Why Would a Company Refuse an Employee's Request for Demotion Back to a Previous Role?

If an employee asks for demotion in an organization, for example, if they were a sales executive previously and later promoted to the position of an area sales manager, but due to various factors both internal and external to the individual, they could not achieve their targets and request the organization to put them back to the position of a sales executive where they were performing well, and the organization refuses to do so. What could be the probable reasons for the organization to refuse?

Very good question!

If I were to handle this situation, I would give counseling to the guy, help him realize why he was unable to perform, identify the root cause, arrange training and mentoring, and then assess whether he improved within the given time frame. If he succeeded, that would be good; otherwise, I would have to let him go.

The reasons why I cannot demote him would be:

1. That would demoralize other employees in the department, as nobody would want to accept that they underperformed.
2. Both his superiors and subordinates would feel uncomfortable.

It would be better to have him submit his resignation letter and move on.