What is Merit Rating? - Meaning, Objectives, Methods and Advantages

Everything you need to know about merit rating. Merit rating is the systematic evaluation of the performance of an employee on the job in terms of the requirements of the job.

It may also be ascertained by comparing the superiority of an employee over others. Quantity and quality of work, attendance, obedience, skill, desire to learn, loyalty, family background, personality, etc. are some of the factors that are taken into consideration in assessing merit.

According to dictionary, merit rating is defined as, “employee rating achieved through a periodic employee evaluation system, often used as the basis for pay increases and/or promotion”.

Main aim of merit rating is the evaluation of the performance of employees. Employer can give reward on the basis of merit of employees. It is also helpful to compare the quality of different employees.

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Learn about:-

1. Meaning of Merit Rating 2. Definitions of Merit Rating 3. Objectives and Importance 4. Methods 5. Comparison between Job Evaluation vs. Merit-Rating 6. Programme 7. Advantages 8. Disadvantages.

What is Merit Rating? – Meaning, Definitions, Objectives, Importance, Methods, Programmes, Advantages and Disadvantages

Contents:

Meaning of Merit Rating
Definitions of Merit Rating
Objectives and Importance of Merit Rating
Methods of Merit Rating
Comparison between Job Evaluation and Merit Rating
Requisites of an Effective Merit Rating Programme
Advantages of Merit Rating
Disadvantages of Merit Rating

What is Merit Rating – Meaning

Merit rating is the systematic evaluation of the performance of an employee on the job in terms of the requirements of the job. It may also be ascertained by comparing the superiority of an employee over others. Quantity and quality of work, attendance, obedience, skill, desire to learn, loyalty, family background, personality, etc. are some of the factors that are taken into consideration in assessing merit.

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Merit rating or performance appraisal is, “a systematic, periodic end so far as humanely possible, an impartial rating of an employee’s excellence in matters pertaining to his present job and to his potentialities for a better job”. This type of appraisal is systematic in that it evaluates all performances in the same manner, utilizing the same approach, so that the ratings obtained of separate personnel are comparable.

Merit rating grades employees on their jobs on the basis of an objective and provides for the comparative review of their individual performances.

The various traits which may be taken into consideration while attempting to rate the workers in a work shop include the following:

i. Ability to do work assigned

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ii. Knowledge of his job and the engineering and manufacturing operations

iii. Work habits and personal characteristics

iv. Special qualities

(v) Supervisory abilities

Some people confuse performance appraisal with that of merit rating. Many use these two terms interchangeably. But these two are basically different. While merit rating, an employee’s internal merits and qualities such as his/her nature and bodily and mental abilities are studied, in performance appraisal, evaluation is made of quantitative factors based on production quantity and quality, quantity of accepted and unaccepted job, strata of work and so on. Thus, in merit rating, the stress is on ‘what he/she is’, while in performance appraisal, the emphasis is on ‘what he/she does and what potentiality does he/she possess’.

The term ‘merit rating’ is designated by a variety of terms. Sometimes it is called ‘efficiency rating’, ‘proficiency rating’, ‘service appraisal’ and so on. But none of these has achieved so much popularity as ‘performance appraisal’. The term ‘rating’ denotes the idea of some type of classification according to grade, rank or class.

Thus, ‘merit rating’ is a system for discovering, analysing and classifying the differences among employees vis-a-vis job standards. Merit rating system, being a scientific tool to assess individual abilities of workers, forces their observations as conceived by the supervisor in a systematic manner with a view to bringing out differences among workers. Such an assessment is very useful in many HR decisions.

What is Merit Rating – Definition According to Dictionary, Ivancevich, James Lundy and Kimball and Kimball

According to dictionary, merit rating is defined as, “employee rating achieved through a periodic employee evaluation system, often used as the basis for pay increases and/or promotion”.

Evaluation of individual merits of the employees is known as merit rating. Systematic analysis and classification of jobs on the basis of their characteristics is defined as job evaluation whereas the evaluation of the merits of the workers and on the basis of that, the classification of the workers is known as merit rating. By keeping the performance records of every worker and by assessing their performance in terms of some norms or standards, merit rating is done by organisations.

