This paper discusses the use of outcome indicators for policy monitoring. In addition to providing general recommendations on their design and implementation, it makes two contributions to the existing literature. First, it shows the importance of distinguishing outcome indicators from other types of indicators and demonstrates the need to develop clear policy objectives as a prerequisite for meaningful outcome indicators. Second, it analyses the use of outcome indicators in specific settings; on the sub-national level, in multi-level governance frameworks and in the context of EU cohesion policy. The paper argues that outcome indicators are better used in relational contracts than in transactional contracts between governments. Furthermore, it highlights the need to harmonise different monitoring frameworks within an administration.