I hire people all the time too, and that sometimes involves promoting from within even if we go through the full interview process. However, the differences here are dramatic IMHO because my hiring process does not play out in public and I don't have a core of important non-employees who are watching my every move to see if they want to stay.

When I'm considering promoting someone, I may be concerned that the person leaves if he/she doesn't get the job. But I usually do not have to worry about several other people leaving if "Bob" doesn't get the job and suddenly I'm up that brown creek with no one to run the business. I don't need to worry about some other company (maybe from Pittsburgh) swooping in to make Bob or Bob's top assistant a better offer while I'm holding them in "interim" status. And - I have to drop the office analogy because it doesn't work anymore, if it did at all - I don't need to worry about current wrestlers and incoming recruits who would be happy staying here UNLESS they become concerned that things might fall apart. These wrestlers know that Virginia Tech is a much better place to be and a much better team to be on right now than Iowa State, and they would be perfectly happy if "Bob" is promoted, but if chips start to fall the wrong way ...