When an executive ceases to perform adequately in a position, the company suffers. The faltering executive not only fails to deliver on objectives, but also can act as a blocker, preventing other talented individuals from moving upward. While in some situations termination is indicated, a well-managed demotion may allow the organization to save a valuable resource. Any number of issues result in reluctance to utilize demotions as a tool. Not the least of these perceived barriers is the belief that demotions cannot be successful, for either the individual or the organization. However, a well- managed demotion is not only possible in some situations, but strongly indicated for good business reasons.

This presentation will explore the conditions and steps necessary for a demotion that is well managed, thereby increasing the probability for success. This includes the critical issues in managing the demotion itself, as well as the related issue of prevention. It is most desirable to avoid promoting an individual who is unlikely to succeed in the new position. However, even with the most careful choices, mistakes are made. In this case, there is a three-step process that should be followed, including: determining between termination and demotion, developing a communication strategy, and actively managing the demotion after the individual has accepted the new role.

The costs related to losing and replacing talented individuals, indicates that human capital must be protected. This requires the organization to wield a varied tool box by which to maximize performance effectively. Building a better understanding of the psychological characteristics involved in such a move, both organizational and individual, can aid the manager in effectively using demotions as a tool to protect the valuable resources of the organization.