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Merit rating is associated with performance appraisal of an employee. This is a systematic approach for evaluating the performance of an employee on the job, which he performs. This is also called as performance appraisal, personnel rating and employee evaluation. Merit-rating is a formal, objective personality, contributions and potentials of employees in a working organization.

According to Ivancevich, the potential purposes of evaluation of performance include development of the employees, motivating the employees, helping in HRP and employment planning, facilitating communication between superior and subordinates, legal compliance by way of legally defensible reason for promotions, transfer, dismissal and so on and HRM research.

James Lundy- “The process of evaluating an employee’s performance on the job.”

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Kimball and Kimball- “The evaluation of any given worker as to his fitness for a given job in terms of assigned factors by which he may be intelligently appraised.”

What is Merit Rating – Objectives and Importance

The Objective of Merit Rating:

1. For each individual worker, assessment of the standard of performance,

2. Providing a basis for rewarding for high merit without detailed work study being applied,

3. Providing a basis for determining the remuneration of the indirect workers, the performances of whom cannot be easily determined,

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4. Choosing suitable worker for a job; job evaluation mentions the job requirement of the worker, while merit-rating mentions what qualities the worker should possesses. The selection will be perfect if these two fit in each other,

5. Providing basis for increment, promotion etc.,

6. Finding out the abilities and defects of each worker, and

7. Improving labour relations and reducing labour turnover.

Importance of Merit Rating:

Merit rating is helpful to the management in the following respects:

(i) It helps in ascertaining the suitability of the worker for a particular job. The objective is achieved by linking merit rating with job evaluation.

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(ii) It helps in ascertaining an employee’s merit for grant of promotion, increment etc.,

(iii) It helps in introducing a system for incentive, wage payment and simplification of the wage structure,

(iv) It analyses the worker’s defects and brings out the strong points and special abilities.

What is Merit Rating – 9 Important Methods Suggested by Ghiselli and Brown: Ranking Method, Forced-Distribution Method, Forced-Choice Method and a Few Other Methods

Ghiselli and Brown has suggested methods of merit rating and they are as such:

Method # 1. Ranking:

This is the oldest and simplest method. This is also known as “Paired comparison method.” In this method the employee is not treated separately from his job. One person is compared with the other. This separates the efficient from the inefficient but this is not practical as all persons have separate qualities. If a person is efficient in one job, the other is efficient for the other; hence comparison is difficult between the two. To solve the problem persons are evaluated in pairs.

This system is simple but it is defective.

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Firstly, to compare one person with the other is a difficult task as every person has his own personal qualities.

Secondly, one group of person are compared but they are not compared with other groups, if this is possible then how efficiency and inefficiency can be known and how measure of efficiency is possible.

Thirdly, there is no basis for serial assessment, hence there is partiality. Therefore, this is not in much use.

Employees are rated by various companies in different ways. The simplest merit rating plan is Straight Ranking Method. It involves ranking the men in a work group one against the other. For example, in a work group of 20 men, the foreman is required to list in terms of numeric rank the relative position of each man. It may also be done by ranking a person on his job performance against other members of a competitive group by placing him as number so and so in the total group.

Rank system does not, however, eliminate snap judgments, nor does it provide the rater with a systematic procedure for determining the relative ranks of his subordinates. A number of plans have been designed to remedy these weaknesses. The Graphic Rating Plan, as used by a company, is given here as an illustration.

Reference Guide:

In rating a person in relation to various characteristics, the points in numeric terms are given ranging from 1.2 for the weakest going up to 12.0 for the best worker. For example, in terms of “accuracy of work”, a worker would be rated as follows – where he makes many errors and spoils the work, or makes many mistakes in carrying out instructions and generally turns out poor quality of work, he will be rated as 1.2 to 2.4. Rating of 3.6 to 4.8 will indicate- careless.

Inclined to make mistakes. Errors due to lack of interest rather than ignorance. Believes in just getting by. A man who produces average quality of work on repetitive jobs and requires comparatively little supervision is rated 6.0 to 7.2. The one who seldom makes mistakes, turns out high quality of work and carries out instructions accurately is placed between 8.4 and 9.6, and a man who is most accurate, checks and observes his work and reports errors, and whose quality of work can be rated upon is rated highest at 10.8 to 12.0.

