The U.S. military has a similar up-or-out policy (especially among the officer corps) and the result is (more often than not I'd say) yes men who latch onto a strong leader type and ride his coattails into a senior officer position. The result is poorly informed and advised leaders, and senior staff who spend their time figuring out if what they're doing will be approved "by the old man" instead of actually promoting the function of the organization, fight and win wars.
This means during prolonged periods of peacetime, a form of regulatory capture happens where the metrics used to evaluate promotion become decoupled from actual fitness of purpose.
For example, since success in academics is usually the first requirement to even start in any position above the most menial, anyone who finds it difficult to toe the line and waste hours listening to someone drone on about a topic totally unrelated to their purpose in life, or enthusiastically embrace make-work homework assignments, will likely have a hard road, no matter how well qualified they might otherwise be.
One could argue that the U.S. military in particular has had a tremendous opportunity this last decade or so to conduct exactly the kind of wartime evaluation you're talking about. But I wonder if the evaluation metrics are optimized towards peace-time?
In many respects, David Petraeus is the perfect embodiment of these political principles. He published, he politicked, he maximized his media exposure, and he hobnobbed within the right DC circles. I'm not qualified to judge whether or not he was as good a leader as many believe him to have been. But he was certainly a top-notch political operative.
(Other government agencies, e.g., the CIA, have very similar internal political incentives. The game is almost the same. This may explain, in part, the fluidity between military leadership and Agency leadership).
The key difference between up-or-out and the alternative is that, in the alternative, a certain segment of the employee base plays the politics game, and a certain segment kicks back and stagnates in the middle, while the rest try to get ahead honestly. In up-or-out, at least the third category has a decent shot. In non-up-or-out, the people trying to work hard and advance on merit will run up against the entrenched slackocracy and the political Machiavellians.
In my post, "problem" was referring to the parent post's "politics organized around moving up." My point is that most corporate cultures have elements of that focus on upward mobility. Obviously its prevalence varies from company to company. But I'd rather take a culture with an over-focus on upward mobility and potential for upward mobility than a culture with even a lesser focus on upward mobility, but less potential for it (due to all the dead weight).
I'm not holding "focus on upward mobility" equal in that assessment.
For the medical corps, above O-6, they usually have commanded at least one smaller facility, before they get an administrative flag assignment. More than a few have flamed-out at O-5 and O-6 commands.
In a carrier squadron, being XO or CO is preceded by being a department head. Maintenance department is a good one to get a command, but there are other departments.
The Army Medical Command had the problem with senior staff, where they were a large number of senior officers, O-8/O-9, involved in the Walter Reed scandal in 2007, were either fired or retired. Covering over issues with memos and paperwork up the chain-of-command by "yes men" didn't cut it.
If they can't, they deserve to drown themselves. If they can, they will filter out most of the fakers, and collect a team that can get stuff done in real adversial situations - since a great commander with a sucky team will suffer, and an okay commander who is able to build a great team will get whatever achievements are possible.
