Would You Fire Your Best Performer?

Sanjay is a great team leader aspiring to be a manager. He has shown good results in the projects he has handled. He has shown willingness to go the extra mile in the tasks assigned. He has been constantly told he is a great performer and the company would not like to lose a great team leader. Regular feedback and company awards have made him proud and self confident. However he has had some issues in his ability to handle larger projects and teams. His view of the industry is relatively narrow. His view of a manager’s role is limited and his attitude is bordering towards arrogance and over confidence. He is closed to any feedback about his limitations and refuses to accept inputs to improve his abilities to become a good manager. He will not get the manager’s position that he is aspiring for. He has thrown tantrums that he will start looking for another job that gives him the promotion that he believes he deserves.
Would you simply wait for him to quit his job, paying him while he finds another job? Or would you fire your best performer who is great at the current role but not ready for the next role? Or would you give in to the tantrums and promote him even though he is not ready for the role?

With the job market opening up and companies vying for talent, I foresee a repeat of what was happening couple of years ago. Given the paucity of talent people were promoted to roles they just weren’t ready for. Do you think this will happen again?