The objective of the study is to review the evidence on the consequences associated with the introduction of national performance measurement systems in the National Health Service (NHS), with the aim of informing the development of similar national performance measurement programmes proposed for Australia. Narrative review of the published evidence on the unintended and adverse consequences of performance measurement systems in the NHS is the data source. We identified 20 different dysfunctional consequences of national performance measurement systems in the NHS in four headings. These are poor measurement (measurement fixation, tunnel vision, myopia, ossification, anachronism and quantification privileging), misplaced incentives and sanctions (complacency, silo-creation, overcompensation, undercompensation, insensitivity and increased inequality), breach of trust (misrepresentation, gaming, misinterpretation, bullying, erosion of trust and reduced staff morale), and politicisation of performance systems (political grandstanding and creating a diversion). Performance measurement programmes can contribute to systems improvement, delivering benefits to health services and patients, as evidenced by the dramatic reduction in waiting times in the NHS following the incorporation of targets and indicators for waiting times. Nevertheless, experience from the NHS shows that in addition to generating desired improvements, performance measures can induce a range of unintended and dysfunctional consequences. We recommend Australia to heed the lessons of the NHS, and strive to balance effective performance measurement and management against the potential drawbacks and adverse consequences. Any national performance measures need to be piloted and carefully evaluated to assess potential benefits and pitfalls.