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In the turbulent business environment, managers need to use innovation control systems to drive strategic renewal. Criticisms of the inadequacy of cost managements systems including budget, in a changing business environment emerged as early as the mid 1980s (Ahmad et al., 2003). Therefore, new strategic management tool such as balanced scorecard is developed in order to response to the recent business environment.
1.0 Today's business environment
In past three decades, business environment is rapidly changed due to the interplay of three factors, namely advance in technology, globalisation and intensive competitive. These three factors force the changes in current organisational arrangements and management practices.
1.1 Changes in organisation structure
As organisation grows in size and complexity, organisation moves gradually from centralisation to decentralisation. In such situation, traditional hierarchical "top down" management style which emphasis "command and control" is no longer succeeded. Conversely, comparatively progressive organisations with flatter structures, which involved their employees during the conceptualization, planning and implementation stages of change, succeeded to meet the rising demands for quality and flexibility through popular change brought about through empowerment of its employees (Bilal, 2007). Hence, employees are given level of decision making authority and develop sense of ownership among the employees. This indicates that arise of employee empowerment.
1.2 Changes in management practices
Globalisation and technology have broken down traditional barriers to entry, and then forces organisations move from protected markets to highly competitive global markets. Furthermore, today's knowledge and service-oriented economy results in a dominating role for soft success factors, for intangible assets, and thus increases not only the dynamics on the macro level but also creates new challenges for companies internally: Company activities become more complex and internal dynamics also increase (Daum, 2002). Therefore, organisations have to change their practice and apply long-term strategic management in order to meet the intense competitive business environment.
Due to globalisation, variety of products and services are provided in global market. The strong Japanese focus on quality as a competitive factor, has led the whole world to focus on customer satisfaction (Rolstadås, 1998). Organisations must respond quickly to the requirements of customers in all kinds of ways such as quality, functionality and after sale service. Hence, organisations need to focus on cost reduction as well as customer satisfaction. Also, manufacturing sector shifts from "production led" to "customer led". Thus, the products will be produced based on customers' demand.
Indeed, organisations move from industrial era into information age due to technology has made information preparation and dissemination faster and inexpensive. Rapid technological creates development and improvement in communication, thus manager must face to a large amount of data and arrive at decision, which would produce results comparable to the market standards (Punniyamoorthy and Murali, 2008). Thus, managers must quickly make effective decisions by adequate information. Besides, information age forces organisation to recognise knowledge as an asset. According to Arora (2002) cited in (Wu, 2005), the only way to create a competitive advantage is by managing intellectual capital, which is commonly known as knowledge management in the fast-changing business environment. Hence, organisation must have ability to attract, retain, develop and utilise the right type of employees in order to success.
Furthermore, outsourcing non-value added services or non-core activities become a trend. The primary reasons for outsourcing are to cost savings and the desire to avoid high-risk capital investments in new technologies (Zhu et al., 2001). For example, companies buy technologies and services from outsourcers. It follows that the organisation will be downsizing and layoff. In addition, the way of managing inventory has changed. In 1980s, Just-in-time (JIT) adapted by Japan manufacturing companies to continuous improvements and eliminates the wastage and non-value-added activities that has influenced western countries. JIT is based on the concept of delivering raw materials just when needed and producing products just when needed (Vuppalapati et al., 1995). JIT will remove the ordering cost, carrying costs and shortage cost to give value to customers.
Nowadays, new performance measurement systems not only include financial, but also non-financial measures because non-financial measures will enable organizations to give more weight to customers and internal processes in their performance measurement system (Gosselin, 2005). Thus, organisations more emphasis non-financial measures now. Additionally, the growth of e-commerce and supply chain management practices force benchmarking today not only focuses on internal operations, rather it encompasses the entire supply chain and how it should be managed electronically (Yasin,2002). Therefore, organisations need to enhance performance, operational efficiency and strategic effectiveness in order to establish best practice and become "world class".
Consequently, management accounting changes along with the organisation arrangements and management practices. Thus, managers need strategic management system to control the operation and business efficient and effectively to response to modern business environment.
