| On September 29,2017,the Ministry of Finance of the PRC issued 22 guidelines for the application of management accounting.Among them,Guidelines for the Application of Management Accounting No.100--Strategic Management highlights the importance of strategic planning.Guidelines for the Application of Management Accounting No.101--Strategy Map highlights the importance of strategy map as a tool of strategic management.Guidelines for the Application of Management Accounting No.200--Budget Management mentions that a firm's budget management should be guided by strategic goals,integrate the management accounting tools and methods in the field of budget and strategic management,and strengthen the link between budgets and strategic goals.How does a firm's strategic management activities affect its budget management activities? More research is needed to fully address this issue.Strategic planning is an important step in a closed-loop strategic management system.Researchers put forward a closed-loop strategic management system including six steps:(1)developing strategies;(2)planning strategies;(3)decomposing strategies;(4)planning operations;(5)reviewing the execution of strategies and operation plan;(6)Inspecting and adjusting strategy.The step of planning strategy is further divided into five steps:(1)setting strategic goals,(2)selecting performance measures,(3)setting target values,(4)developing action plan and(5)budget planning.However,the effects of these specific designs have not attracted the wide attention of researchers.Strategy map and balanced scorecard are two interrelated concepts.The balanced scorecard is a system of performance measures which implements a firm's strategy as operable measures and target values from four perspectives including finance,customer,internal process,and learning and growth.The balanced scorecard only establishes a strategic framework,but lacks a specific,systematic and comprehensive description of the strategy.Strategy maps are based on the four levels of objectives of the balanced scorecard(financial level,customer level,internal process level,and learning and growth level).It is formed through the analysis of the causal relations among these four levels of objectives.The combination of strategy map and balanced scorecard is referred to as balanced scorecard framework in the previous literature.The balanced scorecard framework has evolved since its inception.Early versions of the balanced scorecard focused on the use of multiple performance measures to manage firm performance,providing a more “balanced” view of performance.After the combination of strategy map and balanced scorecard,the balanced scorecard framework focuses on revealing causal relations between performance measures to users.Balanced scorecard framework is only a specific form of Strategic Performance Measurement System(SPMS).Consistent with the trend that practitioners increasingly emphasize strategic management,SPMS has received more and more attention in the academic research literature of management accounting,and previous studies generally believed that SPMS can help the implementation of strategy,therefore improving performance.Many researchers believe that the SPMS should include the strategic planning procedure,and that there should be causal relations among the measures.However,few studies adopted the perspective of SPMS to investigate the impact of causal relations between strategic planning procedure and performance measures on corporate budget behavior.In order to fill this gap,this paper focuses on the relationship between strategic planning procedure and the causal relations of performance measures.Under theoretical perspectives such as management control system as a package,self-determination theory,procedural fairness theory,mental model theory,and goal-setting theory,this paper uses case study,experiment and survey to examine the impact of the above two on corporate budget behavior.Strategy map is a typical form of causal relations performance measure.Before studies based on larger samples,the first study of this paper,through case analysis,examines the specific process by which strategic planning procedure and strategy map affect budget management in one typical firm.The study uses exploratory case analysis to systematically analyze the introduction of 6S management system(including strategic planning,business planning,management report,performance evaluation,internal audit and manager evaluation),strategy map and balanced scorecard,and 5C value-based financial management system(with capital,cash,and asset management as the core,including capital structure,cash creation,cash management,capital financing,and capital allocation)into China Resources Group.The study shows that the rapid growth of China Resources Group exposes it to complex and changeable business environment,and the uncertainty of the environment makes it pay more attention to non-financial measures and strategic planning.By introducing the new version of 6S management system,China Resources Group began to adopt formal strategic planning procedure.With the introduction of strategy map and balanced scorecard,budget became a part of the business planning system in the new version of 6S management system.In management practice,6S management system helps China Resources Group to execute its strategy.The Group also establishes the link between budget and strategy by determining strategic goals,performance measures,target values and action plans in turn.Since then,in order to address the constraints of financial resources,The Group has introduced 5C value-based financial management system to assist in determining investment strategies in order to allocate scarce financial resources more effectively.Based on the case study,this paper presents three major findings:(1)a formal strategic planning procedure creates an application environment for strategy maps and balanced scorecards,making it easier for firms to apply strategy maps and balanced scorecards;(2)the combination of strategy maps and formal strategic planning procedure helps to establish the logical link between strategic goals and budget goals and enforce the link between firm budget and strategy;(3)strategy maps and balanced scorecards can promote the decomposition and implementation of established strategies,but cannot adequately help managers choose strategies;as a supplement,budget constraints based on financial measures help firms determine the scope of strategies before the