DEMOTION: A TOOL TO GROW THE COMPANY

Congratulations comes in many flavors.

Promotion

More money

Demotion

Demotion? Now there’s a word that doesn’t get flung around too often. Demotion is never thought of as a way to grow the organization. On the contrary, it is usually looked at as a negative that will eject the shrapnel of havoc flying in every direction. However, a much needed, appropriately managed demotion can be a tool to correct a previously, though well intended, mismatched promotion.

What is a mismatched promotion? As example, the foreclosure department of a large servicer has a star player. This person, John, is a five year veteran of the department, has demonstrated the ability to handle deadlines, remember even the smallest details, work independently and yet be a good team member. He is dedicated, efficient, eager and has a terrific work ethic. If only everyone in the department could be like John! When the supervisor of the division resigns John’s name is passed around the boardroom and everyone agrees to ‘promote’ him to Division Director. If he can train and lead others to be like him things will be good indeed!

John is a people kind of guy and when presented with the idea he agrees. John is flattered but nervous. He knows if he doesn’t accept the offer he could be killing his future with the company. He also realizes he has never managed a group this large before. In fact, he has never managed anyone before! But hey, the promotion comes with a nice raise so he fully accepts and commits himself to success.

Fast forward six months. John’s personal workload has suffered greatly. For the first time he has missed deadlines and screaming realtors to appease. Attorney firms are calling John’s supervisor in alarm. “Where are the documents? Who’s in charge anyway?” There is more grumbling from the employees then ever before and John’s frustration in not being able to complete performance reviews only enlarges the gap between him and his team. For the first time John has to stare budgets and management memos in the face with no idea how to balance them into his workday. He is in over his head, drowning and no lifeline in sight.

What looked like a great idea to promote John has turned into a finger pointing fiasco.

The competitive nature of the mortgage industry requires high performance at all levels. Executives who are not performing, although scrutinized, may be left alone. The under lying fear of hurting someone’s feelings or being sued may cause the company to forego a termination, thus leaving in place a person who is failing. Acceptance of the poor performance impacts the company beyond just the executive’s department. Negative consequences can be seen throughout the corporation creating mistrust and confusion about what is rewarded in the organization.

Clearly a botched promotion needs to be corrected. The biggest reason not to terminate is in the very reason to promote in the first place. A capable, achieving employee was seen as an even greater asset in the new executive position. The employee would still be doing a terrific job if the decision to promote had not gotten in the way. Employers who take responsibility for this and face the challenge of demotion may retain the good employee for the benefit of all. The mortgage industry is starved for experienced workers in every discipline. To relinquish an achieving employee would not only be unfortunate but would incur additional costs of recruiting and training. The extra effort to solve the problem instead of ignoring it is an investment of time and courage.

Much like in a termination, important factors must be considered before a demotion:

* What are the most critical skills and abilities needed within the existing job?

* Does the failing executive possess these skills, and if not, can they be trained in an effective timeframe?

* Have clear expectations and expected results and timeframes been communicated?

* Did the individual understand these and agree to them?

* Has performance feedback been clear and regular?

* Has any positive progress been made in the overall job performance?

When the factors above have been fully analyzed it is important to take action by issuing warnings and consequences about missed targets and production goals. The individual most likely knows things are not going well. The company’s address of the issues begins to clear the air. Acting early in this phase keeps further damage from being done to the relationship of the employee and the company or supervisor(s). Legal review of the historical facts and the current demotion plan will keep the plan legally in check. Any suggested adjustments can be made more readily at this phase then after the fact. When dealing with employees’ income and employment status it is best to have management, H.R. and legal viewpoints considered.

Before making the decision to demote assessing the individual's tolerance for change and personal setbacks is a must. How the executive reacts will be a big factor in the successful demotion. What other job is this person willing to do? Will they be ok going back to their former desk and position in the company? Is relocation to another division altogether the only way to save this employee?

Trepidation about what others might think almost always causes the demoted person to miss the inherent opportunity for a brighter future. The current job may make for unhappy days but going “backward” is against societal and peer pressures. Recognizing the feelings of lost dignity is hugely important and offering counseling during this time may be appropriate.

Once the demotion has occurred and the executive accepts a lesser position it is paramount that the new job not be viewed as a safe harbor. Contribution to the company is still required and clear objectives, goals and expectations must accompany the new position. The individual must be told very clearly that failure in the new position could lead to termination. Usually a close bond occurs during a successful demotion and the employee that was once a star begins to shine again knowing that management recognizes ability and contributions not just failure.

Demotions cause the entire organization to look inward. Performance expectations are real. Every employee has value and saving the employee in the company for a job that is a better fit for that employee is one way the company can demonstrate to its employees and clients “We care.” However, business takes more than a caring attitude. It takes action. Acting upon the difficult decision of demotion grows the company’s leadership courage and its commitment to quality.

Client Tip ID: 5