What warrants consideration for a grade promotion? Its really a question of what do you consider to be an excelling students. Its it academics solely or do you factor in athletics? Community involvement? Artistic ability?. Some students have difficulty in core classes and sometimes feel less than equal to students of a higher academic caliber. Yet they thrive in other situations or just simply aren't being challenged in their current classes. All students should be noticed for areas they thrive in and require help in as well and have their courses adjusted accordingly.
The only true measurement of advancing through classes in a public school setting in the United States is the A through F grading system. All-around development, though a part of getting good grades, shouldn't be considered as too many kids will be left behind when their academic prowess is fine. If a 12-year-old can get straight A's in a high school curriculum, go for it.
I understand why people think tests aren't a fair representation of a person's ability. Some people simply may be bad test takers. However, they are a way of measuring intelligence. Measuring "development" may be difficult. What if someone has been promoted based on development, but they cannot excel in higher classes? That can discourage them, and really hinder their development.