2.0 Traditional management control system: Budgeting is still relevant?
Due to rapid changes in business environment, there is a controversy surrounds the relevance of traditional control system including budgeting. For example, the Consortium for Advanced Manufacturing-International (CAM-I), argue that the traditional budget acts as a barrier to effective management, particularly in the present dynamic business environment (Sulaiman et al., 2004). Some research suggests that 80 percent of companies are dissatisfied with their planning and budgeting processes (Neely et al., 2003). Beside this, Daum (2002) and Neely et al. (2003) mentioned that traditional budgeting has had its day due to its problems. In fact, the problems of budgeting in modern business environment can be categorised as below:
Budget is short-term business plan. They are developed infrequently and they are often outdated before the beginning of the budget period because they are usually prepared annually. Furthermore, it is based on out of date assumptions, and even based on unsupported assumptions or guesswork. Hence, managers cannot deal with fast-changing environment and today's competitive because budget lacks of reality. Also, budget is time-consuming and costly. According to Takana (2004), American companies spend an average of four to five months-and top executives spend 20 to 30 percent of their time creating their annual budgets. The result is similar to the survey of KPMG (Daum, 2002). In practice, budgeting is a long process that includes negotiation, updating and reworking but it add little value to the achievement of business's goals. Thus, it is expensive to prepare budget too.
Beside this, budget strengthens "top down" management style with underlines a "vertical command and control" structure (Anon.a., 2008), that empowering the senior managers and preventing junior mangers from existing autonomy. Such management style will not suitable in organisation structure of decentralisation. Moreover, managers may quit if they feel constraints, thus it is difficult to retain and recruit competence managers. Additionally, managers are motivated to bias their budget estimates to ensure that their budgets are more easily met or so that their performance looks better (Merchant, 1985) cited in (Yuen, 2004). They may negotiate or set lower sale targets and higher cost targets to meet budget targets. This will lead to "budget slack". Thus, the mangers focus their performance rather than driving organisation's overall gaols.
Apart from that, budgets concentrate on cost reduction rather than value creation. The prices of products and services are often set by the market. Due to gain more profit, organizations focus on cost reduction at the expense of long-term performance. For example, managers achieve cost reduction by reducing the research and development expenditure. Indeed, managers should focus value creations such as innovation, quality and brand loyalty in order to response to competitive threats. Furthermore, traditional budgets encourage the managers and employees to "going by the book", and encourage parochial behavior (Sulaiman et al., 2004; Brown and Atkinson, 2001). This, budgeting is a mechanism of "control by constrain". It encourages wrong managerial behaviour that inhibiting individual creativity and innovation because everything must conform to the budget. Therefore, the products and services cannot compete with competitors'.
Overall, budgets tend to promote an inward-looking, short-termist culture that focuses on achieving a budget figure, rather than on implementing business strategy and creating shareholder value over the medium to long-term (Neely et al., 2003). As a result, should organisation leave the traditional control system and follow the new strategic system?
2.1 Does budget can be totally discarded?
Interestingly, several authors' findings that companies and organisations are still using budget as a planning, control and performance evaluation tool despite the preceding problems. For example, companies in Malaysia still use budgets, to a large extent, as part of their planning and control mechanisms (Ahmad et al., 2003; Sulaiman et al. 2004). This refutes that some researchers argued that budgets are no longer valued in modern business environment. Based on Chun (1996), Malaysian user-groups views on the role of budgets, budget pressure and participation, was similar to Lyne's (1988, 1992) findings that 13 UK companies covered the issues relating to the managerial uses of budgetary information, the extent of participation by managers in setting their budgetary targets, and the sources of pressure to meet these budgetary targets (Joshi et al., 2003). Furthermore, according to Ghosh and Chan (1996) cited in (Sulaiman et al. 2004), 97 per cent reported the use of budgets by companies in Singapore. Such high per cent indicates that budget is still useful. Another 2005 survey done by Dugdale and Lyne that managers tended to disagree that budgets led to dysfunctional behaviour or that they provided little or no value (Anon.b., 2007). Instead, managers consider budgets are useful in planning, control, performance measurement, co-ordination and communication. Also, Armstrong et al. (1996) concluded that budgetary controls are intimately linked with considerations of labour controls in large manufacturing UK companies (Joshi et al., 2003).
