I have just made an external appointment to a senior position in my team. A talented member of my existing team was passed over for this post because he is not quite ready. I do not want to lose him but he seems to be taking it badly.

It sounds like something has gone wrong both in terms of communication and the way you approach the development of your people. Most talented employees want two things from their boss. First, they want to be supported in making the most of their talents. They want to have an impact and feel recognised for that. Secondly, they want to be treated as adults, to understand how they are viewed and the issues they need to fix in order to achieve their goals. Many bosses find the latter difficult. They do not want to upset their people and deal with the conflict they feel might ensue. In reality, conflict arises when straight conversations do not happen, which seems to be the case here.

Be up front

First of all, you need to make sure that you have explained the reasons for your decision and that these have been understood. Try not to dress things up or leave things unsaid. Then you will need to do a lot of listening. People receiving bad news usually need to deal with their shock or anger before they can view the situation objectively. Be prepared to acknowledge their perspective and give them time. Most importantly, try not to come over as defensive - you each have a right to your own views and do not need to agree.

Execute a development plan

You will then need to think about how you can help them to be successful with future applications. Now that you have explained where their gaps are, you need to help them articulate where their real strengths lie. After all, these are likely to be the foundation stone for their future success. Once this is clear, you will be in a good position to work together on a plan aimed at closing the gaps and helping them to apply their strengths even more effectively. The plan should include the new experience, skills and knowledge that they need to acquire and how they can access these. It should be reviewed and updated regularly.

Be open

An important point is that, assuming that your new recruit will be the individual's line manager, you will need to bring them into the loop to ensure that they are sensitive to the situation. You might consider holding a three-way conversation. You can then coach the line manager to offer the best support. You can work together to identify any emerging job opportunities for the individual and how you can help.

Reflect

Finally, you should reflect on why the situation arose in the first place; and how you can ensure that regular, honest dialogue and developmental support are consistent features of your leadership. This is vital for all employees - not only those with the most talent - if they are going to feel that their employment offers them the chance to better themselves and be respected as individuals. You will feel the benefit both in terms of business performance and employee engagement. Issues such as these are likely to become even more important in the future as the supply of talented labour decreases.

Matt Brown is a business psychologist and director of YSC, the consultancy. Send your questions to businessfeatures@thetimes.co.uk