It can be useful to find out what the underlying situation is.

For example, are they a perfectionist? Why is that? Is it because they have felt they have had to fight for permission to be in the room at all?

Do they have attributes of a minority group that might have found it hard to get promoted?

What happens if you give them more responsibility? Does it come naturally, almost effortlessly? Do they get bored easily?

Does this person act like a backseat driver? Do they often ask why you made certain decisions and suggest alternatives? Do they naturally try to take the lead? Do they have a clear vision for the future and direction of the team?

Once, in that situation, my manager at the time kindly took me aside and told me that there was no suitable position in my current company, but that she would support my efforts to look elsewhere. I found another job at the sister company and jumped three grade-bands in the process, and while I felt more comfortable in the new role, it still wasn't exactly difficult.

I was not so much out of my depth as wading, rather than paddling - I still don't know where my depth even is - but I do know that I feel very uncomfortable when I have to try to make myelf very small to fit into a space I grew out of years ago.