Demotion

Abstract: In this paper, I examine the sensitivity of promotion and demotion decisions for lower-level managers to financial and nonfinancial measures of their performance and investigate the extent to which the behavior of lower-level managers reflects promotion-based incentives. Additionally, I test for learning versus effort-allocation effects of promotion-based incentives. I find that promotion and demotion decisions for store managers of a major U.S.-based fast-food retailer (QSR) are sensitive to nonfinancial performance measures of service quality and employee retention after controlling for financial performance. The likelihood of demotion in this organization is also sensitive to nonfinancial performance on the dimension of service quality, while the probability of exit is primarily sensitive to financial performance measures rather than nonfinancial performance measures. I also find evidence that the behavior of lower-level managers is consistent with the incentives created by the weighting of nonfinancial performance measures in promotion decisions. Managers in locations where there is a higher ex ante probability of promotion and a higher potential reward upon promotion demonstrate significantly higher levels and rates of performance improvement in service quality. Finally, consistent with promotion-based incentives inducing both effort-allocation and learning effects, I find that performance-improvement rates for service quality: (1) are higher in prepromotion periods in markets where promotions occur, (2) decrease immediately after the occurrence of a promotion in the same market area, and (3) remain higher than in markets where promotions do not occur. These findings provide some of the first empirical evidence on an alternative to the explicit weighting of nonfinancial metrics in compensation contracts as a mechanism for generating improvements in nonfinancial dimensions of performance.

Abstract: Based on biographical data on more than 2,500 individuals in China's thirty provincial units from the beginning of the People's Republic in 1949, this is the most comprehensive and systematic treatment of China's provincial leaders ever published. The study presents detailed accounts of four categories of provincial leaders - party secretaries, deputy party secretaries, governors, and vice governors - including age, gender, nationality, hometown, education, party membership, and length of membership. It also traces the careers of these leaders in terms of promotion, demotion, transfer, and retirement. And using sophisticated statistical analysis, it links the political mobility of these leaders to the economic performance of their provincial units.

Abstract: Past research has consistently shown that separation of CEO and board chair roles has no systematic effect on firm performance. In this study, we introduce the different forms of such separation: apprentice, departure, and demotion. In a study of Standard & Poor's (S&P) 1500 and Fortune 1000 firms, we find that separation of the two leadership roles positively impacts future firm performance when current performance is poor, but negatively impacts future firm performance when current performance is high. We find that this effect is most dramatic for demotion separations. Finally, we test theory about the permanency of CEO-board chair separation. Our results show that the different types of CEO-board chair separation have very distinct consequences. [ABSTRACT FROM AUTHOR]

Abstract: Hierarchical loyalty programs award elevated customer status (e.g., “elite membership”) to consumers who meet a predefined spending level. However, if a customer subsequently falls short of the required spending level, firms commonly revoke that status. The authors investigate the impact of such customer demotion on loyalty intentions toward the firm. Building on prospect theory and emotions theory, the authors hypothesize that changes in customer status have an asymmetric negative effect, such that the negative impact of customer demotion is stronger than the positive impact of status increases. An experimental scenario study provides evidence that loyalty intentions are indeed lower for demoted customers than for those who have never been awarded a preferred status, meaning that hierarchical loyalty programs can drive otherwise loyal customers away from a firm. A field study using proprietary sales data from a different industry context demonstrates the robustness of the negative impact of customer demotion. The authors test the extent to which design variables of hierarchical loyalty programs may attenuate the negative consequences of status demotions with a second experimental scenario study and present an analytical model that links status demotion to customer equity to aid managerial decision making.