After defeating Xiang Yu and becoming the founding emperor of the Han Dynasty, Liu Bang wanted to reward the generals who had fought alongside him. The generals argued endlessly over who deserved the highest positions, leaving Liu Bang unable to decide for a long time. After careful consideration, he concluded that Xiao He had contributed the most, so he first enfeoffed him as the Marquis of Zan with a fief of eight thousand households, placing all other generals beneath him.
The generals, unconvinced, said to Liu Bang, "We followed you to conquer the realm—some fought dozens of battles, others over a hundred, charging into enemy lines and risking our lives. Xiao He never fought a single battle. Why should his rank be higher and his salary greater than ours?"
"Have you ever seen a hunt?" Liu Bang asked his generals. "Of course—hunters with bows and arrows, hounds chasing beasts," they replied. Liu Bang nodded and pressed on, "Then do you know the separate roles of the hunter and the hound?" The generals, puzzled by such simple questions, quickly answered, "Yes, we do."
Emperor Liu Bang laughed and said, "When hunting, the hounds chase down the wild beasts, but the hunter directs the hounds. You men have captured cities and territories, your merit is like that of hounds. Xiao He, though a scholar who never bore arms, possesses wisdom and strategy to command you into battle—his merit is that of the hunter. Moreover, when I first raised troops in Pei County, each of you came alone or with at most two or three followers, but Xiao He brought his entire clan. His contribution I will never forget."
When the generals heard Liu Bang say this, they had nothing more to say.
Later, the idiom "awarding ranks based on merit" came to refer to granting official positions according to the size of one's contributions.
Source: *Book of Han*, "Biography of Xiao He"
Meaning of the Idiom: Later, the Chinese idiom "论功行封" came to describe how granting official positions according to the size of one's contributions.