Promoting from within is an excellent policy, and is a great reward for coworkers that have excelled at their current positions. While many rungs in the assent of coworkers involve next levels within their current position, eventually that ascension will include supervision or managerial responsibilities.
One of the great things about having worked at twelve different companies is that you get to see a wide variety of best practices. You also get to see some commonality in bad practices. One of the most common bad practices is the rewarding of superior work with a promotion to supervisor or management. While that in itself is a good thing, excelling at tasks associated with individual or small team accomplishments has no correlation to excelling at leading a larger team or department.
Probably the worst transgression I have seen over the years is the consideration of engineers for advancement. Engineers are typically great task mangers and very detailed and through team members. The natural progression is to reward them for their accomplishments and make them and Engineering Supervisor or Engineering Department Manger. While very well intentioned, engineers typically are some of the worst communicators and motivators. Their tendency toward introversion can get in the way of results. They can find themselves ill prepared for the dynamics involved in management and leadership.
As part of recognizing their successes, inquire as to their aspirations for advancement and then arm them with the education and tools they will require continuing to be successful. They learned quite adeptly to work with and maximize the inanimate, now they need to learn how to get the most out of the animate, i.e. the people on their staff.
The same could be said for many operatives coming off the manufacturing floor. Being adept at their job is reason for celebration and reward, but continue to augment their hard skills with training on the soft skills.