Demotions in the Workplace

Within the workplace, certain scenarios might necessitate demoting an employee. Demotions can be a valuable solution for dealing with budget cuts, restructuring your company, or responding to poor employee performance.

Prior to demoting an employee, it is important to understand what a demotion entails, when it is appropriate to demote an employee, and the pros and cons of demotion. This can help you determine whether or not demotion is the right solution for your specific situation.

What Is a Demotion?

A demotion takes place when an employee is shifted from one role to a lesser role in the company. For example, if an employee is a manager, a demotion might return them to a line-level employee.

Demotions can be permanent, or you can use them as a temporary solution. A demotion does not have to result in a direct departmental demotion but could instead involve shifting an employee from one team to another. The exact details of a demotion will depend on the reason for demoting an employee.

When to Demote an Employee

There are numerous scenarios that can result in the demotion of an employee. The following are all reasons why you might decide to demote an employee:

  • An employee is underperforming: Often, a demotion is an alternative to letting an employee go. If you have an employee who is not meeting their productivity or revenue goals, you might consider demoting them to keep them on their team while they improve their performance. In this case, you might consider a temporary performance-based demotion. An employee can earn their original role back by showcasing improvement.
  • An employee is failing to adhere to workplace policies: If an employee is not following company policies and has been written up for misconduct, a demotion is an alternative option to terminating the employee. Similar to performance issues, this might be a temporary demotion used as part of a performance improvement plan.
  • An employee needs further training: In some situations, an employee might lack adequate training for their role. In this case, demoting the employee to a position where they can learn the skills they need can help ensure they continue to earn money while becoming prepared for increased job responsibilities later.
  • An employee wishes to have less responsibility: There are situations when an employee no longer wishes to have their current level of responsibility but would like to stay with your company. In this case, they might voluntarily request a demotion. This is a great choice for employees who are in good standing with the business and simply wish to strike a different work-life balance.
  • A department is being dismantled: When a company goes through restructuring, entire departments might be dismantled. In this case, a demotion is an option for keeping quality employees.
  • A merger has taken place: If more than one company merges, it usually leads to downsizing teams or shifting department structures. Similar to dismantling a department, a method for retaining employees during a merger is to demote them into available roles.
  • Budgets are being reduced: When a company experiences unexpected financial strain, it can lead to the necessity of reducing personnel budgets. Demotions allow you to retain employees while lowering costs.

What Are the Benefits of Demotions?

The following are all benefits of employee demotions:

  • Training opportunities: In some cases, employees fail in their current roles due to a lack of training. Through a demotion, you can provide a paid-training opportunity that will prepare that employee to be successful throughout their career. This can help reduce frustration and lead to improved confidence.
  • Retaining talent: Just because an employee is not a good fit for one role doesn’t mean they aren’t a good pick for another. Demotions allow you to shuffle talent to the best role to fit their skills and talents.
  • Weathering financial difficulties: During financially uncertain times, demotions can help you balance your budget and make it out to the other side. This, in turn, gives you the chance to promote employees down the road.
  • Improved work-life balance: For some employees, a demotion is a welcome experience. With fewer responsibilities, they can focus on improving their work-life balance and discovering what it is in their career that makes them tick.

What are the Drawbacks of Demotions?

The following are the drawbacks of demoting an employee:

  • Leads to resentment: In some situations, an employee who has been demoted will be unhappy and displeased with their new role. This can lead them to become disgruntled and lack motivation in their new position.
  • Creates an uncomfortable team dynamic: If an employee is demoted from a manager role to working on the same team they once managed, it can create a difficult team dynamic. It might be hard for a former manager to let go of control and follow the leader who replaced them.
  • Causes an employee to leave: Even if you demoted an employee in an effort to retain them, the reality is that it might cause them to leave your company. If they feel their demotion was unwarranted, they might seek employment elsewhere.

How to Demote an Employee

If you have determined that demoting an employee is the right fit for your situation, use the following steps to help make the process as positive for everyone involved as possible:

  • Give them plenty of notice: Never blindside an employee with a demotion. This is particularly important if you are demoting them due to performance or behavioral issues. Address issues as they occur and bring up demotion as a possibility if improvements are not made. In the case of budget issues or restructuring, try to let employees know as early as you can about the possibility of demotions.
  • Have a one-on-one conversation: Don’t demote an employee through email. Instead, sit down with them to discuss the demotion in detail. Let them know the reason for the demotion and inform them what will happen next.
  • Don’t get personal or emotional: An employee might react strongly to a demotion. While you can’t control their anger or sadness, you can remain calm and keep the conversation professional. Let the employee know you are happy to let them take some time to process the conversation if they are particularly upset.
  • Clearly define their new role: Make sure that you provide your employee with a documented explanation of their position. Never assume that they know their new responsibilities, even if they were previously working in a managerial role on the team. Provide clearly defined expectations for them going forward.
  • Outline training and coaching opportunities: If you had to demote an employee because they couldn’t yet meet the expectations of their previous role, explain the ways in which you plan to support them going forward. Offer training and coaching that they can take advantage of to grow in their career.
  • Document the demotion: Make sure you keep copies of all notices you provide to your employee regarding their demotion. It is best to document the demotion with a written letter after your conversation. This should outline the date of their demotion and details their new position within the company.

If you are looking for more resources about hiring and retaining talent, make sure to check out our employer insights center.

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