Should Staff Demotion Be a Key Talent Retention Strategy?

 Now, to many of you, this may seem like scraping the bottom of the barrel in terms of a talent retention strategy. That is, taking failed mediocre employees, hiring them back into lower positions, and making an industry or conscious strategy of it. But it’s not as crazy as it sounds for two reasons.

First, a Wharton study shows that internal hires tend to outperform external hires and are cheaper and stay longer.

Second, although it may be hard to remember when you stare at this burnt out shell of a failed promoted employee, this person was once a superstar or a least at promising high potential, or else why was he/she promoted in the first place? The person has simply fallen foul of the Peter Principle, which is a management theorem that suggests that in hierarchical organizations people get promoted and promoted until they reach their point of incompetence at which point they fail – and crash out of the organization, undermining your talent management strategy.

But, it doesn’t have to be this way: ambitious, career climbing professionals do not have to be doomed to ultimate failure. As an alternative, you could actively engineer an exit strategy for your high flying executives who have flown a little bit too close to the sun and got burnt. That would be to give employees the ability to demote themselves to more suitable positions where they know they can perform. Or you could actively work with failing high fliers to engineer a well orchestrated demotion, which means you move a once great employee into a position where they can be great again, (while at the same time retaining their skills). Of course, demotion is the most unacceptable face of corporate failure, but in times of jobs and talent scarcity, it’s becoming more acceptable and they even have a word for it now. It’s called Inverse Promotion. (Yes, really.)

But, can it really work in practice? Yes, of course, some managers will be pragmatic and philosophical enough to accept an inverse promotion that puts them back into a job and environment where they can be happy again. But, for reasons of ego and money, many will resist. However, both these issues can be addressed. The ego issue can be addressed by reminding the employee of just how successful, happy, valued and respected they were in the previous position of competency and that it can be this way again. If possible, and I accept this is more likely in a larger organization, demote them into a different department to avoid the ego issues. As for the money issue, consider leaving them at their higher salary or a slightly reduced salary on the basis that they will not receive any more pay rises until they are back in line with the pay structure for that position.

You could also give managers a voluntary way out, by creating a well thought out inverse promotion policy/procedure, which of course ensures that people strive to succeed and that they persevere. But if success is not coming after an agreed period of time, they can enter negotiations for an inverse promotion, which should help you turn a failing employee back into a star, retaining them and filling an empty position all in one. One could call it a master stroke.

I accept that inverse promotion is not for everyone and every organization. This approach has a better chance of working in a larger organization when they can be inversely promoted into a different department so they can save face. But, do I believe that demotion/inverse promotion should be an active part of talent management strategy ? In these talent stressed times we live in, absolutely.