Performance Appraisal and Salary
administration under the existing Plan:
Merck’s performance appraisal and salary administration
program was first introduced in 1978.
Under the plan, supervisors rated employees on a scale
from one to five. One indicating unacceptable performance and 5 indicating
The scale was absolute and the rating assigned to an
individual was to reflect only the individual performance independent of the
performance of other employees.
Salaries for employees were based on a combination of
hay points and merit.
Salary revisions are linked to both control point
increases and performance ratings through guidelines established by personal
Employees with higher ratings tend to get larger pay
increases, while raises for a giver performance rating tend to be smaller for
employees who have already attained a high compa- ratio.
Understanding the current
performance appraisal and salary administration system, a number of flaws were
identified which are stated as below.
Negative feelings concerning the reward system by some
of the best performers at Merck.
Rewards for outstanding performers were not adequate,
the salary hike that they received were only marginally more than the average
In many cases outstanding performers were not even
Different ideas regarding how to structure a
performance appraisal system.
Managers were afraid to give experienced people low
Supervisors were sometimes reluctant to give good
ratings inspite of good performance by the employee.
No uniformity in the ratings given, approximately 98%
employees were given a rating of 3 to 4.
Due to all the above mentioned
reasons, we can conclude that the performance appraisal and salary
administration system should be revised.