By not helping them find a better fit, either internally or at another company, you’re tying them to someplace they don’t belong. They’ll never reach their potential. It also hurts the potential of the team. The best thing you can do is take that step back and reassess whether they are the best fit. Notice I didn’t say, a good fit, or good enough. Stop trying to shave the corners off the square peg to make him fit the round spot. It’s very rare that all the effort pays off. They might eventually do a good job but imagine how much better they could be doing and how much greater their engagement and job satisfaction would be if they found the right job. Think how much better your team would perform if everyone were the best fit.
At the end of the day, are you doing your team or that employee any good?