Merit Rating

Merit Rating is also known as performance appraisal or performance evaluation. It is a systematic process for measuring the performance of the employees in terms of job requirements.

It utilizes various rating techniques for comparing individual employees in a work group in terms of personal qualities or deficiencies and the requirements of their respective jobs. It is an established fact that people differ in their abilities and aptitudes. These differences are natural to a great extent and cannot be eliminated even by providing same training and education facilities to them.

There will be some differences in the quality and quantity of work done by different workers even on the same job. Therefore it is essential for the management to know these differentials so that employees having better abilities may be rewarded and the wrong selection and placement maybe restricted or avoided.

Concepts and Definitions of Merit Rating

According to Scot and Spriegel

“Merit-rating of an employee is the process of evaluating the employee’s performance on the job in terms of the requirements of the job”. It is a technique of assessing the worth of an employee with reference to job requirements.

According to Dale Yodder

“Refers to all formal procedures used in working organizations to evaluate personalities and contribution and potential of group members”. In the words of Yodder all types of methods used in evaluating the worth of employees for the organization are termed as performance appraisal.

In views of Alford and Beaty

“Employees rating is the evaluation or appraisal or the relative worth to the company of a man’s services on his job”. According to his definition the contribution of employees on jobs and their usefulness to the company is assessed under performance appraisal.

Thus according to the above mentioned definitions merit-rating or performance appraisal is a systematic evaluation of employees contribution to the organization in performance of their jobs. This evaluation is normally done by the immediate superior in the organization which is reviewed in turn by his superior. Not only the qualities, but deficiencies are also taken into consideration to improve the performance of employees.

Objectives of Merit Rating

People differ in abilities and aptitudes. Management should know these differences so that employees are assigned jobs according to their capability.

Main objectives of merit rating are as follows:

• To assess the work of employees in relation to their job requirements.
• To consider employees/workers for promotions, transfer, layoffs etc.
• To assess the good and bad points in working of employees and then making suggestions for improvement.
• 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 and helping in planning suitable training and development programmes for workers.
• 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.
• To help supervisors to know their subordinates more closely for increasing their efficiency and improving productivity.

Process of Merit Rating

Merit rating should be done on the basis of certain standards fixed in advance. The workers should also be in the know of the yardsticks to be used for evaluating them. Unless a proper process is used for evaluation, it will not give good results.

Following process is used for merit rating:

(i) Establishing Standards

The employees/workers will have to be rated against the standards set for their performance. There should be some base on which one may categorize that the performance of a person is good, average, bad etc.

The standards may be in terms of quantity and quality of production in case of workers; personality traits like leadership, initiative, imagination in case of executives, files cleared in case of office staff, etc. These standards will help in setting yardsticks for evaluating performance of the people concerned.

(ii) Communicating Standards to Workers

The standards set for performance should be communicated to the employees. They should know what is expected from them. When the standards are made known to employees, they will try to achieve their performance equal or above them.

Even later on they will not resent adverse reports if they fail to achieve certain standards. It is essential to get feedback from employees whether they have followed the standards as is desired by the management.

(iii) Measuring Actual Performance

The next step in evaluation process is to measure actual performance of employees. The performance may be measured through personal observation, statistical reports, oral reports, written reports, received from the executives concerned.

(iv) Comparing Actual with Standards

The actual performance is compared to the standards set earlier for finding out the standing of workers. The employee is evaluated and judged by his potential for growth and advancement. Deviations in performance are also recorded at this stage.

(v) Discussing Reports with Workers

The assessment reports are periodically discussed with concerned employees/workers. The weak points, good points and difficulties are indicated for helping employees to improve their performance.

The information received by employees influences their performance. It also effects their attitude and work in future. It may be easy to convey good reports but it requires tact to discuss adverse reports with the concerned employees.