Similarly, quantity of work can be made the basis of merit rating. The worker who is very slow, clumsy and does not care is rated 1.2 to 2.4. The one who is slow with low production, possesses insufficient knowledge of the job and lacks skill is rated 3.6 to 4.8. The man who works at moderate speed, needs encouragement and urging and has good output on repetitive work is rated 6.0 to 7.2.

The worker, who works fast and skillfully, uses good methods for turning out high quality work and does his share when working with others is rated 8.4 to 9.6. The exceptionally fast and skillful worker who does his work in the best and quickest way turning out best production and when working with others does more than his share is rated 10.8 to 12.0.

Under the graphic rating plan, rank-and-file factory workers are rated on ten characteristics, each of which is explicitly described for the rater in the manner stated above in relation to accuracy and quantity of work. For each characteristic, points are assigned to the employee on the basis of his performance and attitudes. Thus, if an employee is inclined to be careless, he will be ranked low on the accuracy of his work. If his accuracy is extremely poor, he is given 1.2 points.

If it is extremely good, he gets 12 points. In this manner points are arrived at for each factor and a total point score is obtained. Similarly, other employees can be ranked and then compared.

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It will be noticed that employee A received 7.2 points for accuracy of work; 7.2 points for quantity of work; 3.4 points for use of working time; and so forth. His total score is 62.4 points. Before the total score is used in comparing workers, it is adjusted for the systematic error of the rater (i.e., the tendency to rate everyone either too high or too low).

First, the average rating given by the rater is determined. Then each rating given by the rater is compared with his average rating, and the net difference between a specific rating and the average rating is added to or subtracted from a base score of 70. To illustrate – If Foreman X’s average rating for all his employees is 72.4, we can obtain employee A’s final rating by finding the difference between 72.4 and 62.4 (i.e., 10 points) and subtracting it from the base score of 70. Employee A’s merit-rating score, then, is 60 points (70-60).

Method # 2. Descriptive or Essay Type Merit Rating:

In this plan, the supervisor writes an essay on his subordinates. The essay approach has advantages in evaluating supervisory employees. It forces the rater to think about his men and avoids a mechanistic approach to evaluation.

The “Review’ or ‘Appraisal’ should consider the following factors:

a. Relation with Fellow Supervisors and Personnel Assigned to him.

b. General Organisation and Planning Ability.

c. Understanding and Application of Company Policies and Procedures.

d. Job knowledge and Potential.

e. Production Quality and Cost Control.

f. Housekeeping and Safety.

g. Demonstrated Attitude and Personnel Characteristics.

h. Physical Condition.

After Reviews have been completed for all first level supervisors, they should be examined by other reviewing supervisors in the same shop or group to obtain concurrence. The “Appraisal of Performance” must clearly indicate how the supervisor is performing on his assigned job. Then “Suggestions for Development”, if any, should be made in specific and helpful terms.

Method # 3. Forced-Distribution:

This method is used to eliminate or minimize the rater’s bias. The Forced-distribution plans require the rater to distribute his ratings to follow a predetermined distribution. For example, students are sometimes graded as A, B, C, D and E, according to their performance in the test. In a large under-graduate class, 5 to 10 per cent of the students be given A’s; 20 to 30 per cent, B’s; 40 to 60 per cent. C’s and 10 to 20 per cent.

D grades, in the same manner, a normal group of workers doing the same job would fall into some such grouping as superior, above average, average, below average, and poor and the relative percentages would be approximately 10-20-40-20-10. Although this method does tend to eliminate or reduce bias, its use in wage administration leads to low morale and low productivity.

Method # 4. Forced-Choice:

The forced-choice method attempts to correct a rater’s tendency to give consistently high or consistently low ratings to all employees. The rater is asked to choose from several sets of phrases the one phrase that best describes the man being rated, and the phrase that least characterises him. The ratings are then scored by a key that has been worked out in great detail.

The rater does not know what kind of score he is giving a person. This system has merit when properly worked out, but some raters do not like to use a form unless they know the results of their efforts.

