Purpose: The purpose of this paper is to examine the association between three organizational factors (the use of multi-dimensional performance measures, link to rewards, and training) and three organizational culture dimensions (innovation, outcome orientation, and teamwork) with the effectiveness of performance management systems (PMSs). Design/methodology/approach: Data were collected by survey questionnaire from a random sample of 450 Australian local governments. Findings: The performance management systems of Australian local councils are only moderately effective in relation to performance related outcomes, and less effective in relation to the achievement of staff related outcomes. The results indicate a significant relationship between the use of multidimensional performance measures, link of performance to rewards, training and two organizational culture factors (team work/respect for people and outcome orientation) with the effectiveness of PMSs. Different factors were found to influence the effectiveness of PMSs for large and small sized councils. Practical implications: The findings imply that there is a need for the managers of local government councils to improve the effectiveness of their PMS. Originality/value: The study provides an initial empirical examination of the effectiveness of performance management systems and the influential factors in the Australian local government context. The study assists local government managers in effectively managing their employees and operations.