This paper examines the purpose, validity, and reliability of performance indicators in higher education, focusing on the experience of higher education institutions in the United Kingdom. Specifically, it studies the role of student entry and exit performance, teaching and staff quality, retention and completion, and placement in employment as indicators of higher education performance. It examines these indicators in terms of the interests they serve, their validity, and their robustness (including their vulnerability to manipulation). The paper discusses the problems associated with each set of indicators, noting that the validity and reliability of such indicators are mixed and that government attempts to tie funding to performance indicators may have unintended consequences. The paper concludes that the belief that performance indicators can provide accurate information on institutional functioning appears to have weakened in recent years, with early optimism having becoming tempered by debate and experience. (Contains 40 references.) (MDM)