Implementing financial and non-financial KPIs improves results. Here's what Harvard and MIT show with numbers, and how to set up your management control step by step.
Management control: how to implement KPIs (including financial ones) and what the numbers say
One phrase sums up the problem in many companies: what doesn't get measured doesn't get managed. Without clear indicators, leadership flies blind, decisions are made on intuition, and problems surface only when they're already expensive. Management control exists precisely to prevent that: it turns strategy into measurable indicators that enable timely, well-grounded decisions.
And this isn't textbook theory. The academic evidence —from both Harvard and MIT— shows with numbers that measuring well and deciding based on those measurements translates into higher productivity, better financial results, and greater company value. In this article we cover what management control is, how to implement financial and non-financial KPIs, what the numbers say, and how to build the system step by step.
What management control is
Management control is the function that lets an organization verify whether it is meeting its objectives, comparing actual performance against a benchmark —a budget, a previous period, or a set target— and acting on the deviations.
Its core tool is the set of Key Performance Indicators (KPIs), which translate abstract objectives into concrete, comparable metrics. The person who leads this function, the management controller, isn't limited to reporting numbers: their role is to generate actionable information so leadership can decide better and faster.
In essence, management control closes the loop between strategy and execution: it defines what to measure, measures it rigorously, detects where reality drifts from the plan, and steers corrective decisions.
Why measuring changes behavior: the Harvard lesson
The most influential framework for implementing KPIs was born in Harvard Business Review in 1992, with the article "The Balanced Scorecard—Measures That Drive Performance", by Robert Kaplan (Harvard Business School) and David Norton. They developed it through a one-year research project with 12 companies leading in performance management.
Their starting point is revealing: a company's measurement systems strongly shape people's behavior. Put differently, "what you measure is what you get." If you measure only one thing, your team will optimize that thing, even if it hurts everything else.
Hence their critique of relying solely on traditional financial measures —such as return on investment or earnings per share—: while indispensable, they look at the past and can send misleading signals for the continuous improvement and innovation that today's competition demands. They worked well in the industrial era but fall short for managing a modern company.
Their proposed solution, the Balanced Scorecard, balances KPIs across four complementary perspectives:
- Financial: how do shareholders see us? (profitability, revenue, costs)
- Customer: how do customers see us? (satisfaction, retention, share)
- Internal processes: what must we excel at? (quality, cycle times, efficiency)
- Learning and growth: can we keep improving? (training, innovation, climate)
The key is that these perspectives connect through cause-and-effect: investing in people improves processes, which raises customer satisfaction and, ultimately, drives financial results.
Financial KPIs: the core of management control
Financial KPIs are the backbone of any control system: they show, in numbers, how well the company generates revenue, controls costs, and maintains solvency. The most-used ones usually group as follows:
- Profitability: gross margin, operating margin, EBITDA, return on investment (ROI), and return on equity (ROE).
- Liquidity: current ratio (current assets / current liabilities) and operating cash flow, indicating whether the company generates enough cash to cover its payments.
- Leverage: debt ratio and interest coverage, reflecting dependence on external financing.
- Efficiency: inventory turnover and accounts receivable turnover.
An important caveat, aligned with Kaplan and Norton: financial KPIs are lagging indicators (they tell you what already happened). They are essential, but insufficient on their own to anticipate the future. That's why they should be combined with indicators that do.
The non-financial KPIs that anticipate results
Non-financial indicators are leading: they capture today what will show up in the financials tomorrow. Examples:
- Customer: retention rate, satisfaction (NPS), response time, sales per customer.
- Internal processes: cycle time, defect rate, productivity, on-time delivery.
- Learning and growth: training hours, employee turnover, employee satisfaction.
A good management control system balances both: financial KPIs confirm the result, and non-financial KPIs explain and anticipate why that result is improving or worsening.
What the numbers say: the MIT evidence
Does measuring and deciding with data really move the needle? The most-cited evidence comes from MIT. In the study "Strength in Numbers: How Does Data-Driven Decisionmaking Affect Firm Performance?" (2011), Erik Brynjolfsson, Lorin Hitt, and Heekyung Kim analyzed the management practices and technology investments of 179 large publicly traded companies.
The central finding is compelling: companies adopting data-driven decision making have output and productivity 5% to 6% higher than expected given their other investments and technology use. And the effect doesn't stop there: it also shows in better asset utilization, return on equity (ROE), and market value. Using rigorous econometric methods (instrumental variables), the authors ruled out reverse causality.
This connects with other Harvard research (Sadun, Bloom, and Van Reenen, 2017): among the practices that distinguish the best-managed companies are precisely setting clear objectives and tracking performance. In other words: measuring well isn't bureaucracy, it's one of the practices that separate high-performing companies from the rest.
The practical conclusion is clear: a KPI system isn't justified "because you should have reports," but because the evidence shows that measuring and acting on data translates into concrete points of productivity and profitability.
Power BI and dashboards: the tool that puts KPIs into action
Having KPIs defined is only half the work. The other half is making them visible, current, and within reach of decision-makers, the moment they decide. That's where dashboards and Business Intelligence tools like Power BI, Tableau, or Looker come in.
