Since local government is the nearest to service users it is expected that it is at the forefront of service delivery. Local government needs to demonstrate that performance is managed, measured and improved on a continuous basis. For this purpose it must develop a comprehensive performance management system. The development of such a system is, however, not without challenges and local government should identify crucial elements which should be incorporated in such a system. The aim of this article is to focus on key considerations and challenges associated with the improvement of local government service delivery through the implementation of performance management systems.