by C.V.Rajan

Created on: January 05, 2009

DECISION MAKING USING WEIGHTED AVERERAGE METHOD

Whether in business management or in personal life, we have to make decisions at several junctures. Decisiveness is a fundamental characteristic of any manager. Decision making involves making a choice, after carefully studying the available facts, figures and information, weighing the pros and cons, advantages and disadvantages and then making up your mind. Some amount of influence of emotions, instincts and a hunch feeling too cannot be ruled out in decision making.

Many times, making a choice between two seemingly "equally good" options may prove to be too daunting in decision making. Under such circumstances, "weighted average method" is a simple mathematical technique you can follow to get a clearer picture on what is a better choice.

Let us understand the whole thing through a practical example.

(1) Define your problem: Let's say you are presently employed in a firm. You are not unhappy about your position there. You have now got a new job offer with better pay, but there are several other influencing factors to be considered over and above salary. Your problem is whether to accept the new job offer or not.

(2) List out the influencing factors: In this case, let us say these are the eight influencing factors you will consider.

(A) Location of the new work place

(B) Salary

(C) Growth prospects

(D) Matching of your qualification and experience with job profile

(E) Your designation/ position in organizational ladder

(F) Extent of traveling involved

(G) Perks

(H) Convenient working hours (day shift / night shift)

(3) Allocate points to each of these factors in option 1 (your current job) on a 5-point scale: (1 = least favorable; 5= most favorable):

Let's say (A) = 5, B= 3, (C) = 4, (D) = 2, (E) = 5, (F) = 1, (G) = 2, (H) = 2

Average of above = (5+3+4+2+5+1+2+2) / (8 x 5) = 24/40 = 60%

(4) Based on available information, allocate points to option 2 (your new job):

Let's say, (A) = 2, B=5, (C) = 2, (D) = 2, E = 5 (F) = 3, G = 2, (H) = 3

Average of above = (2+5+2+2+5+3+2+3) / (8 x 5) = 24/40 = 3/5 = 60%

The above is a simple average method. In this specific example, using the average method, you get same weightage for both the options and hence it will be difficult for you to come to a decision. Now let us see how the weighted average method works.

(5) Give weightage to each of the influencing factors based on how much importance you give to each of them. Here, the "subjective" influence (or to some extent, your emotional influence)

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