The problem they solve is very concrete. In many companies, finance and management teams spend more time gathering and consolidating data —from an ERP, several Excel spreadsheets, a CRM— than analyzing it. By the time the report is ready, the information is already outdated. A well-built dashboard automates that collection and turns scattered data into a single source of truth, visual and real-time.
How they help, specifically
- They centralize information: integrating finance, sales, operations, and customers into a single view, eliminating data silos.
- They update in real time: instead of waiting for month-end to see performance, leadership sees the P&L or cash flow daily, and can anticipate liquidity problems before they happen.
- They make deviations visible: with alerts and traffic lights, the board automatically highlights which KPI drifted off target, focusing attention where it matters.
- They democratize data: putting information in the hands of the whole organization —not just IT or finance—, enabling exactly the data-driven decision culture that MIT links with higher productivity.
- They reveal hidden inefficiencies: by visualizing bottlenecks, rework, or idle capacity, they enable workflow redesign and cost savings.
What the numbers say about dashboards
The study Total Economic Impact of Microsoft Power BI, conducted by Forrester Consulting (commissioned by Microsoft, which is worth keeping in mind), reported tangible benefits in the organizations analyzed: a 2.5% increase in operating income, savings of about 125 hours per BI user per year thanks to self-service, a 42% reduction in central analytics team effort, and shorter time-to-market for new products. Beyond the exact figures from one vendor, the pattern is consistent: less time building manual reports, faster decisions, and fewer errors.
A dashboard, however, doesn't replace judgment. Its value isn't in flashy charts, but in connecting each KPI with a decision and each decision with a result. A board overloaded with metrics no one uses is as useless as having none.
How to implement a management control system with KPIs
Implementing KPIs isn't about filling a board with metrics. These are the key steps:
- Start from strategy, not data. Define first what objectives the company pursues; KPIs should measure progress toward them, not what's easy to measure.
- Pick few, relevant indicators. More KPIs isn't better: a board with 50 metrics doesn't enable action. Apply SMART (specific, measurable, achievable, relevant, time-bound) and balance financial with non-financial.
- Set benchmarks and owners. Each KPI needs a target (budget, comparable period) and an owner accountable for it.
- Build a clear scorecard. A useful dashboard is visual, groups KPIs by type (financial, operational, strategic), shows deviation alerts, and updates regularly —ideally in real time. Tools like Power BI let you integrate your data sources (ERP, Excel, CRM) into a single automated board.
- Establish a cadence of review and action. The value isn't in looking at the board, but in deciding from it: reviewing deviations regularly and triggering corrective action.
- Avoid vanity metrics. If an indicator doesn't change any decision, it doesn't belong on the board.
Conclusion
Management control turns strategy into something measurable, and measurement into better decisions. Harvard showed, with the Balanced Scorecard, that balancing financial and non-financial KPIs aligns the behavior of the whole organization with its objectives. And MIT backed it with numbers: companies that decide with data are 5% to 6% more productive than expected, with better profitability and value indicators.
In an environment where margins are tight and decision speed matters, a good KPI system isn't an administrative luxury: it's one of the highest-return investments a company can make.
Frequently asked questions
What is management control?
It's the function that verifies whether a company is meeting its objectives, comparing actual performance against a benchmark (budget, previous period, or target) using KPIs, and steering corrective decisions on the deviations.
What financial KPIs should a company track?
The most common are profitability (gross margin, EBITDA, ROI, ROE), liquidity (current ratio, operating cash flow), leverage, and efficiency (inventory and receivables turnover). Ideally, combine them with non-financial KPIs.
Why aren't financial indicators enough?
Because they're lagging indicators: they show what already happened. As Kaplan and Norton argued in Harvard Business Review (1992), relying only on them can send misleading signals; balance them with customer, process, and learning KPIs that anticipate results.
Does implementing KPIs really improve results?
The evidence says yes. An MIT study (Brynjolfsson, Hitt, and Kim, 2011) found that companies deciding with data are 5% to 6% more productive than expected, with better asset utilization, ROE, and market value.
What is Power BI used for in management control?
It brings together data from different sources (ERP, Excel, CRM) into a single, visual, real-time dashboard that displays KPIs and alerts on deviations. This reduces time spent on manual reports, speeds up decisions, and lowers errors, helping sustain a data-driven decision culture.
Sources
- Kaplan, R. S. & Norton, D. P. (1992). The Balanced Scorecard—Measures That Drive Performance. Harvard Business Review, 70(1), 71-79. https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2
- Brynjolfsson, E., Hitt, L. M. & Kim, H. H. (2011). Strength in Numbers: How Does Data-Driven Decisionmaking Affect Firm Performance? MIT / SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1819486
- Sadun, R., Bloom, N. & Van Reenen, J. (2017). Why Do We Undervalue Competent Management? Harvard Business Review, 95(5), 120-127.
- Forrester Consulting (commissioned by Microsoft). The Total Economic Impact™ of Microsoft Power BI. https://info.microsoft.com/ww-landing-TEI-of-microsoft-power-BI.html
