merit rating system

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Merit rating is a method in which an employee’s performance is measured, documented, evaluated and used for promoting, demoting, imparting a bonus or deciding whether to retain an employee or not. Merit rating is mostly done by the immediate manager or supervisor of an employee, however, this is not always the case, as sometime peer reviews are also factored in calculating merit ratings (Muchinsky 2006). While merit rating and performance appraisals have been used widely since the middle of the last century and their use has consistently increased, they have been increased on various accounts as well. The primary concerns regarding merit rating have been laid out in the quotation from Edwards Deming’s work. While most scholars accept the positive effect that merit rating has on short term performance, there are areas where the effect of merit rating is vague and contested. These areas include long-term planning, teamwork, internal organizational politics, and the mental health of workers. In this report, the effect of the merit rating on the above mentioned areas of organizational and employee management will be surveyed, and the second part of the report, will document the managerial practices and tools employed to tackle these negative consequences. 

Assessing reactions to merit rating system 

Most of the research work done on the positive and negative effects of the merit rating system are measured by looking at the reactions employees to it. The most frequently gauged by variable in such research work was the employee satisfaction with the merit rating (Cawley et al. 1998). This is primarily because of the relationship of between employee satisfaction with the appraisal system with other important work-related outcomes including motivation, commitment to the company, drive to improve and average level of productivity. Within the variable of satisfaction with performance rating, two further forms of employee satisfaction have been differentiated: satisfaction with the system for appraisal in place, and satisfaction with the appraisal provided to the employee. The result so being satisfied with either of these is almost identical, in the context of work-related outcomes (Cawley et al. 1998). 

Positive impact and importance of merit rating system 

The positive impact of merit-rating on short term performance has been proven in various studies.  On the other hand, it also has been shown in research that such performance appraisals also help, both employers and employees, in achieving strategic objectives by defining short term goals and communicating them with in the organization. The merit rating system, much like any performance appraisal system, provides the organization with the ability to communicate feedback and make sure that employees are developing skills that are need to tackle challenges required to fulfill the organization’s goals and aims (Bacal 2004). However, it is important to remember the nuance within these studies – which states that the presence of merit rating system would help only if it is implemented in a coherent manner, where the ratings and appraisal are given in an interactional way rather than in a simplistic top-down manner. The simplistic top-down manner, could be further defined as a way of providing feedback where the manager (the person providing feedback) is communicated is his performance rating, and is not allowed to or encouraged to discuss the reasons for the performance rating with the employees (Lawler 1994).

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