I'd definitely worry if I were relying on this strategy. 1) What about the employees who won't or can't jump ship? These are the ones that are most important t

I'd definitely worry if I were relying on this strategy. 1) What about the employees who won't or can't jump ship? These are the ones that are most important to push along in terms of company health. 2) I'm not a huge fan of the implicit 'firing'- the employee may feel a sense of responsibility to the company and slowly become more and more upset as theyre passed over for promotions. 3) I'd worry about the easy slippery slope towards terrible culture this would allow. A manager thats allowed to keep on sub-par staff because they're cheap might start stringing them along to keep the cheap and mediocre work. "Sure the promotion is coming, we just need to find the money in the budget next quarter...". Its hard to have insight into these issues from a level above the manager, and the manager has huge incentives to do it. So best not to create a structure where it can happen so easily.