Demotion or termination? How to make the call ? Business ...

If you?re faced with an employee who isn?t a good fit with his or her current job, is termination the answer or is demotion a better alternative?

The answer is, of course, it depends.

Demotions should always be considered on a case-by-case basis. The key factor is whether or not the employee is worth keeping around. However, a demotion will be more effective in some situations than others.

Poor performance. If an employee is underperforming, you must first investigate to find out why. Is the employee simply unsuited for a particular role, but could thrive elsewhere? If so, he might be relieved at the opportunity to be moved back to a position that better suits his talents and skills.

For example, say an outstanding employee was promoted to management, but is floundering in a supervisory role. Some employees are happier (and better at) doing the work than managing it.

Misconduct. Using demotion as a disciplinary tool for misconduct is dangerous. First, does it actually solve the problem, or will the employee carry those same issues to the other position?

Second, is the demotion consistent with similar situations in the past? If not, you could face legal discrimination complaints.

Third, are you creating an unwanted precedent for how to deal with similar situations in the future?

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Finally, what kind of a message are you sending to other employees? (?Goof off and get punished with a lighter workload? ? Hey, I wanna get demoted, too!?)

Restructuring. Losing a valuable employee during a company or departmental restructuring is difficult. It?s tempting to try to shuffle the best performers into new roles, even if that means demoting some.

It could be a good move if the demoted employees are truly appreciative to retain a job. It could be bad if other good workers lose their jobs as a result.

Demotion dangers

There are other important caveats to consider before choosing demotion over termination in any situation:

• An employee who agrees to a demotion only to avoid being fired may feel demoralized and have difficulty performing well even in his old, more comfortable position.
• The employee may be embarrassed, considering the public nature of the demotion, and also if the employee becomes a peer to employees he once supervised.
• If the demotion is accompanied by a corresponding pay cut, the demoted employee is likely to leave for a better-paying job. Tip: To entice demoted employees to stay, consider offering a bonus for staying on board (payable after a certain amount of time) or keeping them at the same pay level, with the understanding that future pay increases will be lower.

Bottom line: The most successful demotions are ones in which everyone agrees it is the best option. It?s a rare situation, however, in which the employee truly wants to take a step back and the employer considers the employee an asset worth retaining. So it is highly important to think through a demotion decision and how you will carry it out.

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