You have a team member with an okay(ish) performance record. While enough work is getting done, there is so much more that could be accomplished. Unfortunately, the person in the position doesn’t have the potential or willingness to grow further. At least not to the extent they need to.
Too often managers leave people in a role simply because they’re in the role. The perceived disruption of finding someone new, who may not be an improvement, biases managers towards maintaining the status quo.
Whenever I find myself in this situation I ask a simple question – if I moved to a new company, would I try to recruit this person for a similar position? Asking the question this way removes the bias towards inertia and forces you to make a fresh evaluation of someone’s suitability for a role. If the answer is not an easy yes, it’s time to think about what comes next.
Very Important Note
I’m not suggesting you immediately fire someone if the answer to the question “if I move to a new company…” is no. That would be silly. Good management is about understanding the strengths and weaknesses of your team and their potential for growth. First, I would try coaching, personal development or looking to see if there is another role that would better suit their strengths. Ending someone’s employment is a last resort and should never be done casually.