In recent years, the role of the principal has become more critical in the success of schools. School improvement is often tied to principal performance, yet the practice of evaluating principal performance leaves a lot to be desired, according to some educators. This ERIC Digest reviews current principal evaluation practices and describes some emerging issues and alternatives. It begins with a discussion of how principals are typically evaluated, noting that while there is little evidence that principals or their districts see evaluation as a major problem, neither is there any indication that evaluation plays a significant role in school improvement. The Digest next discusses the shortcomings of current practices, stressing that because of the complex nature of the job, principal evaluation is difficult. The Digest then discusses the key elements of effective evaluation, what standards should be used, and what assessment instruments are available. It states that productive evaluation processes are anchored in explicit standards that make expectations clear. Increasingly, policymakers are turning to comprehensive national standards, such as those devised by the Interstate School Leaders Licensure Consortium. Checklists seem to be the most commonly used assessment instrument. Portfolios are also being used to complement checklists. (WFA)