honorifics - When shouldn't I use 「〜さん」when referring to a third person?

In In actual Japanese society, how often are second-person pronouns used?, the accepted answer says:

You can either refer to a person by the name like 山田, which is not (particularly) polite, or put a polite affix or a title after it like 山田さん or 山田先生, but which to use depends not only on the relation between you and the person referred to, but also on who you are talking to. Japanese adopts a system called relative honorification (as opposed to absolute honorification used, for example, in Korean). If 山田 is your boss with the title 部長 within a company, and you are talking with someone within the company, you have to be polite enough to refer to him/her as (山田)部長 (even attaching the polite affix like 山田さん is not polite enough, and is rude). But when you are talking with some outsider, then you have to say 山田, and saying 山田さん would be impolite to the outsider (and the expression 山田 does not become impolite to 山田).

Further, in a comment:

It is polite to the outsider for you to do so. It is particularly not impolite to 山田 for you to do so. If you still don't get it, then that is how complex the Japanese honorification system is.

The answers in When should one add さん at the end of a name? don't touch on this problem.

What is it about 「〜さん」 for a third person that makes it rude (or not) to the second person? Using this example, does it place 山田 above the outsider?