Over the last thirty years the higher education sector has witnessed several changes. Factors like "massification" of higher education, cuts in public spending, greater competition and "marketization" of the sector forced institutions to evolve and to apply performance management approaches. The majority of studies in the literature have focused on "what" should be done in order to improve performance, and not on "how" to implement such improvements and what consequences, issues and benefits can arise. Hence, the aim of this research is to give some evidence on how performance management systems can be implemented in higher education institutions, and to provide some insights about the barriers and the potential benefits. Furthermore, this study includes the first literature review on performance management in higher education and develops a conceptual framework that summarizes the state of the art of research. Relevant suggestions for managers of higher education institutions are also provided.