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Supplement
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Reference no. 9-491-006
Authors: Kevin J Murphy
Published by: Harvard Business Publishing
Originally published in: 1990
Version: 20 November 1991

Abstract

In late 1986, Merck revised its performance review and pay practices. The most important change was a shift from an absolute rating system to a forced-distribution system in which managers are forced to adhere to a given distribution of performance ratings. Other major revisions included revised rating categories, revised performance categories, and a shift in the timing of performance evaluations. A discretionary award program was also introduced. The objective is to have students discuss the costs and benefits of the revised performance plan, paying particular attention to the relative performance evaluation aspects of the new plan. Is it better than the plan it replaced? Is pay more closely related to performance under the new plan?
Location:
Industry:
Size:
USD6 billion sales, 35,000 employees
Other setting(s):
1986-1989

About

Abstract

In late 1986, Merck revised its performance review and pay practices. The most important change was a shift from an absolute rating system to a forced-distribution system in which managers are forced to adhere to a given distribution of performance ratings. Other major revisions included revised rating categories, revised performance categories, and a shift in the timing of performance evaluations. A discretionary award program was also introduced. The objective is to have students discuss the costs and benefits of the revised performance plan, paying particular attention to the relative performance evaluation aspects of the new plan. Is it better than the plan it replaced? Is pay more closely related to performance under the new plan?

Settings

Location:
Industry:
Size:
USD6 billion sales, 35,000 employees
Other setting(s):
1986-1989

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