Most leaders don't want to fire someone.
So when an employee can no longer succeed in their role, demotion can feel like the humane compromise: keep the person, lower their responsibilities, and give someone else the job.
But that “compromise” can create a much bigger problem.
Before you move someone down the ladder, Cindi Baldi and Geoff Tumlin argue that you need to understand what a demotion actually does to performance, motivation, fairness, and the rest of the organization. In this episode, they unpack why involuntary demotions so often backfire, what fairness research tells us about how people respond to losing pay or status, and why moving someone out of a role does not necessarily solve the underlying problem.
In this episode of Management Muse, we explain why we’ve almost never recommended a leader-driven demotion, when moving someone into a different role can work, and what leaders should consider before choosing the “middle ground.”
Episode Highlights:
- Why demoting an employee can create a bigger problem than firing them
- What fairness research reveals about how people respond to losing pay or status
- When moving a longtime employee into a different role can actually work
- The crucial difference between being demoted and choosing to step back
- How leaders can make difficult exits more respectful
- Why asking employees to permanently absorb eliminated jobs eventually drives them out
Watch This Episode on YouTube: https://youtu.be/1l8Jyqd4SPg
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Want to Go Deeper? Check Out Our Recommended Reading:
- Banko, P. The Necessary Goodbye, Forbes Books, May 2026, https://link.amazon/B0h8KtWKl
- Greenberg, J. “Employee theft as a reaction to underpayment inequity: The hidden cost of pay cuts,” Journal of Applied Psychology, 75(5), 561-568, 1990, https://psycnet.apa.org/doi/10.1037/0021-9010.75.5.561
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