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Merit Rating

Human Resource Management

Merit Rating

Objectives of Merit Rating

Methods of Merit Rating


What is Merit Rating ?

According to

 Scot & Spriegel : It is the process of evaluating the

employee’s performance on the job in terms of the
requirements of the job.

 Dale Yodder : Refers to all formal procedures used in

working organizations to evaluate personalities and
contribution and potential of group members.
 In other words it is a systematic approach for
evaluating the performance of an employee on the
job, which he performs.

 Also called as performance appraisal, personnel

rating and employee evaluation.

 It is also a formal, objective procedure for

evaluating personality, contributions and potentials
of employees in a working organization.
Objective’s of Merit Rating :
 To assess the work of employees in relation to their
job requirements.
 To consider employees for promotions, transfer,
layoffs etc.
 To assess the good and bad points in working of
employees and then making suggestions for
 To help in wage and salary administrations and
taking decisions about incentives and increments to
be given to the workers.
 To evaluate skill and training capabilities of
employees .
 To know the problems faced by workers while
doing various jobs.
 To provide a basis for comparison to segregate
efficient and inefficient workers.
 To help management in placement/transfer to
workers according to their capacity, interest,
aptitude and qualifications.
Methods of Merit Rating:
 Ranking Methods
 Paired Comparison Methods
 Grading System
 Forced Distribution Method
 Check List Method
 Critical incident method
 Free essay Method
Ranking Method:
 It is the oldest method of
merit rating.
 In this method ranking are
done on the basis t of the
performance of the employee
 It permits comparison of all
employees in any single rating
group regardless of the type of

 The difficulty of this method is that it is very

difficult to compare persons on the whole .
 It only gives the idea about the standing of various
people and not the actual difference among them.
 This method however does not indicate specific
strengths and weaknesses between employees.
 It is used in those enterprises where there are few
Paired Comparison Method:
 In this method every person is compared trait wise,

with other persons one at a time, the number of

times one person is compared with others is
recorded on a piece of paper. These numbers help
in yielding rank of employees.
 It will be suitable only when the number of persons

is small.
 Time consuming.
Grading System:

 Under this system certain

features like analytical ability,
cooperativeness, dependability,
job knowledge, etc. are selected
for evaluation.
 The employees are given grades
according to the judgment of the
 The actual performance of every
employee is rated with various
grades in the mind of the rater.
Forced Distribution Method:
 This system is based on the presumption that all

employees can be divided into five categories

which are generally Outstanding, above average,
average below average and poor.
 The main aim in this system is to spread ratings in a

number of grades.
 It is useful only when the group of employees is
Check List Method :
 In this method, the rater is given
a set of statements related to the
employee’s performance,
attitude, behavior and
 The rater is asked to tick-mark
either yes or no.
 Each yes/no carries certain
points, which when added up,
give final rating of the employee.
Example of checklist :
Questions Yes No
Is the employee hard ×
working ?
Is he regular on the ×
Does he co-operate √
with his superiors?
Does he maintain his √
Does he obey √
instructions well?
Free Essay Method :
 In this method the supervisor writes a report about

the worker which is based on his assessment about

performance of workers.

 The supervisor continuously watches the

employees and writes his assessment in the report.

 The covered factors are the behaviour with

employees, job knowledge, employee traits,

development requirements for future, etc.
Limitation of free Essay Method:
 The system may suffer from human bias because of

likings or disliking of the supervisor for specific


 The other limitation of this technique is that an

appraiser may not be able to express his judgement

in appropriate words and it will limit the utility of
appraisal reports.
Critical Incident Method :

 The assumption in this method is that the

performance of an employee on the happening of

critical incidents determines his failure or success.

 The supervisor keeps a record of critical incidents

occurring at different times and then rates him on

this basis.
Examples of critical incident Method :

 Refused to follow instructions without a detailed

discussion with superiors.

 Refused to follow instructions even when these
were made clear.
 Increased his efficiency despite resentment from
other worker/ employees.
 Showed presence of mind in saving a worker when
sudden fire broke out.
Limitation of critical incident
method :
 The difficulty in this method is that outstanding
incidents may not regularly occur.

 Moreover negative incidents may be more noticeable

than the positive ones.

 The supervisor may not record an incident

immediately and forget it later on.

 It may be difficult for the supervisors to decide

whether an incident is critical or not.
Modern Methods :
Management by objectives
 The management by objective was developed by

Peter Drucker who emphasized that performance

of each job should be directed towards the
achievement of whole business objectives.

 In the MBO system of merit rating the superior and

subordinate sit together and set the goals to be

achieved by the later in a particular period of time.
 The work to be performed becomes a goal for

performance evaluation.
 The employees periodically meet their supervisor
to evaluate the progress of important features of
this system.
Limitation of modern method :
 MBO, as a technique of evaluation, may not provide

good results if the goal setting is hasty and over


 Lack of proper feedback between the superior and

subordinate may also adversely affect the

application of this technique.
Assessment Centre Method :
 It was first used in German army and later in British

Army. The purpose was to assess people in

particular situations. The evaluators record their

assessment regarding various people when they

perform in an actual situation.

 This method is utilized, generally, to determine the

suitability of persons for first supervisory levels.

 It helps in determining training and development

requirements or employees.

 The distinguishing characteristics normally assessed

are organizing and planning ability, getting along

with other, quality thinking, resistance to stress,

orientation to work etc.

Advantages of Merit Rating :
 It provides a scientific basis for judging the worth of


 It provides a basis for decisions like promotion,

demotion, transfer or termination of employees.

 It helps in distinguishing between efficient and

inefficient workers.
 Objective merit rating develops confidence among

the employees if the methods of evaluation are

systematic and impartial.

 It helps in creating a congenial working

environment in which employer- employee

relations are improved.

 It also helps in stimulating and development of an

employee as it points out the weakness of the

Limitations of Merit Rating :
Halo Effect:
 There is a tendency to rate the employee on the basis of one factor

 It is also known as ‘blending tendency’. If the rater finds that the

man is good in one factor he may rate him good in all other factors.

Clarity in Standards:
 Each rater may apply his own standards with the result that final
ratings simply cannot be compared. For example, a rater may think
that ‘satisfactory’ rating is better than ‘excellent’.
Leniency or Strictness:
 Lenient raters give high ratings whereas strict raters always give low

ratings. Hence, there is a big difference of ratings between two raters.

A supervisor may feel that low ratings may reflect his own weakness in

dealing with workers.

Central Tendency:
 Generally the raters evaluate employees by keeping them in the

average category though some may be falling in the extreme ends of

the scale viz., excellent or poor.

Influence of Higher-Paid Jobs:
 Usually there is a tendency to give high rating to a person who is
doing the highly paid job. Merit rating has nothing to do with the
worth of the job (which is the subject matter of job evaluation).

Differing Perceptions:
 Even if a person tries to be a fairest rater in performance
evaluation, he cannot eliminate bias because of differing
perceptions. Certain unconscious factors such as race, caste, and
creed etc., effect merit rating.
Thank You