How to Demote an Employee

Demoted EmployeeHave you ever heard of the Peter Principle?  The odds are good that even if you haven’t heard of the Peter Principle, you’ve encountered the effects of it in your professional life at some time or another!

The concept of the Peter Principle is that employees tend to be promoted until they reach a position at which they cannot work competently.

The idea is that eventually everyone reaches the job at which they’re incompetent, and there they remain, held back from further advancement by their lackluster performances.

In 2008 the Society for Human Resource Management (SHRM) did a poll of the reasons that organizations demoted employees.

  • 71% responded that demotions had been done for performance issues
  • 41% of demotions were by an employee’s request
  • 39% of demotions were due to a reorganization
  • 37% of demotions were due to conduct issues

What do we do if we want our incompetent employees to be productive?

Really, only two choices come to mind.  We can terminate them and hire someone productive, or we can demote the employee back to the position where they were competent.

The question is, how do you effectively demote someone and still have a productive, happy employee working for your business?  Is it even possible to do such a thing?

There are some steps you can take to try to mitigate the potential repercussions of an employee demotion and to soften the transition for the employee.

Make a sound decision about demotions.

Every situation and every person is different.  Before you demote someone, you must first spend time asking yourself some tough questions.  For instance:

  • Are you trying to resolve a performance issue by passing it on to another department?
  • Is this an employee with a bad attitude that will probably only get worse with the humiliation of demotion?
  • Are you dealing with an employee who is currently in over her head, but who you believe would probably thrive with a change of supervisor or duties?
  • Is it a conduct issue that may be resolvable by sending a strong message to the employee?

By thoroughly considering the entire situation and everyone involved, you’ll make a better decision.

Communicate clearly.

If the demotion is being made due to the employee’s conduct or failure to perform, don’t sugarcoat the situation.  They need to know what your performance expectations are and that they will be held to them in the next position.

It’s best to give them the option of taking the new position or of being terminated from the company.  You do not want to force an employee into a demotion, only to find that the situation has gotten even worse.

If there is a potential severance package, provide them with all of the information so they make an informed decision.

Plan a smooth transition.

A demotion is a rocky  road to travel down, so do your best to smooth it by planning ahead.

Consider whether there will be a reduction in salary and/or benefits.  If there is, be up front about when it will go into effect, and if there will be any transition period.

Think about logistics issues, such as:

  • Will they have to train their replacement?
  • Will they be reporting to someone that was previously a subordinate?
  • Will they lose their office space?

Inform your employee about the way you plan to communicate the changes to the rest of the organization, and do everything you can to make it a smooth transition for both the company and the employee.

Crush the gossip grapevine.

Employees can scent change on the air.  The gossip game will start almost as soon as you begin thinking about demoting your employee.

If you’re proceeding with the demotion, you want to convey the change to the rest of the staff in a way that helps preserve the employee’s pride and right to confidentiality, while minimizing the disruption to the environment.

Everyone will know if you’re being disingenuous, so put out as much honest positive information as you can and make the changes swiftly and decisively.

Plan for an earthquake.

When someone gets demoted in a company, everyone else may duck and cover.  People start to worry that they might be next? For a while you may find yourself dealing with emotions and uncertainty amongst the staff, much as you would if you had terminated your employee.

Take this opportunity to coach employees on their own performance shortfalls while you quiet the concerns.

Everyone can benefit.

I have seen good employees falter when they’ve been put into a position in which they’re set up to fail.  That same employee has blossomed when moved into a more suitable position.

Sometimes something that is a “demotion” is really just a step onto a different rung of the career ladder.  By utilizing their talents and coaching them through the transition period, they’ve become a very successful contributor in their new role.

Honesty is the best policy.

Be honest with yourself.  Are you really dealing with a problem employee?  Will the demotion just transfer the problem to a different department?  Is this employee’s attitude likely just to worsen due to the change?  Are you putting off the inevitable, while risking creating an employee who now may be motivated to retaliate against the company?  If so, it’s probably time to do what’s best for the organization and dismiss rather than demote.

There’s no doubt that successfully demoting an employee is difficult at best.  It may help to retain a talented individual, but in order to do so, you’ll be required to spend a significant amount of your own time in the process.

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