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By:Saurabh Bokil 1127 Suraj Pandey 1136 Udit Verma 1138

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 procedure for evaluating personality, contributions and potentials of employees in a working organization.

Advantages of Merit Rating

Merit-rating plays very important role in the human resource administration of a firm. Its advantages are: (1) (2) (3) (4) Systematic evaluation of employees Facilitates matching of job with individual. Facilitates promotion related decisions. Facilitates training related decisions.


Helpful in identifying weakness of the employees which may systematically be removed.

(6) Provides base for guidance and counseling for the employees. (7) Develops healthy competition among workers to improve performance. (8) Serves as motivational tool for employees. (9) Provides objective basis for bonus, incentive wage, and salary related decisions. (10) Improves employee-employer relationship due to increased trust and confidence. (11) Sound base for negotiation with trade union.


Ranking Method
This is the simplest method in which all the employees are compared with one another. They are ranked in descending order from best to worst. This method has a serious limitation that it is not diagnostic to point the specific areas of weakness and strength of a worker. The method is highly subjective. The difference in rank does not provide the exact nature or quantum of merit-differential. There are chances of personal bias of the rater.

Paired Comparison Method

In this method, each member of the group is compared with remaining other members of the group. Each judgment is recorded in terms of score. These scores are added up to find the final ranking of each person. This method is an improvement over ranking method. It is a more rational and comprehensive method. The bias of the rater is minimized, yet it may not be over. The method involves large number of comparisons. For example, for a group of n persons, total number of comparisons is factorial (n 1)! Therefore, for a group of 10 persons, the trained comparisons would be 362880 and for 50 persons, it is 6.08 1062 Therefore, this method is quite time consuming when number of employees are more

Checklist Method
In this method, the rate is given a set of statements related to the employees performance, attitude, behavior and shortcomings. The rate is asked to tickmark either yes or no. Each yes/no carries certain points, which when added up, give final rating of the employee.

Graphic Rating Scale

In this method, the rater marks the rating on a graphic rating scale, the scale containing different degrees of performance in terms of phrases, such as: outstanding, excellent, good, average and poor. For each degree few numbers are allotted. Different performance measures are rated on this scale:

Rating by Result In this method, the rating is done on the basis of achievement of set objectives. Therefore, performance standards are set in advance. It is known to both rater and employee. Under achievement or over achievement is noticed by the rater. Therefore, this method eliminates the personal bias of the rater. Another advantage of this method is transparency in rating. Thirdly, continuous review of rating is possible by both employee and his supervisor. Possibility for improvement may be explored at regular intervals. Since approach is participative, it instills confidence in employees. The method is more suited for executives and managers as it requires proper education and training on the path of employees.


(1) Bias of rater may under-rate or over-rates an employee. (2) Due to Halo Effect (which is the tendency of a rater to consistently rate under or above the average), the ratings may not be accurate. (3) Assessment of irrelevant factors may result in deceptive rating. (4) Due to improper weightage of factors, the ratings may be improper.

(5) Due to fear, negligence, insufficient time, insufficient information or temperament, the rater may play safe and give average rating to an otherwise good or unsatisfactory employee. (6) Reward for employee may not follow immediately after a good rating due to organization constraints. This may lead to dissatisfaction. (7) Many rating factors are very subjective. Due to this, exact rating may not be forthcoming. For example, innovativeness, drive, organizational loyalty, etc., are difficult to be quantified in exact terms.


Employees are rated on the basis of many factors related to personal attributes, leadership quality, on-job performance, interpersonal quality, loyalty, attendance, etc. Some of these factors are: 1. Quality of work 1.1 Accuracy 1.2 Rejections and scrap 1.3 Thoroughness 1.4 Economy of time 1.5 House keeping 1.6 Contribution in quality circle team 1.7 Contribution in other TQM effort

2. 2.1 2.2

Quantity of work Output Approach in meeting overdemand

3. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8

Personal Qualities Team spirit Attitude for work Loyalty Leadership Relations with superior Relations with subordinates Integrity Judgment

4. 4.1 4.2 4.3 4.4 4.5

Others Attendance Ability to follow instructions Safety habits Interest in training and learning Interest in corporate culture, etc.

Objectives of Merit Rating

1. Helps in executive decisions related to human resource department (HRD). 2. Appraisal of workers. 3. Continuous record for the worth of a worker. 4. Tool for decisions related to training, placement, promotions, confirmation, increment, transfer and counseling of workers. 5. Useful for understanding areas of improvement in a worker 6. Helps in discovering special talent in a worker. 7. Useful in personal research, validation of training objectives and training methodology.


A successful merit rating system should be objective. Standard for outputs should be set against which performance should be measured:

For a merit rating system, these requirements are of prime importance: (1) Commitment and support of top management

(2) Approval of employees and union (3) Knowledgeable rater

(4) Education and training of employee to understand the rating system (5) Continuous rating system and periodic review

(6) Grievance redressal system (7) Administrative support for generating and retrieving necessary information (8)Sufficient time, fund and formats for the rating.

Thank you