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Merits of grading employees include providing a structured framework for performance evaluation, which can enhance motivation and clarify career progression paths. It allows organizations to identify high performers for recognition and development opportunities. However, demerits include the potential for demotivation among lower-rated employees and the risk of oversimplifying complex performance issues into a single grade, which may not capture the full scope of an employee's contributions. Additionally, grading can foster unhealthy competition rather than collaboration among team members.
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