execution of strategies.The findings of case studies can help researchers understand the relationship between the components of management control system,and also provide implications for practitioners on how to introduce strategic management accounting into enterprises.Firstly,since formal strategic planning was put forward as an academic concept,although previous studies have discussed its impact,few empirical studies have examined the impact of formal strategic planning process on the application of strategic performance evaluation system.Based on the case evidence,this paper systematically explains how the process of strategic planning and strategy map affects budget management,how to make the budget and strategy more closely linked,and how to promote the effective implementation of the strategy.Secondly,this paper expands the research on management control system.Based on the viewpoint of management control system as a package,formal strategic planning process,strategy map and budget are regarded as major components of a management control system respectively,and the process of their interaction is revealed.Thirdly,the findings of this paper can help researchers understand the relationship between the components of management control system,and also provide implications for practitioners on how to introduce strategic management accounting into enterprises.The implication of this paper to firm management lies in that in order to better promote the Guidelines for the Application of Management Accounting No.100--Strategic Management,managers should solidify the process of strategic management by formulating rules system,so as to promote the application of strategic management tools such as strategy maps and balanced scorecards,and to improve budget management.The second study of this paper uses an experiment to examine the impact of strategic planning procedure and causal relations of performance measures on budget goal setting under the balanced scorecard framework.In the experiment,participants were asked to act as subordinate manager,participating in the budget planning and reporting the budget goals to the superior manager.Firstly,the experiment examines subjects' budget goal setting in a simulated budget planning process.The experimental results show that when the financial objective value set by superiors is higher than that of previous years,the causal chains of performance measures that depict their causal relations can prompt subordinate manager to report target values higher than those of previous years in order to match the given financial target.Next,the experiment examines the satisfaction of the participants with the given budget goals after the superior manager has planned higher budget goals than in previous years at four levels: finance,customers,internal processes and learning and growth.The experimental results show that using causal chains of performance measures in the strategic planning procedure can bring higher budgetary satisfaction to subordinate managers.The results of supplementary tests show that the combination of strategic planning procedure and causal chains of performance measures can enhance the subordinate manager's perception of causal linkage of performance measures,thereby improving their sense of justice in the budget planning process,and ultimately improving their budgetary satisfaction.The findings of the above experimental studies indicate that under the balanced scorecard framework,the combination of the strategic planning procedure and the causal linkage of performance measures can enable firms to set budget goals more effectively.After the superior manager set the overall financial targets,the subordinate manager,guided by the causal linkage of performance measures,tends to report the target values of other performance measures in a way to support the overall financial targets.Once all the target values of key performance measures are determined,the combination of the strategic planning procedure and the causal linkage of performance measures will help subordinate managers to accept these given target values more readily.The findings of the above experimental study expand the research on the strategy maps and its causal linkage.Previous experimental studies show that the causal linkage of performance measures contained in strategy maps can affect managers' performance evaluation judgment and decision-making performance.The experimental evidence in this paper shows that the causal linkage of performance measures also plays an important role in the process of goal setting.In addition,this paper not only focuses on the form of the balanced scorecard,but also focuses on its application process.The empirical evidence in this paper shows that the causal linkage of performance measures can play a better role in the strategic planning procedure that consists of strategic goals,performance measures,target values,action plans,and budgets.The third study uses a survey to capture the differences in the strategic planning procedure using the sequence of strategic goals,performance measures,target values,action plans,and budgets.Using the structural equation model to analyze the questionnaire data,it examined the mechanism of the impact of strategic planning procedure on the fairness of the budget procedure.The results show that the consistency of strategic planning procedure with the sequence of strategic goals,measures,target values,action plans,and budgets will positively affect manager's understanding of the causal relations of performance measures,thereby;the causal relations will directly affect the fairness of budgetary procedure or indirectly by promoting budget planning participation.The findings of the above survey study suggest that in management practice,the selection of measurement measures,the setting of target values,the development of action plans,and budget planning,when based on firm strategies,can help managers better understand the causal relations between performance measures.The cognition of the causal relations of performance measures helps superior managers to rationalize their interpretation of the budget target values,so that subordinate managers can understand how the targets are set,thereby increasing their perception of the fairness of the budget procedure.In addition,the causal relations of performance measures can also enable managers to realize the interdependence of different works,thus facilitating the establishment of budget participation mechanism,thereby