Promotion systems must create experience for the next officer

Why do navies use up-or-out promotion systems when some officers are happy and effective in their current posts?

Because junior officers need those billets to gain experience for higher roles, and the service has only a limited number of positions at each level.

Promotion policy has to provide experience for officers coming up through the service. If one officer stays indefinitely in a useful billet, the person below cannot gain the experience that post offers. Creating a duplicate post is impractical when the navy needs only a limited number of people in that role. Moving officers through different appointments therefore supports the progression of the next generation, even when someone is content and effective in the present job.