How should we handle employee demotions?

Demotions may be proposed for a number of different reasons, including poor employee performance, disciplinary actions, position elimination or organizational restructuring, and at times an employee-desired reduction in responsibility. Each circumstance should be carefully considered prior to determining that demotion is the appropriate action. Additionally, the manner in which a demotion is handled and communicated can directly affect the success or failure of these arrangements.  

Employers should thoroughly examine if a demotion can truly achieve the desired purpose. Start with these questions: Will the employee be successful in the demoted role? How will the demotion affect the employee, team or the department? If the demotion is for performance-related issues, have all other performance improvement options been explored? Did the position entail supervisory responsibilities? Will the demotion result in a pay reduction?

Demotions for simple performance-related issues may be both the easiest and most challenging to deal with. If the employee is a long-term employee who was successful in his or her previous role and simply lacked the skill set to be successful in the new position, returning the employee to the previous role may seem logical. However, this choice may face challenges such as:

• The previous position may have been filled, or the position may have been eliminated.
• A demotion in most circumstances will result in a pay reduction, which may be difficult depending on the length of time in the previous role.
• If the position had supervisory responsibilities, complications may arise when the employee is back among those he or she previously managed.

Demotions that occur due to misconduct, issues of ethics or other disciplinary matters can be very risky. A demotion is not likely to correct the problem, and it could send the wrong message to other employees that the employer does not take misconduct seriously.

When a disciplinary demotion is determined to be the appropriate action to take, following these steps can help make the discussion and the transition smoother and less disruptive:

• Be respectful of the employee during the demotion discussion, keeping in mind that the organization is taking this step because of the desire to retain the employee and the expectation that he or she will be successful.
• Clearly and honestly communicate the performance-related reasons for the demotion or the reasons why the organization is taking this action as opposed to termination. This second point could be instrumental in helping the employee respond positively to the transition.
• Clearly outline the new position and the transition plan (e.g., last date in the old role, first day in the new role, to whom the employee will report). If a pay reduction will occur, do not avoid this point. Address it in a straightforward manner.
• Be ready to respond to questions and requests such as:

• • "Can I have a little more time in the position to improve?"
  • "Can I move to a different position/department/location?"
  • "Can I have a few days to think about it?"
  • "What if I don't want to take the position?"

• Be prepared should the employee have a very emotional and perhaps negative response. It may be necessary to escort the employee out of the office if the response is too negative or combative.
• If the employee is accepting of the demotion, you may want to use this meeting to work out a communication plan answering who will be told, when the demotion will be communicated and what information will be shared. Ensuring the employee retains his or her dignity through the process will increase the likelihood of a smooth and successful transition. The communication plan may have to wait if there is negative response or if the employee is provided with some time to consider it.

As demotions are usually considered negative employment actions similar to a termination or being rejected for a promotion opportunity, there may be risks associated with questions of fairness, consistency with organizational policy and even discrimination. Therefore, ensuring that company discipline and performance management processes are followed will be critical.

Another risk is retaining an employee who may now have a negative attitude toward the employer and to his or her demoted role. A negative attitude can spread quickly to or harmfully affect other employees. Therefore, managers should monitor the transition and quickly respond to any negativity being spread by the employee.

In the end, demotions that occur within the right circumstances can provide an employer with the opportunity to retain a valuable employee while allowing the employee to be successful in a role more conducive with the knowledge, skills or abilities he or she has. Effectively managing the risks and preparing for all contingencies can result in a win for both employee and employer.