The authors explain how the Department of Family Practice and Community Health (DFPCH) at the University of Minnesota School of Medicine has responded to the need to create for its faculty an evaluation system that provides information for both feedback and merit-pay decisions. The development process, begun in 1996, is described, and its present format detailed. Also presented are the results of a 1999 assessment of the system, which found high satisfaction among the faculty and the department head. In particular, this system has allowed the department head to have a more objective basis for making salary decisions, to increase his role as coach, and to commit more time to career correction and/or development. Other observed outcomes include an enhanced ability to track faculty productivity, increased clarity in organizational structure and goals, increased research productivity, and early retirement of senior faculty receiving low evaluations. The key components of the DFPCH system mirror recommended elements for the design of faculty evaluation systems offered by evaluation professionals. Specific elements that the DFPCH found critical to success were stable and supportive departmental and project leadership, supportive faculty, skilled staff, a willingness to weather resistance to change, tailoring of the system to the department's specific needs and culture, and a willingness to allow the process to evolve. A key question that the evaluation system has evoked at the DFPCH is whether "merit" equals "worth"; that is, does the collective meritorious work of faculty members effectively address program and departmental goals?