External and Internal Ratings

Rating of an organization plays an important role in the long run of an organization. Rating is nothing but the ranking of an organization based on the performance of it. There are basically two types of rating that take place inside an organization they are internal rating and external rating.

Internal Ratings:

In this type of rating the organization rates its internal system. For example if it is a big organization with many departments then rating of department take place based on its performance etc. These internal rating are carried out to increase competition between the department and there by increase the efficiency of the organization. Internal rating does not include only the rating between department it also includes the rating of the various teams present in the organization, rating of the various system followed inside the organizations, rating of the managers etc.

Advantages of internal rating,

• It increases the competition between various departments, teams etc.

• The efficiency of the organization increases due to these ratings.

• Flaws in the system or departments can be pinpointed due to these ratings.

Disadvantages of internal rating,

• It might lead to internal politics in order to maintain the top ranking.

External ratings:

In this type of rating the organization as a whole is compared with other similar organizations that are in the production of the similar product and services. These rating increase the efficiency of the industry as a whole. This is usually done by external neutral organization whereas internal ratings are usually done by the organization itself. Internal ratings increase the efficiency of the various departments inside the organization whereas External rating increases the efficiency of the organization as a whole.

Advantage of external rating,

• It increases the efficiency of the organization as a whole as the organization will strive to reach the top rating.

• It brings synergy to the organization.

Disadvantage of external rating,

• It has no use in a monopoly environment and where there is no ideal competition.

Questions:

• Advantage of external rating
• Disadvantage of internal rating