---
title: "Merit rating and its methods"
subject: "Organization and Management"
chapter: 7
key: "semester_7/organization_and_management:merit-rating"
source: https://www.bctengineer.com/q/semester_7/organization_and_management/merit-rating
site: BCT Engineering
---

# Merit rating and its methods

Organization and Management · Chapter 7: Personal Management

- Asked in: 2070 Chaitra, 2+6 marks
- Video: [Merit Rating - Management Science](https://www.youtube.com/watch?v=3gIx-fHCcPk) — BVCITS MANAGEMENT STUDIES
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/organization_and_management/merit-rating
- Whole chapter: https://www.bctengineer.com/md/semester_7/organization_and_management/chapter-7

## Question

Define merit rating. State and describe the various methods of merit rating.

## Short answer

Merit rating evaluates performance for promotion, pay, and training decisions. Traditional methods include graphic scales, ranking, and critical incidents; modern methods include MBO, 360-degree appraisal, and assessment centres. Clear standards and trained raters reduce bias.

## Answer

#### Merit rating
Merit rating (performance appraisal) is the systematic evaluation of an employee's performance, qualities and potential on the job, usually by the supervisor, in order to take decisions on promotion, pay, transfer, training and development.

**Objectives:** reward good performers, identify training needs, improve fairness in promotion, give feedback and improve performance.

#### Methods of merit rating
**A. Traditional methods**
1. **Ranking method:** Employees are ranked from best to worst. Simple, but ignores the degree of difference.
2. **Paired comparison:** Each employee is compared with every other, one pair at a time.
3. **Grading method:** Predefined grades (outstanding, good, average, poor) are assigned.
4. **Graphic rating scale:** Traits like quality, attendance and initiative are rated on a scale, e.g. 1 to 5. Most common.
5. **Checklist method:** The evaluator ticks statements that describe the employee.
6. **Forced distribution:** Employees are placed in fixed percentages (e.g. 10% excellent, 20% good, 40% average...).
7. **Critical incident method:** Records important positive and negative behaviours.
8. **Essay (free-form) method:** A written description of strengths and weaknesses.
9. **Field review:** An expert from HR reviews the rating.

**B. Modern methods**
1. **Management by Objectives (MBO):** Performance is compared with agreed goals.
2. **360-degree appraisal:** Feedback from supervisor, peers, subordinates and customers.
3. **Behaviourally Anchored Rating Scale (BARS).**
4. **Assessment centre:** Employees are observed in simulated tasks.
5. **Human resource accounting:** Values the contribution of employees in money terms.

Valid appraisal needs clear standards, trained raters and feedback to avoid bias (halo effect, favouritism).

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. What is merit rating?
   A. Setting the salary scale
   B. Systematic evaluation of an employee's performance and potential, used for promotion, pay and training decisions
   C. Selecting new recruits
   D. Measuring machine output
   Answer: B. Merit rating (performance appraisal) is systematic evaluation of employee performance, used for decisions on promotion, pay, transfer and training. (Key point: Meaning of merit rating)

2. What is the limitation of the ranking method?
   A. It is too complex
   B. It needs 360-degree feedback
   C. It rates only traits
   D. It ignores the degree of difference between employees
   Answer: D. Ranking is simple but gives only order, not how much better one is. (Key point: Ranking method)

3. What does forced distribution do?
   A. Places employees in fixed percentages across categories
   B. Compares every pair of employees
   C. Records critical incidents
   D. Uses feedback from customers
   Answer: A. Employees are placed in fixed percentages, e.g. 10% excellent, 20% good, 40% average. (Key point: Forced distribution)

4. What is 360-degree appraisal?
   A. Rating only by the supervisor
   B. Self-rating only
   C. Feedback from supervisor, peers, subordinates and customers
   D. Comparison with agreed goals
   Answer: C. 360-degree appraisal gathers feedback from many sources; comparison with agreed goals is MBO. (Key point: 360-degree appraisal)