What action involves a formal change of a member's grade or position?

The correct answer is reduction, which is defined as a formal change in a member's grade or position that typically involves lowering their current status, role, or responsibilities. In many organizational contexts, a reduction can occur due to various factors, such as performance issues, organizational restructuring, or other disciplinary actions.

In contrast, demotion signifies a downward change in rank or position but may not always imply a formal process. Promotion refers to an upward change in grade or position, indicating advancement, while transfer typically means changing an employee's role or position without altering their grade or status. Therefore, "reduction" is the most appropriate term for indicating a formal change involving a decrease in a member's grade or position.