This conceptual paper draws on the understanding and application of institutional performance management system (IPMS) by managers in a higher education institution's department. Managers in HEIs [higher education institutions] are tasked to develop and support staff at all job levels and are accountable for their performance. The implementation of the IPMS in higher education institutions could enhance the growth and development of the department and its staff. The paper highlights practices of IPMS as well as identifies the successes and challenges in understanding and applying IPMS within HEIs, to provide a consolidated practical advice for universities in South Africa. Staff development and support are central to ensuring that commitments made, are seriously translated into relevant actions in the department. Such actions by the institution lay a strong foundation for improved performance. The purpose of the paper is to unpack and contextualise the understanding and application of institutional performance management system (IPMS) of staff, by recognising its merits depending on the context and circumstances where it is applied. This qualitative paper analysed literature studies that include books and articles written on performance management systems in higher education, to establish how performance data is used to improve institutional staff performance. Findings reveal that HEIs' performance criteria in IPMS, do not always serve to monitor and evaluate the department's progress on planned goals, objectives, and initiatives. The paper, therefore, serves as a foundational piece that highlights gaps in higher education institution managers' understanding and application of IPMS, for supporting and improving staff performance.