Method # 5. Critical-Incident System:

This system is designed primarily to contribute to the growth and development of supervisors and their subordinates. The distinguishing feature of this type of plan is that it attempts to measure workers’ performances in terms of episodes.

The heart of the plan involves training supervisors – (a) to recognise episodes of exceptionally good or bad performance; (b) to speak with the worker at a time relevant to dealing with the observed episode; (c) to keep a written record of the episodes so that they can be easily recalled and used during the periodic appraisal and coaching interview; and (d) to develop skill in handling the coaching and appraisal interview.

As a device for developing effective supervision, the plan has a number of advantages. First, its administration requires the supervisors to develop habits and skills that are essential to good supervision (i.e., they become aware of criteria for judging exceptional performance; they develop skill in interviewing and in handling episodes of unusually good or bad performance; they get to know their subordinates, and vice versa).

Second, it avoids having the supervisor make direct comparisons between workers. The focus is on the concrete examples of performance. The third and major advantage of this type of plan is that it brings employees and supervisors together in a constructive environment. It directly attacks what appears to be a basic problem in all large organisations – namely, the workers’ anxiety about where they stand.

It enables the employee to discuss job performance with his supervisor through daily interaction as well as a periodic appraisal interview. The worker receives individual attention. He knows better where he stands and also where his supervisor stands.

In order that any merit rating system should prove effective, it should rate the employee in terms of his actual performance on the present job. A given employee might be rated C or D on performance, yet under the promotability side might be marked promotable to a higher job because of special qualifications for the higher job when he is average or even below average on his present job.

Such a situation might easily arise in the case of a toolmaker by trade who is currently working on a production machine because there is no vacancy in tool making. A similar situation might arise in a department store or office or even among supervisors. It could readily arise in the case of a college teacher who was teaching statistics but who was primarily trained in accounting.

Again, employees tend not to be rated but to be paid on an automatic basis of increments, or to be paid, in case of an incentive basis, solely on objective data, such as- quantity of output, quality of output, attendance, and tardiness, etc. The employee should be encouraged to participate in the scheme.

Method # 6. Employees Comparison:

This method is also called “man to man comparison” method. In this method for merit rating, more variables are ascertained like leadership, qualifications and faithfulness. After this for each variable, a master scale is prepared in which for executive of each job strata are maintained according to qualities. For that work most efficient and least efficient person are selected.

These persons are the two ends of the scale. After that as a medium point, an average person is selected. Later on the two points are marked below and above the average. In this way five points are ascertained. Comparing these points, other person’s qualities are known. The main difficulty in the preparation of this plan is of ascertainment of five points.

Method # 7. Descriptive Evaluation:

Under this method, the evaluator prepares a written report in relation to execution of the employee in which his personality merits and quantity of job and job strata units are described. The clarity and extensiveness of the description makes evaluation best and satisfactory.

Method # 8. Point System:

In this method, for every unit of every work some points are specified. A mutual or a scale is used in which all units, description and points for evaluation and evaluation procedure is given. Generally, some units are determined as cleverness, responsibility, effort (mental or bodily) and job conditions. Each person’s each merit is given the points from the maximum determined points. Afterwards, all the points are totalled and it is the evaluation of that person.

Method # 9. Field Review:

Under this method, evaluator asks the supervisor, questions about the workers working under him and gets his opinion and records it. These are signed by the supervisor and keep it for future reference as a context.

This type of merit-rating is useful for large organisations, and appears to overcome a number of the weaknesses found in many of the other systems. It consists of having a trained employee from the personnel department interview line supervisors about their respective subordinates. The supervisor is asked to give his opinion about the progress of his subordinates, the level of performance of each subordinate, and possible-plans of action in cases requiring further consideration.

The representative of the personnel department takes detailed notes of the interview. These notes are approved by the supervisor and placed in the employee’s personnel folder. The success of this system depends on the competency of the interview. If this man knows his business, he can contribute significantly to reasonably accurate appraisals. Moreover, he can help the supervisor think through his evaluations, so that bias and prejudice can be more readily minimised.

