A program linking merit pay and faculty evaluation was initiated at Sumter Area Technical College (SATC) in Sumter, South Carolina, in 1978. The performance-based evaluation system focuses on three elements: the job description, which identifies professional responsibilities and how they relate to the college's mission; the individual action plan; and the institutional plan of action. Supporting the evaluation process is a system of recognition and reward, which involves the following components: (1) outstanding service awards are presented annually to a faculty member and a staff member; (2) the president sends personal cards and notes to employees on special occasions, such as birthdays, including an acknowledgement of achievements and contributions to the college; (3) the achievements of committees and task forces are recognized with luncheons; (4) those who contribute most to SATC are given priority for travel to conferences and workshops; and (5) faculty and staff members are asked to give staff development presentations on their areas of expertise. Of the five types of merit increases which are utilized by two-year colleges, SATC uses a combined merit and cost of living approach, while other South Carolina technical colleges use a total merit system. SATC's experiences suggest that the following components are essential in implementing a merit pay system: planning, judgments about personnel performance, explicit criteria defining good teaching, open communication, an adequate budget, and a mechanism for continuous monitoring and refinement. Though the approach requires more time and increases the difficulty of administering across-the-board increases, it also increases employee and supervisor accountability, encourages employees to coordinate their activities with the college's mission, and recognizes and rewards individuals. (LAL)