This paper addresses the main issues related to concepts of school effectiveness and their implications, with a focus on the selection of school-performance indicators. School effectiveness has many definitions, which is in part due to the different demands made by various social groups. The boundaries of performance within which schools should operate are generally ambiguous, but in essence have two strands: one that promotes social equity in terms of academic achievement, and one that promotes social competencies required for citizenship. The issues of pupil assessment, school evaluation, learning environment, and potential problems with the use of performance indicators are discussed. Formative models in performance-indicator development are evaluated in terms of their theoretical and practical uses. It is recommended that researchers categorize groupings of schools according to academic performance and socioeconomic features in order to identify common patterns and compare those groupings with other categories of schools. Four figures are included. (Contains 53 references.) (LMI)