Demps had been Pelicans GM for nine years, which included three trips to the playoffs but advancing only once past the first round.
"I would like to extend my appreciation to Dell for his tireless work and commitment to our team over the last eight-plus years," Pelicans owner Gayle Benson said in a statement. "Dell, his wife Anita, and his family have been a credit to our city and I wish them nothing but the greatest success going forward."
Former Cleveland Cavaliers and Atlanta Hawks GM Danny Ferry, a consultant for the Pelicans, has been named the team's interim GM. New Orleans assistant GM David Booth was also considered for the interim role, league sources said.
"My focus for the rest of the season is to provide leadership to our basketball operations group and give [coach] Alvin [Gentry] and our players the resources and support to positively impact the culture and foundation now and going forward," Ferry said in a statement.
For now, Gentry and his staff are safe, sources said. The organization has been pleased with how he's navigated the team under difficult circumstances this year, and he's expected to finish out the season, sources said.
Gentry's future is likely dependent on the next GM's purview. Gentry signed a contract extension in the offseason.
Benson has been angry over the Davis trade demand and her belief that "outside forces" are trying to push the franchise into decisions that don't make sense, league sources said.
Her mandate has been to "take back control from outside forces," one league source told ESPN. Benson has been adamant with the organization about finding a pathway to sustainable winning in one of the league's smallest markets and plans to be aggressive in pursuing the best available candidates to oversee basketball operations, league sources said.
"We will immediately begin the process of restructuring our basketball operations department," Benson said. "This will include a comprehensive, but confidential, search aided by outside consultants to identify a new leader of our basketball operations, directly reporting to me."
Among preliminary possible candidates, league sources tell ESPN: former Cleveland GM David Griffin.
Benson owns the Pelicans and the New Orleans Saints and had Demps reporting to Saints GM and Pelicans head of basketball operations Mickey Loomis. The Pelicans are eager to conduct a search that will attract a top basketball executive who will take on a more prominent role in the franchise. Benson is promising to pursue a top-level GM to revitalize a franchise that's coming to a crossroads with the Davis trade.
Davis can become a free agent in July 2020 but publicly demanded a trade on Jan. 28. The Pelicans refused to negotiate with the Lakers, who made offers in hopes of landing Davis prior to the Feb. 7 deadline.
The Pelicans have endured a succession of trades and missed draft picks that have depleted the roster of a sustainable path to long-term success, but Benson hopes the team remains competitive this season.
"My expectations, and the expectations of our fans, are that this team will compete at a high level for the remainder of the season," Benson said.