Moreover, 106 companies in Singapore that said "yes" to budgets reported that they used budgets to evaluate performance (Sulaiman et al. 2004). Accordingly, they found that cash budget is prevalent amongst companies in the retail, manufacturing and the hotel sectors. According to Anderson (1993) and Douglas (1994), budget is still used as the main performance measurement system that placing a high importance on the budget-to-actual comparison for performance evaluation purposes both at the corporate and the subsidiary levels (Joshi et al., 2003).
Some organisations still use budget partly because they feel that there is no reason to change the traditional control system and top managements do not accept the change in approach. This is particularly because budgeting is embedded in organisation's culture, thus managers reluctant to move to other new systems. Besides this, it may a high cost of implementation contemporary system for some small or medium size companies. Also, budgeting provides an overall framework of control without which it would be difficult or impossible to manage and it provide a level of stability that could not be achieved using the beyond budgeting (Anon.b., 2007). This means budget is important as controlling tool.
However, in order to have a good budget, organization should follow the five principles of budgeting: all employees should be involved; the budget must be realistic, with the objective of gaining general support; the outputs must be linked to the inputs; recognise the concept of flexibility and; learn from the process (Howard, 2004). Obviously, it is management problem rather than budget problem because the top manager is the one who set the mission, develop a strategic plan for future. Also, companies should develop their culture which emphasis value-based, continuous improvement, creative empowerment and knowledge-sharing. For instance, companies should update their budgeting system to zero-based budgeting or activity-based budgeting. Furthermore, organisations need to develop balanced range of performance indicators which incorporate strategic indicators of an operation's "drivers" of future performance as well as shorter-term measures regarding results actually achieved (Brown and Atkinson, 2001). Hence, they can put the long-term perspective into the objectives and include better benchmark.
In conclusion, the evidences above have proved that budget is no abandoned by the organisations and companies. Budget is still considered as planning and controlling tool if the organisations change their managerial behaviour and the way they develop budgets.
3.0 The strategic management system - Balance scorecard
To be successful and remain in the turbulent business environment, organisations must keep bringing new products onto the market in shorter time intervals, form systematic long-term workable and profitable relationships with customers and business partners, constantly develop and retain the company's human capital, and not least satisfy investors with good financial results (Daum, 2002). Hence, organisation needs to implement new strategic system such as Balanced Scorecard (BSC), at the same time, render traditional successful business models obsolete. BSC is developed by Kaplan and Norton to translate the organisation's mission and strategic into objectives and performance measures to reflect financial perspective, customer perspective, internal business processes and leaning and growth. Organisation can from the strategy, make out a strategy map and get all the linkages, thus give a clearer idea of the complex linkages with which the company has to mow through for its ultimate successes and strategy map can be made for the entire activities as a whole or for a specific segment (Punniyamoorthy and Murali, 2008).
Today, the concept of BSC become a strategic control system that building a bridge between performance measures and non-performance measures; lag indicators and lead indicators; short-term objectives and long-term objectives and; internal performance and external performance perspectives. Every measure on BSC attempts to address an aspect of a company's strategy (Gautreau and Kleiner, 2001). BSC allows organization to clarify strategy and turn it into action. The limitation of convention performance measurement system is it only emphasis financial measurement such as return on equity (ROE) and profit margin. In contrast, BSC extends traditional short-term financial measures to including measures of performance relating to customer, internal processes and learning and growth needs of their people (Latshaw and Choi, 2002) cited in (Chavan, 2009). It links financial measures and non-financial measures in one coherent system. Consequently, BSC aims to provide managers with richer and more relevant information about activities they are managing than is provided by financial measures alone (Punniyamoorthy and Murali, 2008). Meanwhile, organisation can achieve profitability, competitive strength and long-term strategic goals as well as achieve the short-term goals.
