How should we handle employee demotions?

Demotion is very critical issue, it must be handled  in very careful manner. I will suggest for proper training and motivation first. If this also not solves the issue, we must give employee a formal notification and then later on demotion,but must  take care that it should be in a manner that employee is not ashamed of himself.

i dont prefer to make demotion , but if i have as he have high skills in specific area , i would create for him consultant position to make him not feel a shame and same time i can utilize both his skills and the new one skills and make all parties win

We have a manager who we are replacing due to performance issues. He’s a long-time employee who has a lot of skills that are beneficial to the company but since his promotion to management a couple of years ago, he has not been managing his department. Rather, he continues to complete incomplete work of his employees, doesn’t motivate them to work to deadlines, and overall just isn’t managing his department. We have tried for8 months to coach him but he chooses to do what he thinks is important rather than what the owners require of him. 

So, we are going to replace him, but keep him in the company. He’ll still work in the same department, same office, same salary (frozen for a while). We have told him of our decision. He understandably pushed back a bit, but he recognizes that he still has a job. He brings a lot to the table. He just won’t be managing the department, and he’ll have a new boss. 

We set the bar very high for candidates and found a great candidate, with years of managing in our industry (something that the previous guy did not have), and overall a great set of credentials and attributes that meet our criteria. We extended the offer, and he accepted. We were completely honest with him about why we were looking to fill this position, and when we sat down with him, he immediately expressed his sensitivity to the situation and made us feel at ease with how he would handle the transition with the former department head and how to best utilize his talents and skill sets. So, both people knew going into this what was going to happen. 

I’m looking for any pointers on how to make this announcement to the company (we are about30) and the department. Any advice will be appreciated.

The most diplomatic way to frame this is probably to announce that because the old manager is going to be focusing more on ___, you’re bringing in someone new to manage the department.

But no matter how diplomatic you are about it, even though you’re not explicitly saying “Bob was a bad manager,” it’s pretty likely that people are going to read between the lines and understand that Bob was just demoted. There’s not a lot you can do about that; it’s the reality of the situation. All you can do is try to protect Bob’s dignity and help him save face to the extent possible.  (Speaking of which, make sure you have a matter-of-fact attitude with him and others about it; if you’re giving off “poor Bob” vibes, it’ll make it more awkward for him.)

It’s worth noting that of the employees who figure out what happened, they’re likely to see this in one of two ways: Some will think it was really nice of the company to keep Bob rather than firing him outright, and this might even engender more loyalty in those people (“they treated Bob well, so they’ll probably treat me well”). Others might be annoyed that Bob kept his job after months of poor performance and may see favoritism or weak management there. There’s not really any action to take there; these are just things that you want to be aware of.

Also, over the coming months, make sure you periodically check in with the new manager about how things are going with Bob. Some people in Bob’s shoes would be relieved to be back in a position where they could excel. Others would quietly start job-searching. But others might become resentful and bitter, which can be toxic. If it’s the latter, you want to make sure the new manager is attuned enough to quickly spot it and address it.

What do others think? Would you want it handled differently if you were demoted?