Demotion: Demoralizing or Not?
Demotion is the movement of an employee from one job to another of lower rating, employment status, or rank. From Schalk and Rousseaur’s perspective on psychological contracts, we know that the effects of demotion on one’s health depends on how we perceive the change.
Let me cite an example.
Kirk, a 48-year-old executive employee of a multinational company in the Philippines, was given a lower rank with lesser
responsibilities. This was through no fault of his own, as the company had to downsize that year.
Although he was demoted, Kirk still received the same high salary. This is because under the labor law of the Philippines, a demoted employee will receive the same salary of his or her previous job.
Unfortunately, despite having no change in salary and benefits, Kirk’s morale was damaged and he developed low self-esteem.
This was the opposite of what happened to Fred, an executive employee of another multinational company, who was nearing
retirement stage. Despite being evaluated as excellent in the annual performance evaluation of the company and offered a
higher position, he preferred to remain in his current rank. What’s more, he requested his boss to assign him to a lower rank—effectively demoting him—so that he will have fewer responsibilities!
His boss was stunned. Who asks for a demotion? However, Fred reasoned that he was already 59 years old and will be retiring after a year. So he needed to maintain his good health condition.
A demotion may have lesser responsibilities, but it will help him to lead a well balanced life. On the other hand, a promotion with bigger responsibilities, long work hours and a learning curve may stress him and lead to health problems.
According to Perfecto Sison, in his book entitled “Personnel and Human Resources Management,” demotion is usually initiated by management for any one of the following reasons:
1. Reduction in business so that the number of positions at certain levels must be trimmed, or elimination of certain functions resulting to lesser manpower. This demotion is not due to the fault of the employee.
2. Failure of the employee either to qualify for work on the occupational level to which he has been assigned or meet established job standards.
3. As a form of disciplinary or punitive action against an employee found guilty of violating company policies or
rules. Such action is seldom resorted to in most business concerns because it lowers morale and can have an adverse effect on the employee’s performance.
4. Inability of the employee to meet the requirements of the job due to age, poor health, or physical disability.
What if management does not want to demote its employees?
Then the alternative to demotion should be re-training or re-orientation on the job. Training should target the attitude towards work and behavioral change in the performance of the employee’s functions. There are grounds for the termination of employment if no improvement is achieved.
Authors Hall and Isabella recommend that a lower rank need not necessarily have a lack of the challenge. They suggest that growth possibilities be incorporated within the job function. There should be use of new knowledge and skills. It should provide the chance for further development.
Support for the new job should also be provided through adequate training, keeping salary at least on the same level, and relocation to a new environment.
The psychological effects of demotion for employees can largely depend on age. Relatively younger employees may immediately feel bad about being demoted and, without proper guidance, can develop a lack of self-esteem.
If allowed to worsen, this may develop into a deeper mental problem like depression. Depression in psychology is a mood or
an emotional state that is marked by feelings of low self-worth or guilt and a reduced ability to enjoy life. When an employee reaches this stage, then it may be necessary to seek help.
Meanwhile, older employees, especially those nearing retirement, may not mind a lower rank with less responsibilities because of health reasons. It would therefore be good to suggest the option if it is likely that these employees would welcome a quieter change.
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Caroline Orani is the lead consultant at Corporatenuances Publishing and Consulting in the two services being offered –Compensation Structuring Service and Seminar-Workshop on Workplace Success. She is an HR author, publisher, speaker on workplace success, and Compensation and Benefits Consultant. She has 16 years of experience in different industrial settings in Human Resources Training and Management. Rising from the ranks, she has served in various capacities such as Human Relations Manager, Training Manager, Skills Development Manager, Recruitment Manager, and Corporate Social Responsibility Programs Manager.
She is the author of the book Master the Multinational Workplace: Everything You Need to Know about Working and Winning in Multinational Companies. This is an easy-to-read book that talks about thriving in any workplace but with an emphasis in multinational environment. She wrote the book with the belief that the Filipino workforce will find hope that it is still possible to live comfortably in the Philippines. Multinational companies provide outstanding compensation and benefits, and this uplifts the way of living of the Filipinos. She presented in Chapter II the job levels and this chapter talks about the level of difficulty and importance of jobs in the organization. In Chapter VII of the book, she talks about how jobs in the organization are priced. Companies may use the sample provided in creating their own salary structure or may opt to ask the service of the author to do the creation of their salary structure. Assessing, structuring and pricing jobs are unique to every industry. Compensation and benefits include basic pay, incentives and benefits. Pay packages vary based on the financial capacity of the company to pay. Structured basic pay is the end result of the compensation consulting service; incentives and benefits are recommended upon the client’s request. Other areas to have in-depth overview of the ins and outs of a multinational workplace are presented in other chapters. The printed copy of the book is available at National Bookstore and Powerbooks in the Philippines.
For seminars, talks and consultations Caroline can be reached at info@corporatenuances.com. Visit https://www.corporatenuances.com for more information.
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