Companies grow, they mature...and the company starts changing. Anyone who has been a long term relationship may be able to relate to this analogy; both parties sometimes fail to change at the same rate. The Early Hire would need to be an exceptional individual to be able to maintain his/her level of contribution through all cycles of a business' maturity. That is not to say there are not individuals out there who can do exactly that, but they are rare.
I have seen the full gamut of the EHC. The best cases are when the EH recognizes for his/herself that it is time to move on. I have seen founders come to this realization and quite frankly, I find that level of insightfulness humbling. I have also seen the opposite, EHs who should have left the organization years earlier. Management has a very difficult time addressing this issue, they still remember the long hours and the dedication that the EH brought to the team. I would remind the management team that this is why they get paid the big bucks, you have to make the tough decisions, and yeah, as decisions go, this is one of the worst ones.
At the time, the EH is unlikely to thank you for releasing them from the organization. We hear a lot of talk about how it is best for everyone, but at the time, and for some time after, I promise you the EH is NOT thanking you, but that is okay. Time is a wonderful healer, and there will be a time when both the organization and the EH will look back and realize that it was the right decision. Handle the situation with dignity and consideration, treat the EH with respect, and make the hard call.