank the potential problems for each alternative according to probability and significance.
- Obtain a total weighted score for the adverse effect (adversity rating).
Adverse Effect
Probability
Significance
Weighted Score
1
5
9
45
2
3
10
30
3
8
6
48
Adversity Rating for Alternative A
123
10. Analyze the alternative ranking and the adversity rating and make a final decision.
11. Decide on mitigating actions for the chosen alternative.
- Look at each of the adverse effects already identified and generate a list of proactive responses to reduce the probability of each.
- Continuously monitor these probabilities and take action as needed.
Key Points
The Kepner-Tregoe Matrix is a well-respected and systematic approach for making decisions. The matrix process forces users to be well-organized and thorough.
By weighting and ranking both the benefits and risks, it helps you choose the very best alternatives.
Using the Kepner-Tregoe approach requires patience and a commitment: the payoff for the time invested is good, unbiased decision-making that makes good business sense.