(vi) Taking Corrective Action

Evaluation process will be useful only when corrective action is taken on the basis of reports. One corrective action may be in the form of advice, counselling, warning etc. Other action may be in the form of additional training, refresher courses, delegation of more authority, special assignments, coaching etc. These actions will be useful in helping employees to improve their future performance

Importance of Merit Rating

It is an established fact that people differ in their abilities and attitudes. The evaluation of their performance is the most important tool of an organization. This helps in assigning of work according to ability and capacity, spotting people for higher responsibility jobs, and recognising training and development requirements.

Following points brings out the importance of merit rating:

1. It is a managerial technique to find out the worth/capacity of various workers.
2. It helps in correct placement of workers.
3. Evaluation reports help employees to know their good points and weaknesses. The superiors also counsel their subordinates in improving their performance.
4. It provides a scientific basis for employee’s selection, training, promotion, demotion and any other action required.
5. It provides a basis for fixing wages and salaries and also helps in deciding about pay increases and incentive schemes for work force.
6. Merit rating can be used as basis of sound personnel policy in relation to transfer, promotion of workers.
7. It helps in eliminating personal prejudices and human bias against workers for any reasons.
8. It helps in removing grievances and develops a sense of confidence amongst workers because they will be sure of impartial evaluation process.
9. The workers will be more concerned in improving their performance and it will create more discipline among the employees.
10. It aims at providing data to superiors with which they may judge future job assignments and compensation required.
11. It helps in improving employer-employee relations through mutual confidence which is a result of frank discussions between a supervisor and his workmen.

Advantages of Merit Rating

The following are the advantages of Merit Rating:

1. It provides a scientific basis for judging the capability of employees who will try to improve their performance if it is not up to their satisfaction. Hence it helps in making comparisons.
2. It provides a sound basis for the purpose of promotion, demotion, transfer or termination of employees. Better persons are selected for promotion. The systematic evaluation remains as a part of permanent record.
3. It helps in distinguishing efficient and inefficient workers. In this way it reveals the defects in the selection procedure if any. Those employees who are misfit may be spotted and appropriate action initiated against them.
4. Workers may be given increase in pay or incentives if their performance is good. It helps the management in avoiding spot judgements and replacing it by advance decisions.
5. It develops confidence among the workers since the methods of evaluation are systematic and impartial. Among the workers, a sense of competition develops resulting into increased output hence improved productivity.
6. It creates a congenial atmosphere in which employer-employee relations are improved. Subordinates are motivated to work harder for getting favourable rating.
7. Merit rating is helpful in stimulating and guiding the development of an employee as it points out the weakness of the employees. In this way training requirements can be known and training programme can be accordingly decided.
8. It is a systematic evaluation technique which produces better supervisors and executives. On the basis of merit-rating report, the top management can judge the ability of executives writing such reports.

However, formal merit rating may not take place in case of a small unit where the informal rating can provide all the desired information. In case of a large scale concern, or big industries both employer and employee will be benefited from a systematic performance appraisal.

Limitations of Merit Rating

The various methods of merit rating are subject to the following limitations:

1. There is a tendency to rate employee on the basis of one factor only. It is also known as ‘blending tendency’. If the rater finds that the man is good in one field he will rate him good in all other concerned fields.
2. Each rater may apply his own standards with the result the final ratings simply cannot be compared. For example, a rater may think that ‘satisfactory’ rating is better than ‘excellent’. So clarity in standards is missing.
3. Lenient raters give; high ratings where as strict raters always give low ratings. Hence there is a big difference of ratings between two raters. It is another limitation of merit rating.
4. Generally the raters evaluate employee by keeping them in the average category though some may be falling in the extreme ends of the scale i.e. excellent or worst. So this central tendency is another drawback of this technique.
5. Usually there is a tendency to give high rating to a person who is doing the higher paid job. Merit rating has nothing to do with the job so it is its limitation.
6. Even if a person tries to be fairest rater in performance evaluation, he cannot eliminate bias because of differing perceptions.

Certain unconscious factors such as race, caste, creed, etc. may affect merit rating. If a manager who is less qualified, rates his subordinate who is more qualified, evaluation in such cases may not be fair. The limitations of merit rating explained above can be minimized to some extent by educating and training the raters..