One of the most difficult challenges facing any entrepreneur is correcting a prior promotion that didn’t work out.
Sooner or later it happens to every business owner. You promote employees because they’ve worked hard, were senior in their position, or showed a lot of ambition. You had an opening for someone who could handle more responsibility, and you tapped the best resource available. Before too long, you realize that you’ve made a mistake, and you’ve put someone in a job they just can’t do.
Perhaps you overestimated his or her abilities. Often the company has simply grown beyond them. Either way, is there any way to fix the problem without losing a good employee?
Faced with an uncomfortable situation, many owners choose to approach the problem obliquely. They restructure to shift responsibilities to other managers, who may resent having to cover for their underperforming colleague. Some owners let the problem 
slide until it is intolerable, and then embark on a progressive warning and discipline process, knowing full well that they are merely seeking an excuse to push the employee out the door without feeling too guilty about it.
Although either of these options is undesirable, every boss “knows” that you can’t demote employees and keep them happy and productive. Sometimes, however, it can be done. It’s not fun, and it isn’t easy, but you have to make a choice. Would you prefer losing a good employee, or facing a little discomfort to retain a valuable team member?
Handling a Demotion
The biggest obstacle in any demotion is psychological. Not only does the employee think he has been publicly branded as a failure, but you probably feel he’s let you down as well. If the demotion isn’t handled well, every additional day on the job can be a source of embarrassment for both of you in front of coworkers. By eliminating these psychological barriers to repositioning, you might be able to save a good worker who was a valuable asset in his or her former position.
First, accept your own responsibility in making an unsuccessful personnel move. You knew what was expected in the new position. Did you really analyze whether the employee had the appropriate skills, experience and temperament to handle it, or did you make the move because it was the easiest course of action? Did you objectively asses the employee’s ability and experience, or did you promote on attitude, hoping that the skills would catch up later?
The only possible way to reverse a bad promotion is to publicly shoulder the blame. You have to announce to the employees (and possibly to others outside the company) that you made a mistake. You took an excellent employee whom you wanted to recognize, and you put him into a position without the training and resources he or she needed to succeed.
Discuss the move with the employee first. Make it plain to him and especially to others that there will be other opportunities for advancement in the future. Thank him for his excellent work in the past, and express how happy you are that he will be once again playing a key role on your team, by using his abilities to the best advantage. Explain that you want him to succeed, and need him in a position where that success is assured.
Of course, you will sacrifice some of your aura of owner infallibility. It often seems 
easier to just blame the employee, and remove your mistake from everyone’s view via termination. You have a choice between saving your own ego and saving a good performer who once had a positive influence on your bottom line. Which is more likely to contribute to the success of your business?
Open Communication
No one is perfect. You have control over the job, its duties, and whom you select to perform it. If a good employee fails, it’s because you made a mistake. I am excepting, of course, the occasional idiotic move of promoting a marginal employee to see if he “steps up” with greater responsibility. In that case, you made an even bigger mistake.
Communication is critical throughout the process. Tell the employee why you are advancing him or her, and exactly what is expected in the new position. Be honest with him (and yourself) about any weaknesses that need to be addressed for a successful transition. Meet regularly to give feedback and direction. If you do that, the employee is more likely to approach you with concerns about suitability long before you need to take uncomfortable action.
