If a person has been a great employee and a hard working and honest person but is no more suitable for the company, it is best to take him out to lunch and talk about his own ambitions. During the discussion, if you feel that your employee’s ambitions are not compatible to that of your company’s it’s better to lay him off but not in a quick manner. Offer him to stay for a few more weeks while he searches for other jobs. And, if he finds a job, make sure that he gets a proper sending off so when in future he is asked about your company, he always gives raving reviews.
Not many people are willing to leave their current workplace even though they are no longer required. Letting go of such people can be tricky but doing that in a robust fashion could be detrimental to your company’s reputation in the market. So, it would be better if you give these people options they can go for before explaining them their status quo at your organisation.