Employers know that hiring processes involve a lot of variables for both the employer and the candidate, and either party is entitled to bow out prior to things becoming official. The first point for you to consider is that it's not unusual or disrespectful to withdraw from consideration.
You mention,
I would feel kind of bad to interrupt the hiring process when they have shown such interest
Consider this: it would be much worse for the employer if you were to know in your heart that it's the wrong decision, but continue anyway. As long as you're interested, it makes sense to continue. The minute you're sure you're not interested, it makes sense to withdraw. Bowing out any later than that is unfair to the employer (and, arguably, yourself).
Given that, we now arrive at your question:
how do I tell the company that in a professional and non-condescending way?
If you look at expert advice for bowing out of hiring processes without causing disruption or earning a bad reputation, the consensus is to focus on a few points:
- Be prompt. Covered this above. As soon as you are sure, tell them. Otherwise, you ARE wasting their time. They need to be focusing on candidates who are interested, not those who aren't.
- Be brief. You do want to make it clear you're not interested, but you do not (generally) want to ramble or go into detailed specifics. Specifics are where you can get into trouble, because you're giving them something they may feel they can dispute or argue. (or, worse, something they'll be offended by). Staying generic prevents this.
- Be polite. Approach the communication as if you're writing a thank you, versus a "rejection" of their interest. Convey gratitude at the opportunity. If you are serious about considering different positions there in the future, make that clear.
- Think about the long term relationship. If there's a clear reason why other positions may be a better fit, it's OK to mention that (as a way of addressing the obvious question of "why would they want a different job with us if they didn't want this one?"), but keep it high level and be thoughtful - you don't want to say, "I didn't get along with the person who interviewed me, but I might get along with someone else" but you could say, "I'm looking for something more technical" or "I'm looking for something more customer-facing" or "I'm interested in something with more of a focus on individual contribution versus management."
An example if you're interested in future opportunities:
Dear (Hiring Manager),
Thank you for the interview yesterday. I appreciated learning more about your organization and the position you're trying to fill. After careful consideration, I have decided to withdraw my application, as I've found the position you're trying to fill isn't the best fit for me. I wish you luck in your search and I hope to stay in touch in the future about other opportunities - especially if you have a need for a more technical skill set (complete this sentence per above) as that fits better with the direction I see myself going in the future. All the best, (Candidate).
If you're not interested:
Dear (Hiring Manager), Thank you for the interview yesterday. It gave me a good chance to learn more about your organization and the position you're trying to fill. I appreciate your interest in me as a candidate, but after more thought, I have decided this won't be a good fit for me and I must withdraw my application. Thank you for the consideration, (Candidate).
High quality employers - the kinds of places you'll want to work for - will understand that interviews are a two-way street and it's a sign of integrity and thoughtfulness for a candidate to carefully consider their fit in a role and a workplace - they may be disappointed by a polite, brief, and timely withdrawal, but they won't count it against your reputation.
Some references for the three points mentioned above, more are available online:
