Demoting any employee is difficult. It is even more of a challenge if the individual is a member of the senior management team. Various factors play into a decision to lower the status and responsibilities of a high level executive. In some instances the impetus is performance related, but that is not always the case. Often, corporate downsizing results in the need to restructure jobs. Prior to informing a senior executive that she will be demoted, the company's CEO and HR team should carefully consider all the ramifications.
Managing the Options
Demotions bruise egos and may also take a chunk out of the paycheck. By retaining rather than terminating a senior executive, the underlying message is the company still values the employee and intends to utilize her strengths. Begin the process by meeting with the employee to explain your reasons for the demotion and work out a smooth transition plan. Give her some lead time to adjust to the change before going formal with a company-wide announcement. Any compensation and benefit loss should be clearly addressed. If the employee is uncomfortable with taking a step down, consider presenting a termination option. When it becomes obvious that termination is the preferred remedy, provide support to help smooth the transition out of the company. A severance package is one way of smoothing the process and helping the employee regroup.
Take the time to carefully structure the demoted manager’s new position. If performance issues caused the demotion, analyze what went wrong and share your analysis with the employee. When creating a different role, carefully align the job to the employee's talents. For example, if she was good at crunching numbers but had difficulty leading and managing others, place her in a role that takes advantage of her accounting and budgeting skills but does not require direct oversight of others. It may be helpful to involve the employee in designing her new role.
Communication and Mentoring
It is possible to transform a negative situation into a positive outcome. When formulating your communication strategy, take into consideration the employee’s feelings and the need to set the stage for her future success. Frame the demotion in a way that lets the senior executive know that she is still a valued and important member of the company. When you announce the change in position to the rest of the company, highlight the employee's talents and how she will contribute to the company's success in her new role. Once the demotion is finalized, continue to provide guidance by assigning a mentor. Helping the demoted employee flourish in the new role benefits all concerned.
Prior to asking a senior executive to step down, it is prudent to review the action and any subsequent options with a legal counsel. This is especially true for demotions that arise due to performance or behavior issues. Thoroughly document the executive's inappropriate actions and identify what steps must be taken to correct them. Also, gather all performance reviews that cited the employee's performance and behavior issues. Have the attorney weigh in on whether a termination would be the more logical solution.
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