But Merck’s ROA declined in early 1980s and its performance lagged behind by 1983.
Some causes were disappointing new products, inflation and change in foreign exchange rates.</li></li></ul><li>Performance Appraisal<br /><ul><li>Merck’s Performance appraisal and Salary Administration program was first introduced in 1978
Supervisors rated employees on a scale of one to five
Five designated exceptional performance and one designated unacceptable performance
The scale was absolute and the rating assigned to an individual was to reflect only the performance of the individual independent of performance of others.</li></li></ul><li> Salary Determination<br /><ul><li>Based on job characteristics(measured by HAY POINTS) and merit
Hay points are determined by individually evaluating each position in terms of the three “hay factors”-know how, problem solving, and accountability. Numerical scores are assigned to each factor according to guidelines provided by Hay Associates, and the sum of these scores defines the Hay points for each position in the organization.
Hay points are converted to a “control point” using a salary line formula. For example, the 1986 salary line formula was:;</li></ul>control point = $1502 + $4.69x(Hay points)<br /><ul><li>Thus, a mid-level employee with 500 Hay points had a 1986 control point of $3,847 per month.</li></li></ul><li>Salary Determination<br /><ul><li>An employee’s compa-ratio(actual salary as a percentage of the control point) goes up each time he/she gets a merit increase, and falls whenever the salary line formula is moved upward.
Salary revisions are linked to both control point increases and performance ratings through guidelines established by the personnel department
Employees with higher ratings tend to get larger pay increase, while raises for a given performance rating tend to be smaller for employees who have already attained a high compa-ratio.</li></li></ul><li>Flaws in Appraisal System<br /><ul><li>Negative feeling of some of the best performers concerning rewards.
Outstanding performers gets salary increase only marginally than those to average performers.
No clear identification of outstanding performances
Different ideas regarding how to structure a performance appraisal system.</li></li></ul><li>Flaws in Appraisal System<br /><ul><li>Managers afraid to give experienced people low ratings.
Supervisors are reluctant in giving high ratings despite of working hard.
Lack of equity as bosses were afraid to give anything less that an average.
Homogenized the rating method by giving uniform rate to everyone.</li></li></ul><li>Flaws in Appraisal System<br /><ul><li>Outstanding performer rarely received an outstanding reward.
Employee relations review committee felt that the only way is that we need to excel as a company.</li></li></ul><li>Employee Relations Review Committee<br /><ul><li>The committee was formed keeping in mind various flaws in the system and appraisal issues which emphasized on the following issues:
Examine employee policies and practices to determine if they create and environment that encourages and rewards greater productivity and employee excellence.
Determine whether policies and practices are being adequately communicated to employees in a way they can clearly understand.
Review the application of these policies and practices to determine whether they are being applied consistent with objectives set forth. </li></li></ul><li>Conclusion<br /><ul><li>Merck & Co. is an example of a firm which though very successful in its venture can go wrong when it comes to employees and their demands
What is required is complete introspection of the process the firm follows time to time which will avoid generation of any ill feelings among the employees
Merck & Co. should definitely give away with the absolute rating system and adopt relative grading among the employees which will make the employees more competitive.</li></li></ul><li>THANK YOU<br />