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"The Balanced Scorecard - Measures that Drive Performance"¹, Robert Kaplan and David Norton proposed a new measurement system that provided managers with a comprehensive framework to translate a company's strategic objective into a coherent set of performance measures.

During a year-long research project with 12 companies at the leading edge of performance measurement, Robert S. Kaplan and David P. Norton developed a "Balanced scorecard", a new performance measurement system that gives top managers a fast but comprehensive view of the business.

The balanced scorecard includes financial measures that tell the results of action already taken. And it complements those financial measures with three sets of operational measures having to do with customers satisfaction, internal process and the organization's ability to learn and improve the activities that drive future financial performance.

In their book The Balanced Scorecard, Kaplan and Nortan set forth a hypothesis about the chain of cause and effect that leads to strategic success. The cause and effect hypothesis is fundamental to understanding the matrices that the balanced scorecard prescribes. There are four stages to this chain of cause and effect, outlined as follows: -

1. The foundation, or fundamental cause for strategic success has to do with people. Decades ago, Peter Drucker recognized that innovation from creative people provides the only assured source of long-term success and competitiveness, because every other aspect of an organization can be duplicated by others. The right people must be hired, properly trained and mentored, and the learning process should become continuous and endless. Peter Senge, in his very influential book The Learning Organization, described a healthy organization as one in which a learning culture prevails, fostered both by formal and informal learning and by abundant internal communication in all media.

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1 Robbins. P. Stephen & Coulter Mary, Management, Prentice Hall, Inc. USA, 1996, pp. 256-257.

* Contributed by: -
Dr. R. P. Verma,
Ex. H.O.D. & Dean, Commerce and Business Management Dept.,
Arabinda Bhandari,
Strategic Management Researcher,
Ranchi University, Ranchi.