improving the fairness of budget procedure.The above survey study provided important evidence for the impact of strategic planning procedure on enterprise organization.This paper expanded the research on procedure fairness,explores the strategic planning procedure of from the view of procedural fairness,and examines the linkage between the strategic planning procedure and budget procedural fairness,which can provide a new clue for the study of organization fairness.The results of this study also provide implications for the practitioners: setting up a reasonable strategic planning procedure can help enterprises to make a fair budget,thus helping managers achieve higher performance.The fourth study of this paper continues the survey study,using the sequence of strategic goals,performance measures,targets,action plans,and budgets to capture the differences in firms' strategic planning procedure,and using structural equation model to analyze the questionnaire data;it examined the impact mechanism of strategic planning procedure on budget goal commitment.The results show that the consistency of strategic planning procedure with the sequence of strategic goals,performance measures,target values,action plans,and budgets will positively affect budget goal commitment.When the causal relations of performance measures are strong,the budget goal commitment is relatively high and budgets are more likely to bring high productivity to business units and prompt managers to manage costs prudently.The findings of the above survey study suggest that the strategic planning procedure mentioned in previous literature-setting strategic goals,selecting measurement measures,setting target values,establishing action plans and then preparing budgets-has a significant positive impact on firm management.If a firm's strategic planning procedure aligns with the above procedure,subordinate managers will have higher budget goal commitment,which will lead to higher performance.In addition,when managers are fully aware of the causal relations between performance measures,they will also be more dedicated to budget goals.The above survey study expands the research on goal commitment.Goal setting is an important function of strategic performance measurement system,and goal commitment has a significant impact on performance.Previous studies have found the impact of budget participation on budget goal commitment.This study identifies more characteristics of strategic performance measurement system that affect budget goal commitment,and further discusses the linkage between the design of strategic performance measurement system and budget goal commitment.The results of this study also provided enlightenment for the practical realm: setting up a reasonable strategic planning procedure and constructing a performance measurement system with causal relations can improve the commitment of subordinate level to budget goals,and make subordinate managers more willing to accept budget goals and make efforts.Moreover,the above survey study further expands the research on strategic performance measurement system.Previous studies tend to consider strategic performance measurement as a whole.This paper examines the characteristics of strategic performance measurement system in more details,and reveals the impact of two typical characteristics-strategic planning procedure and causal relations of performance measures-on enterprise organization.In reviewing the strategic planning procedure,the sequence of strategic goals,performance measures,target values,action plans and budget is a brief depiction of the strategic planning procedure.It has been mentioned in previous studies,but not fully discussed.This paper uses this concept to measure the difference in strategic planning procedure of different firms,which provides a new perspective for research in this field.The main contributions of this paper are as follows.Firstly,this paper reveals the linkage between the design of strategic performance measurement system and budget behavior.On the one hand,the survey study of this paper reveals the impact of strategic planning procedure and the causal relations of performance measures on budget procedural fairness,which can provide a new clue for research on organizational fairness;it also expands the literature on goal commitment and reveals the linkage between performance measurement system design and budget goal commitment.On the other hand,this paper successfully captures and systematically examines the differences in strategic planning procedure.The survey study uses the sequence of strategic goals,performance measures,target values,action plans,and budgets to capture the differences in the enterprise strategic planning procedure,and uses structural equation model to examine the impact of these differences on budget procedure fairness and goal commitment so as to better examine the linkage between performance measurement system design and budget behaviors.Secondly,the experimental study of this paper expands findings on the causal linkage of performance measures under the balanced scorecard framework.The evidence shows that the combination of strategic planning procedure and causal relations of performance measures can construct a good mechanism for subordinate managers participating in strategic planning,and help to enforce the consistency between budget goals and strategic goals.Therefore,the causal relations of performance measures can play a better role when combined with the strategic planning procedure.Thirdly,this paper provides an important reference for the promotion of strategic management accounting tools and methods.The implications of this paper for managers is that the selection of measurement measures,goal setting,the development of action plans,and budget preparation,when based on enterprise strategy,can help managers better understand the causal relations between performance measures.Causal relations of performance measures help superior managers to rationalize the budget goals,making the subordinate managers understand how to set the target values,facilitating the establishment of a budget participation mechanism,and enforce the fairness of the budget procedure.In addition,the establishment of a reasonable strategic planning procedure and a performance measurement system with causal relations can make managers and other employees more willing to accept the budget goals and make efforts on them. |
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