A reason which is valid on the surface but difficult to implement properly is "it's bad for morale if deadweight employees get promoted just the same as people who contribute."
It makes more logical sense if you value people's achievements. Some years, I simply have to put more emphasis on family. Or I may get crappy projects or overwork myself and have to recover. Other years are better.
I think a strong (30%+) bonus compensation plans + automatic basic raises guarantees the best results. You know you aren't "going for the next level" but simply executing and on bad quarters/years you don't get as much. Easier to accurately quantify in a profit-center as opposed to a cost center, for sure.
A reason which is valid on the surface but difficult to implement properly is "it's bad for morale if deadweight employees get promoted just the same as people who contribute."