Group Members

Shantanu Pandey(2010212)

Hardik Sutariya(2010272)

Ashika Patel(2010270)

Saurabh Singh(2010210)

Sunal Kapoor(2010235)

Shilp Jain(2010214)

Tushar Manghrani(2010243)

Agenda Company’s History

Performance Appraisal

Salary Determination

Flaws in Appraisal System

Employee Relations Review Committee

Conclusion

It is a pharmaceutical company headquartered in Rahway, New Jersey.

Expanded in drug manufacturing in 1827.

In 1887, opened a branch office in New York city.

In 1953, merged with the Philadelphia-based pharma firm.

Today, it is nation’s largest provider of prescription medicines.

Introduced Indocin, Aldomet, Timoptic, Clinoril and Mefoxin.

Annual sales grew from $218 million in 1960 to $6.6 billion in

1989.

Merck & Co. History Selected “ America’s Most Admired Corporation” by Fortune

magazine.

Ranked first in innovativeness, shareholder value, product quality and financial soundness.

Higher than average return on assets.

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.

Performance Appraisal 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.

Salary Determination 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:;

control point = $1502 + $4.69x(Hay points)

Thus, a mid-level employee with 500 Hay points had a 1986 control point of $3,847 per month.

Salary Determination 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.

Flaws in Appraisal System

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.

Flaws in Appraisal System

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.

Flaws in Appraisal System

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.

Employee Relations Review Committee 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.

Conclusion 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.

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