I’m a big proponent of using scorecards to monitor progress to well-defined objectives. Earlier in my career, I ran a software company that used scorecards to help dozens of companies around the world ensure their execution was in line with their strategy. When using scorecards, I’ve cautioned that unless you compare yourself against an external benchmark you might not know whether you’re really making progress.
This quote from the HBO documentary Becoming Warren Buffett made me think about these long-held beliefs:
The big question about how people behave is whether they’ve got an inner scorecard or an outer scorecard. It helps if you can be satisfied with an inner scorecard.
For individuals, an outer scorecard could turn into an unhealthy comparison to what others have. This might be based on unrealistic expectations (“I wish I was as tall as he is”) or material comparisons (“she has more money than I have”). While comparing yourself to others can be motivational, too often it becomes destructive and, in the extreme, can allow others to drive your behavior. To make matters worse, you often compare their best features against your average ones.
On the other hand, an inner scorecard relies on internal comparisons. You ask yourself whether you are improving your performance, making progress towards goals, or focusing on things important to you. Relying on self-motivation can be difficult for many people but, when done well, forces you to focus on your values and beliefs.
While I understand Buffet’s caution, I believe a blend of internal and external comparisons can work for both individuals and corporations. The key is to focus and to understand you can’t be the best in everything. For example, if you want to compare yourself on ten different dimensions, pick one or two you want to excel in (best in class or nearly so). For these one or two focus dimensions, use an outer scorecard to compare yourself to everyone else.
For the rest of the dimensions, an outer scorecard should show that you are above average. Instead, an inner scorecard is usually preferable for these dimensions, as its more important to show you are making continuous improvements rather than external comparisons.
In other words, for most things you should compare yourself to yourself. Except for those things you want to be best at.
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