From my perspective, these words are code for '...I have not really been trying; you have not had my best...' or in some instances it might imply '...I think that I am capable of more but I don't know how to reach my potential...'
Either way, a warning flag has been raised that demands your full attention.
Regardless of which implication is true, the simple fact remains that as a leader you have not been doing your job. If the first response is accurate then you have not connected with this individual on the level necessary to inspire them to be as productive as possible. It may also be that you have not shown sufficient oversight to recognize the latent potential that exists.
If the latter is true, have you done all those things that are expected from the leader? Have you properly trained and equipped the person? Have you provided sufficient guidance? Have you properly monitored their progress by showing interest and recognizing their contributions?
Your role as leader is to ensure that every member of your team has the same opportunity as everyone else to work at 100% of their abilities. I recognize that this often means different levels of results as no two people are gifted equally.
But when you hear that 110% refrain, hit the brakes and look into the mirror. Something is amiss...100% of the time!