Merit rating is a notion describing a process of systematic measuring of employees' performance in terms of specific job requirements. By various rating techniques, it assesses if employees meet given standards as well as states their worth for the organization concerning professional requirements. Merit rating facilitates management to find departures so that they could eliminate them and compare individuals in a workgroup.
Objectives of merit rating
According to Roger Chartier and A. H. Fuersenhal there could be listed following objectives of merit rating. It should:
- record the progress of employees in their jobs, show their strong and weak points, and their relative value to the organization, in order to reward their individual merit accordingly (by promotion) or to displace them to get better work done (by transfer or layoff).
- provide a basis for agreement with regard to the question of wage and salary standards. Merit rating will ensure control and adjustment of pay differentials within categories, according to the relative merit of employees, or will guarantee a fair distribution of bonuses.
- help employee development and adjustment of personal advice, training, and improvement of foremen or supervisors.
- better selection and placement by adjusting 'the right man to the right job'.
- measure the employees' aptitudes to understand and use (or manage) ideas, things (or machines).
Methods of merit rating
The various traditional methods are mentioned by Robert E. Shaeffer:
- Forced distribution - In these ratings, the individual staff member is placed in terms of his standing regarding the group as a whole. The essential presumption of this method is a division of staff into five categories: outstanding, above average, average, below average, and poor. In general, the forced distribution method works best in large groups.
- Paired comparison - in this type of ratings, employees are compared with each other in the group, which results in choosing better workers from each of the pairs. However, this technique is suitable only for a small group of people. For example, a rater should make 45 comparisons to evaluate 10 employees.
- Forced choice - in this method use is made of hidden or dummy questions, which the rater is being asked to classify the employee in terms of trait descriptions whose true significance is not known to him.
- Field review - in the field review ratings the employee is evaluated in terms of his specific strong and weak points and the way in which this affects his job performance, promotability, and so forth, in the course of interviews conducted with supervisor by a representative of the personnel department.
- Graphic - an employee is matched against arbitrary, and often abstracts, standards, usually on a line marked into regular intervals with short descriptive phrases signifying different degrees of the trait. It is the most widely used merit rating plan.
There are also modern methods such as:
- Assessment center - a procedure that organizations use for a variety of talent management objectives. This technique is based on observing the behavior of candidates while they participate in simulations of adequate work activities. Multiple, trained Assessors observe and evaluate participants' performance on a focal construct, such as dimensions and tasks and may make recommendations for improvement. Assessment centers are a very effective tool, they help in recruitments, election, succession planning, and development of human capital across organizational levels.
- Management by objectives - according to Renaud de Harlez, MBO is a process where management and employees define objectives and negotiate the action and deadlines required to reach them. It is a tool available for managers to boost the performance of an organization turning collective objectives into specific and precise goals, which benefits both the organizational unit and the individual employees 
Examples of Merit rating
- Performance appraisal: Performance appraisal is a technique used to evaluate and measure the overall performance of an employee compared to the predetermined job requirements. It provides an objective, clear and consistent way to measure the performance of the employee and helps to identify areas requiring improvement and also rewards outstanding performance.
- Behavioural Expectation Rating: This technique is based on the behavioural expectations of the employees in the organization. It is a rating scale which assesses the employee's behaviour and performance on the basis of the expectations of the organization. It evaluates the behaviour of the employee on the basis of the goals and objectives of the organization.
- 360-Degree Feedback: This technique involves feedback from the employee's peers, subordinates, and supervisors. It is a comprehensive feedback method which provides an accurate assessment of the employee's performance and behaviour. It helps to identify the strengths and weaknesses of the employee and also provides an opportunity for improvement and development.
- MBO (Management by Objectives): This technique is based on the principle of goal setting. The employee and the supervisor develop an agreement on the objectives to be achieved and the employee is then evaluated on the basis of how well he/she has achieved those objectives. It helps to measure the progress of the employee and also provides an opportunity for the employees to take ownership for their work.
Advantages of Merit rating
Merit rating is a great tool for evaluating employees' performance. It can provide the management with a better understanding of their employees’ strengths and weaknesses. Here are some of the advantages of merit rating:
- It helps organizations to identify and reward employees who have performed well and have achieved more than expected. This encourages employees to continue working hard and striving for excellence.
- It helps organizations to identify employees who are not performing as per expectations and provides managers with the chance to take corrective action.
- It helps to maintain fairness and uniformity in the evaluation of employees' performance, since all employees are evaluated on the same set of criteria.
- It helps to create an environment of healthy competition among the employees and encourages them to strive and perform better.
- It provides an objective basis for salary and other compensation increases, as well as for promotions.
- Finally, it also helps to create a culture of accountability and responsibility in the organization.
Limitations of Merit rating
Merit rating has certain limitations, such as:
- The system of merit rating is subjective since it is based on the opinion of supervisors, which can be biased.
- This system also favors employees who have better communication skills, which may create an unfair advantage.
- Merit rating often fails to recognize the effort of employees who work outside the scope of their job duties and responsibilities.
- It can lead to negative competition between team members, thus creating an unhealthy work environment.
- Merit rating encourages people to focus on meeting targets rather than innovation, creativity, and problem-solving skills.
- This system may also discourage employees from taking risks, as it may lead to a decrease in their score.
- Chartier, R., Fuerstenthal, A. H. 1952, p. 85-100
- Shaeffer, R. E. 1949, p. 693-705
- Thornton, G. C., Rupp D. E., Hoffman B. J. 2014, p. 3
- Harlez, R. 2015, p. 6
|Merit rating — recommended articles
|Appraisal method — Forced distribution method — Peer appraisal — Management by objectives — Management by objectives steps — Phases of team creation — Performance appraisal systems — Contingency leadership — Performance appraisal process
- Chartier, R., Fuerstenthal, A. H. (1952). Merit Rating, "Relations Industrielles / Industrial Relations", 8(1)
- Harlez R. (2015). Management by Objectives: Get the best out of your employees, 50MINUTES
- Shaeffer, R. E. (1949). Merit Rating as a Management Tool, "Harvard Business Review", 27(6)
- Thornton, G. C., Rupp D. E., Hoffman B. J. (2014). Assessment Center Perspectives for Talent Management Strategies, Routledge, 2nd Ed.
- Yoder, D. (1942). Personnel Management and Industrial Relations, Tom 1, Prentice-Hall, Incorporated
Author: Małgorzata Lasota