Undeniable, the key of success in organisations are "intangible assets namely quality of products, human capital and customer loyalty rather than "tangible assets in balance sheets. However, to measure intangible asset, it needs non-financial measures. Therefore, BSC includes both of them and strongly emphasis non-financial measures. Apart from that, BSC shift attention from those areas that are not measured, to areas that are measured, since what is measured can be evaluated and what can be evaluated can be appraised (Hauser and Katz, 1998) cited in (Voelpel et al, 2006). Traditional control system failed to do this because it focuses on one perspective which is financial measures.
In the past, organisations only rely on financial measures as lag indicators. This may improve short-term objectives, but at the expense of long-term value creation. For example, Pan Am, IBM and Xerox focused primarily on financial performance indicators, which did not show problems until it was too late because they are mostly lagging indicators like ROE (Gautreau and Kleiner, 2001). It follows that BSC retains measures of financial performance, the lagging indicators, but supplement them with measures on the drivers, the lead indicators, of future financial performance (Brown, 2000) cited in (Chavan, 2009). The key of BSC is deciding how the lead indicators (Key Performance Drivers) affect the lag indicators (Key Performance Indicators). BSC focuses on driver measures, since they are indicators of things to come, however outcome measures are still a vital part of the approach (Gautreau and Kleiner, 2001). Instead of budget, BSC helps managers to see more clearly whether the objectives that have been set have actually been achieved. Beside this, the objectives lag indicators and lead indicators in BSC will be changed accordance with the changes in business environment and new strategies. Thus, BSC can be considered as a flexible managerial tool to meet the business needs.
The BSC enables the companies to develop a more comprehensive view of their operations and to better match all operating and investment activities to long- and short term strategic objectives (Punniyamoorthy and Murali, 2008). It achieves short- and long-term goals by the four perspectives. For example, financial perspective focuses on short-term objectives while customer perspective, internal business processes and leaning and growth focus on long-term objectives. The improvement on customer perspective, internal business processes and leaning and growth will ultimately flow to improvement on financial performance. BSC draws attention to those areas is important to achieve the strategic to the managers. Besides this, the four perspectives form a chain of cause and effect relationship which create trade off between the key objectives and the measures. Thus, it is important to indentify organisation's priorities or main concerns.
On the other hand, it shows both internal and external performance. Organisation must balance between external measures, like customer satisfaction, and internal measures, like employee satisfaction when determining strategy (Gautreau and Kleiner, 2001). Sometimes, organisations may achieve good result in internal measures but show poor performance in external measures. Such circumstance, organisations must re-aligned both internal and external strategies. Hence, organisations should apply the BSC because it can "detect" whether the problems come from internal or external performance.
Ideally, BSC creates a shared understanding of the organisation's vision is created and the business strategy is communicated to the organisation as a whole (Hasan and Tibbits, 2000). It involves the clear communication between top managers and lower employees, and then allows the feedback from lower employees. Thereby, BSC provide a two-ways communication channel within organisation. Based on Gautreau and Kleiner (2001), BSC endorses the idea that employees should be observed on how they are performing with respect to company strategy. Then, all employees are able to understand the contents of strategy and to see how they achieve the objectives.
In summary, BSC is not only a tool for measurement, but also a tool for strategic management (Voelpel et al, 2006; Chen et al., 2006). Besides measuring the previous events, it is also planning for future with the help of measures. It is code of the business to reduce the tension between short-term goals and long-term strategies.
Traditional budget is no longer valued due to plenty of problems in modern business environment. However, some companies still use budget as planning and control tool, but they should change the managerial behaviour and the way they develop budgets as pointed earlier. To survival, organisations need to balance between achieving short-term profits and long-term strategic. Hence, I suggest organisations should consider BSC as their new corporate implement strategy to conduct and control their business. BSC is a strategic management tool that map organisation's objectives into performance metrics in four perspectives. It may solve some problems of budgeting and reduces the tension between the predictable gaol achievements, at the same time, the pursuit of strategic adaption. However, BSC is not panacea. No one system can completely replace other control system. BSC still has some limitations. Therefore, organisations must aware the limitations of BSC when implementing it. In conclusion, organisation should be smart to utilise the BSC in order to survival and maintain sustainability in the modern business environment.