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Introduction: An economically mature health care market has led to increased cost competition. Subsequently, a perceived need for productivity-based physician compensation has developed. While some institutions have rewarded individual productivity based on specific facets of academic responsibility, such as teaching, research, and patient care, we chose to develop an incentive compensation system that rewards both individual and group productivity., Program Development: We developed a physician incentive compensation system that rewards individual and group productivity by capturing multiple aspects of work activity. Faculty members are given compensation value points for clinical productivity, scholarship activities, teaching activities, service activities, and achievement of the department's goals. The system was implemented in a graduated fashion in the Department of Family Medicine at Indiana University beginning July 1, 2000., Program Evaluation: In April 2003, all faculty physicians (n=18) participated in a survey about the compensation system. The majority of faculty view the system as a necessity for the department (72.2%); 35.2% were satisfied with the system overall; 35.3% were neutral; and 27.4% were dissatisfied or not sure of their overall satisfaction., Conclusions: A comprehensive physician incentive compensation system incorporating department goals can be designed and implemented in an academic setting.