If you are a small startup and top level executive, then you decide based on whatever metrics you want.
If you are a top exec at a medium-size company then you set the metrics and your directors make promote/fire suggestions based on those which you then approve or not. If you are a director or manager then you follow what is set by the execs and work with them to approve of your suggestions. If you want to promote multiple people but are limited in the number of people you can promote then it often comes down to who is going to perform better in the higher position.
In larger enterprise companies there will specific policies (which may vary from department to department) and you'll follow those.
Promotions and firing are both also sometimes highly contextual to the current macro environment. If things are going great and look like they will continue going great then you can afford to promote more people whereas in an economic downturn you will likely have to fire people who would otherwise be worth keeping.
Billed the most hours, did the most sales? You aren't incentivized to give any work to your team. You hoard as much as possible. In fact, in MSP land, you incentivize not writing notes or documentation and keep all your stuff in a passworded one note just for you. That work gets prioritized to you because you are the only one who can do the work.
What happens is that the metrics look great for the jerks. Top performers who aren't team players will be the top because they arent wasting potential metric time on helping a coworker. You will promote those people and this will be seen. This will and does cause toxicity in the workplace.
Flipside, how do you decide when to fire someone? If you dont fire a low performer, you are telling the whole team they too can be low performers without punishment.
You still cant do it by metrics. A really good example I experienced. Coworker had saved up 2-3 weeks vacation and did a food tour of italy. When he got back to work there was a metrics meeting and he got publicly chastised for having really bad metrics in the last month. He was beyond pissed off for obvious reason.
Or how about my end of year performance review? I was billing out 50+ hours/week. I was quite commonly available to people afterhours and on weekend to help. I didn't get a raise and was chastised because I was late to work 40+ times. Flipside, I was never late to work, I was often one of the first people into the office. So I demanded to know how or when I was late. I worked 8-5 m-f.
If I clocked in after 8am on a saturday or sunday to help with an emergency. I got listed as late to work. So I worked somewhere between 20 and 40 weekends.
So it wasn't so much the lack of a raise. It was that I was going above and beyond being available to work on the weekends and I was being punished for this.
Metrics are so toxic.
Generally on my teams those who do their work and contribute to making the team, company and product more successful get promoted (when ready).
Those who hurt the team are worked with to fix the issue and only after much effort to try and correct issues is someone let go.
tl;dr - performance or lack of, and team dynamics positive or negative are what drive those decisions.