I would say it's up to the Master Instructor performing the grading to decide. I used to compare students from other schools and think negatively about them/their instructor when comparing their ranks' skill levels to ours. I've grown up.
I used to do this, too. Especially if the other school had a higher enrollment than mine. I think it was mainly bitterness on my part. I, too, have grown past that type of thinking.
Let's say that someone has to be at technical level 100 to get to 1st Dan. Then once students pass 1st Dan the scale ups to 200 when there are new things to learn and a different focus/outlook required from a practitioner (not to mention the mental requirement that everyone wants to feel worth their grade so they feel they have something to live up to). If you have a student at 120, easy decision - promote them. If you have someone stuck at 90 for a while, should you not promote them?
Under the objective test - the answer is no - they don't meet the "100 standard". However, using a subjective basis you can see they are stuck in a rut. Promoting them, teaching them new things, ensuring they know what's expected of a 1st Dan, having them want to "feel justified" in being a 1st Dan means their skill may quickly rise to 120-150. You have improved that student and got them out of their period where they were stuck at a skill level with no improvement.
Students need to keep improving to be eligible for rank advancement. Rank advancement gives them new things to work on - technically and expectations wise. The two go hand in hand, but I feel an objective standard would get in the way of this.
Just my opinion of course... Also, although the tone may sound like I'm arguing with you, I'm not - just posting my opinion as you asked an open question