What is Merit Rating – Comparison between Job Evaluation and Merit Rating

Job evaluation and merit rating are compared in the following ways:

Job Evaluation:

1. It evaluates a job or work.

2. It is for the purpose of fixing a base-wage for a job.

3. It is independent of operator or worker. It is impersonal in nature.

4. Useful for decision regarding wage and salary administration, skills match, etc.

5. It considers requirement of job.

Merit Rating:

1. It evaluates a worker.

2. It is for the purpose of deciding reward for exceptional merit of worker.

3. It is independent of job. It is impersonal in nature.

4. Useful for decision regarding training, placement, promotion, counselling etc.

5. It considers ability and performance of individual.

What is Merit Rating – Requisites for an Effective Merit Rating Programme

Merit rating programme is a very important tool and technique of personnel management. But care and caution is essential in the introduction of this technique.

The following care of requisites be observed before introducing an effective merit rating programme:

(1) Analysis of Jobs and Responsibility:

The first step of merit rating is the assessment of the person’s jobs and responsibilities. For reaching of rights and responsibilities one should go through jobs first.

(2) Ascertainment of the Standard of Job Execution:

While ascertaining the standard employees the supervisors should be consulted. Further, one should also study the evaluation programmes of their industrial concerns and the special facts of those programmes.

(3) To Look on Job Execution:

Evaluator must be fully trained for this purpose. Then alone, he can rightly evaluate the person.

(4) Measure of Ability:

After preparing the different persons and jobs, different statements, descriptions and job analysis, necessary informations are obtained for the person, so that their measure of ability by any one method may be done and their future progress be estimated.

(5) Labour Management Discussions:

Further, he discusses with the labour and supervisor and he classifies on the evaluation strata. On the basis of field report on the occasions, supervisor guides and trains the personnel.

(6) Formulation of Scheme of the Development of Employees:

Supervisor prepares the evaluation report of work of a subordinate employee. Supervisor submits his report to ‘Report committee’ and the committee reviews it. Supervisor for higher official on the basis of that evaluation talks to the employee in private, afterwards higher official and supervisor both jointly plan the scheme for job amendments of the employee.

(7) Review of the Progress:

At times progress is subject to review and revaluation; employee should be recognised necessarily for job execution and objectives he assessed.

What is Merit Rating – Advantages

The advantages of merit rating are as follows:

(1) This Helps in the Development of Personnels:

Development policies like construction of promotion lines, transfer, training and their development are most important instruments by which these programmes are prepared logically and systematically.

(2) Utility for Management:

The main advantage of the merit rating goes to management. They know the abilities of the person and on that basis the management sets right the programme for their promotion, transfer, forced leave and discharge. It serves in determining a sound and suitable wage structure; appraisals can be used to evaluate the training programme also.

(3) High Moral:

A properly planned merit programme gives chances to a person to know about himself and motivates them for development. This increases their mental strength and gets self-satisfaction.

(4) This Helps in the Rise of the Standard of Living:

Merit rating helps the personnel in knowing their abilities and they try to make improvement in that. If they feel that there is some defect in it, they try to improve and thereby earn more money.

(5) Mutual Comparison:

This is a scientific basis of merit rating for all persons. Therefore, on this basis a scientific and comparative study can be made of personnel with regard to their abilities.

(6) Advantage to Supervisors:

By this, the supervisor knows the efficiency and weaknesses of the personnel working under him and then he suggests the management various measures to improve the weaknesses of the workers.

(7) Helpful in Proper Placement:

Merit rating is helpful in the placement of the personnel. This means that the personnel should be placed on the right job. Besides the workers kept on probation should be placed according to his abilities so that he may be kept at the proper place.

Other Advantages:

Merit rating prevents grievances and develops a sense of confidence amongst employees because they are convinced of impartial evaluations. Hence, it improves labour management.

What is Merit Rating – Disadvantages

The disadvantages of merit-rating are:

1. Labour unrest may arise due to wrong rating.

2. There may not be any relevancy of the factors considered for merit rating.

3. Previous records of the employees may influence the rating and thereby justice may be lost.

4. Employees may oppose the rating or may not recognize the same.

5. Workers may not be satisfied with the incentives allowed on the basis of merit rating.

For merit rating purpose, the following factors may be usually in the employee – Attendance, discipline, co-operation, knowledge, skill, experience, aptitude, sense of responsibility and judgement, quantity and quality of output etc.